The Cosmos Hub Governance Approves Proposal to Reduce Atom Inflation Rate
The governance body of Cosmos Hub has approved a proposal to decrease the maximum inflation rate of its native token, Atom, from around 14% to 10%. This change would result in an annualized staking yield for Atom of approximately 13.4%, down from about 19%. The proposal argued that the current high inflation rate of Atom was excessive and overpaid for security. It also stated that validators would still be able to break even or make a profit under a 10% inflation rate.
Narrowly Passed Vote in Favor
The proposal narrowly passed with 41.1% of votes in favor and 38.5% votes against, making it the highest-ever turnout vote in the Cosmos ecosystem. Initially projected to fail, a last-minute surge of votes and reversals from validators swung the outcome narrowly in favor.
Atom’s Role in the Cosmos Network
Cosmos Hub serves as the central blockchain of the Cosmos network, which is an interconnected ecosystem of blockchains. Atom is the native token of the Hub and is used for staking, governance, and transaction fees.
Supporting and Opposing Views
Zero Knowledge Validator, which cast the largest vote in favor of the proposal, argued that double-digit inflation was unnecessary for security and had long-term negative effects on Atom’s price. They also claimed it disincentivized the use of Atom in decentralized finance (DeFi) and other areas within the Atom Economic Zone.
AllNodes, on the other hand, expressed opposition to the proposal, stating that it could harm small validators. They criticized it as an abrupt, short-sighted idea that lacked sufficient research and had potential negative impacts on retail businesses engaged in building, trading, and validating Atom.
Hot Take: Adjusting Atom’s Inflation Rate for a Balanced Economy
The recent approval to reduce Atom’s maximum inflation rate from 14% to 10% reflects the governance body’s efforts to strike a balance between security and economic sustainability. By lowering the inflation rate, Cosmos Hub aims to ensure that validators can still maintain profitability while preventing excessive overpayment for security. This adjustment aligns with the long-term goals of encouraging the use of Atom in various applications, such as DeFi, and promoting a healthy economic ecosystem within the Cosmos network.
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