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- 1 Cosmos Hub has approved a proposal targeting the reduction of its native cryptocurrency, ATOM’s maximum inflation rate.
- 2 This adjustment will also translate into a decrease in the Annual Percentage Rate (APR) for staking.
The recent decision by the Cosmos Hub to approve a pivotal proposal targeting the reduction of its native cryptocurrency, ATOM’s maximum inflation rate, is a significant development in the ongoing evolution of the Cosmos network.
The approved proposal seeks to make a key adjustment by reducing the maximum inflation parameter from 20% to 10%, a move that will have a tangible impact on ATOM’s current inflation rate, which is approximately 14%.
This adjustment will also translate into a decrease in the Annual Percentage Rate (APR) for staking, lowering it from around 19% to approximately 13.4%.
The decision came after a closely contested vote, with the proposal securing a 41.1% approval, narrowly exceeding the 38.5% opposition. This outcome was not without its share of drama, as a last-minute surge in votes and the reversal of stances by some validators played a crucial role in tipping the balance in favor of the proposal.
The primary motivation behind this adjustment lies in the ongoing community discussions about fine-tuning ATOM’s inflation schedule. The current dynamic inflation model, ranging from 7% to 20% and tied to the bonded or staked ratio of ATOMs, has raised concerns related to the sustainability and predictability of ATOM’s future supply.
By addressing these concerns, the proposal aims to create a more stable and balanced ecosystem for ATOM.
Beyond its implications for ATOM, the adjustment holds significance for the Atom Economic Zone (AEZ) and the burgeoning decentralized finance (DeFi) ecosystem on the Cosmos network.
The reduction in ATOM’s inflation rate is strategically aligned with the network’s goals of enhancing the value proposition of ATOM as a security provider for consumer chains within the Cosmos Hub.
This is particularly crucial as the AEZ expands, with projects like Neutron and Stride gaining momentum and contributing to the overall growth of the Cosmos network.
Voters/Validators Reacts on Cosmos Hub Approval
Zero Knowledge Validator, a prominent supporter of the proposal, highlighted the rationale behind its stance on X, stating, “Double-digit inflation is not necessary for security, weakens Atom price long term, and disincentivizes the use of ATOM in DeFi and elsewhere in the Atom Economic Zone.”
We voted YES on @cosmos Hub Prop 848
— Zero Knowledge Validator (@ZKValidator) November 17, 2023
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This seems to be a controversial proposal, but in our view, it shouldn't be!
The Cosmos ecosystem is maturing, and inflation economics need to mature too.
Double digit inflation is not necessary for security, weakens ATOM price long…
The perspective underscores the belief that a more moderate inflation rate will contribute to the long-term stability and attractiveness of ATOM as an investment.
However, the proposal faced significant opposition from validator AllNodes, which expressed concerns about potential harm to small validators. AllNodes labeled the proposal as “an abrupt, short-sighted, and ill-researched idea that might wreak havoc on retail and businesses engaged in building, trading, and validating Atom.”
We voted NO on $ATOM prop #848 not only because it overlooks the importance of small validators and could centralize the ecosystem. Lowering inflation isn't a way to boost token value. Quick, untested changes could harm network integrity.
— Allnodes (@Allnodes) November 19, 2023
Long read with reasoning👇 1/3
In addition, the founder of Cosmos, Jae Kwon, also went on to post on X his disagreement with the recent development in the ATOM production reduction plan. Kwon is reportedly planning to fork Cosmoshub4 and could dub the new project AtomOne. The said project would have its own plan along with the same team and achieve more decentralization.
Now listen up Cosmonauts. Despite our voting NWV #848 has ended up passing, something that isn't too surprising (though it would be good to know whether the later votes came from newly purchased atoms) @cosmos @Allinbits_inc #raptureparty #atomone
— antechristus #343 (@jaekwon) November 25, 2023
Now let's coordinate a split.
The opposition highlights the challenges of finding a consensus in a decentralized network where different stakeholders may have conflicting interests and perspectives.
In conclusion, the Cosmos Hub’s decision to adjust ATOM’s maximum inflation rate is a crucial step in addressing the evolving needs and concerns of its community. As the Cosmos network continues to evolve, finding the right balance between stability, security, and inclusivity will remain an ongoing challenge.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.