Cosmos Developers Consider Zero Inflation for ATOM in Proposed Change
Summary:
The developers of blockchain communications protocol Cosmos may decrease the inflation of its ATOM coin to 0%, down from 7-20%, according to a proposal by StakeLab. The proposal suggests shifting protocol revenues from newly emerging consumer chains to ATOM holders, rather than issuing tokens. However, some fear that a 0% inflation rate could disincentivize current ATOM stakeholders, impacting the ecosystem's tokenomics, where over 60% of ATOMs are currently staked.
Cosmos, the inter-blockchain communications protocol's developers, have plans in motion to dip the inflation rate for its native cryptocurrency, ATOM, even further. StakeLab, a hub for staking and relaying within the Cosmos ecosystem, put forth a proposal on Jan. 9 to decrease ATOM's minimum inflation rate to 0%. Currently, ATOM experiences an inflation rate that fluctuates between 7% and 20%. StakeLab's proposal, if successful, would slash this to either 0% or 20%. For the proposal to take effect, 40% of ATOM's total supply and a majority of affirmative votes are needed by Jan. 23.
In justification of its proposal, StakeLab stated, "The current rate implies that even with 100% of the token supplies staked, there would still be 7% additional tokens every year. This doesn't sit well with any known operational blockchain model and raises concerns."
The organization also suggests that the community reflect on the feasibility of channeling protocol revenue from the budding Cosmos consumer chains to ATOM stakeholders, as opposed to outright token issuance. They wrote, "If the revenue from consumer chains becomes significant, maintaining a 7% annual emission rate may no longer make sense."
One concerned user pointed out that a no-inflation proposal might deter the enthusiasm of current ATOM stakeholders and perturb the tokenomics of the ecosystem, where over 60% of the ATOM tokens are staked currently. The user noted, "Two chains based on Cosmos SDK with 0 inflation are DYDX and Kava. While the former is still transitioning, the latter has long been here and only recently adopted 0% inflation. Currently, DYDX has around 7% staked and Kava 12%."
On Nov. 26, 2023, the Cosmos community decided to cut down the annual ATOM staking yields from 19% to 13.4%.
Published At
1/9/2024 7:02:30 PM
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