A proposition has been approved by the regulating body of Cosmos Hub to reduce the maximum inflation rate of its native token, ATOM, from around 14% to 10%.
The authorized modification would reduce Atom’s annualized staking yield from approximately 19% to 13.4%, as per the proposal.
However, the Cosmos Hub serves as the primary blockchain within the interconnected Cosmos network of blockchains.
Atom is the native token of the Hub and is utilized for transaction fees, governance, and staking.
With a narrow margin of approval (41.1%) to disapproval (38.5%), the proposal achieved the highest voter turnout in the history of the Cosmos ecosystem.
Moreover, the outcome was marginally skewed in favor preceding the deadline due to a last-minute surge in ballots and a few reversals from validators, despite initial predictions of failure.
Meanwhile, in comparison to other tokens, the proposal argued that Atom’s high inflation rate caused the Cosmos Hub to overshoot on security.
Additionally, it posited that validators might still be capable of attaining profitability or breakeven despite a 10% reduction in inflation.
Zero Knowledge Validator, the group that received the largest majority vote in support of the proposal, provided a rationale for its support on X.
“Double-digit inflation is unnecessary for security, undermines Atom price in the long run, and discourages the use of ATOM in DeFi and other areas within the Atom Economic Zone.” according to one post.
As detailed in a post on X, the validator AllNodes cast the most significant vote in opposition.
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.
Long read with reasoning👇 1/3
— Allnodes (@Allnodes) November 19, 2023
AllNodes contended that the alteration might have an adverse effect on smaller validators, characterizing the proposition as “…an abrupt, short-sighted, and ill-researched idea that might wreak havoc on retail and businesses engaged in building, trading, and validating Atom.”
Meanwhile, a recent upgrade to Cosmos Hub enabled the implementation of a liquid staking module, which permits users to unstake ATOM funds and bypass the previous 21-day unbonding period.
Prior to the upgrade, after unstaking the token, ATOM holders were restricted from transferring their funds for a period of 21 days.
The new module enables the utilization of staked ATOM within Cosmos’s decentralized finance (DeFi) ecosystem while maintaining the yields obtained from staking.
