Cosmos Hub Approves Proposal to Lower ATOM’s Inflation Rate to 10%
Summary:
The Cosmos Hub administration has approved a proposal to reduce the maximum inflation rate of its primary token, ATOM, from around 14% to 10%. The proposed change could lower Atom's annual staking earnings to approximately 13.4%. Despite initial expectations of failure, the proposal marginally passed due to last-minute voting. It argued for the affordability of security measures for validators and the maintainability of break-even or profitability even with 10% inflation. Cosmos Hub recently launched a liquid staking module, allowing for immediate usage of staked ATOM in the DeFi ecosystem.
The administration of Cosmos Hub has given the green light to a proposal aimed at reducing the upper limit of inflation for its principal token, ATOM (ATOM), from an estimated 14% down to 10%. According to this proposal, the approved change will lead to a decrement in Atom's annual staking earnings from roughly 19% to about 13.4%. Cosmos Hub is the cornerstone blockchain of the Cosmos network, a configuration of interconnected blockchains, where Atom plays a key role as the native token used for governance, staking, and transaction costs. The proposal barely obtained approval, securing 41.1% votes in favor versus 38.5% against, making it the most participated vote within the Cosmos environment. While it was anticipated to fall through just before the expiration time, a final-minute surge of votes coupled with some U-turns from validators barely swung the results to a positive end.
Image of the proposal Source: Mintscan
The proposal argued that the high inflation rate of Atom, when compared with similar currencies, lead to excessive spending on security by the Cosmos Hub. It further argued that validators are still able to break even or make profit even with the inflation rate being decreased to 10%.
Zero Knowledge Validator, the entity casting the most significant vote in favor of the proposal, defended its support in X. The entity stated that, "Double digit inflation dilutes Atom's long-term value and discourages Atom's usage in DeFi and other zones within the Atom Economic Zone."
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The strongest vote against the proposal was by AllNodes, a validator that expressed its stand in a post on X. AllNodes maintained that the alteration may adversely affect smaller validators and described the proposal as "...a hasty, shortsighted, and poorly researched idea that could wreak havoc on ordinary consumers as well as businesses involved in the creation, trading, and validation of Atom."
Recently, Cosmos Hub incorporated an upgrade to introduce a liquid staking module. This enables users to avoid the previous waiting period of 21 days to unfasten ATOM funds. Before the upgrade, ATOM users had to wait 21 days to transfer their funds after unfastening the token. Now, with this new module, staked ATOM can be readily utilized in the Cosmos decentralized finance (DeFi) ecosystem without sacrificing staking yields.
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Published At
11/26/2023 12:42:46 PM
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