Cosmos Hub Endorses Proposal to Decrease Inflation Rate of Native Token

Overview

The governing body of Cosmos Hub has approved a proposal to reduce the maximum inflation rate of its native token, ATOM, from 14% to 10%. The proposal aims to lower the annualized staking yield of Atom from 19% to 13.4%. The Cosmos Hub is the primary blockchain within the Cosmos network and ATOM is used for staking, governance, and transaction fees.

Narrow Passage

The proposal received 41.1% approval votes compared to 38.5% disapproval, making it the highest turnout vote in the Cosmos ecosystem. Initially expected to fail, a last-minute influx of votes and reversals from validators narrowly tipped the outcome in favor of the proposal.

Reasoning Behind the Proposal

The proposal argues that the elevated inflation rate of ATOM compared to similar tokens has led to overspending for security in the Cosmos Hub. It also suggests that validators can still achieve breakeven or profitability even with inflation reduced to 10%.

Support and Opposition

Zero Knowledge Validator, the entity with the most substantial vote in favor of the proposal, believes that double-digit inflation is unnecessary for security and undermines the long-term price of ATOM. On the other hand, AllNodes, a validator, opposes the proposal, expressing concerns that it could negatively impact small validators and disrupt retail and businesses engaged in building, trading, and validating Atom.

Liquid Staking Module

Cosmos Hub recently upgraded its platform to launch a liquid staking module, allowing users to bypass the previous 21-day unbonding period for unstaking ATOM funds. This upgrade enables staked ATOM to be used in the Cosmos decentralized finance (DeFi) ecosystem without compromising staking yields.