- The Cosmos Hub community has undergone a pivotal vote to alter ATOM’s inflation rate.
- A proposal has been put forth to reduce the rate from 14% to 10%.
- With ATOM’s staking yield facing a notable shift, the community has remained divided over the potential impact.
In a narrow vote, the Cosmos Hub community approved a proposal to reduce the maximum inflation rate of its native token, ATOM, from 14% to 10%. The proposal, which narrowly passed with 41.1% of votes in favor and 38.5% of votes against, is expected to reduce ATOM’s annualized staking yield from around 19% to approximately 13.4%.
Debate Heats Up Over ATOM Inflation Rate
The Cosmos Hub is the main blockchain within the Cosmos network, a system of interconnected blockchains. The ATOM token is used for staking, governance, and transaction fees.
Proponents of the proposal argue that ATOM’s high inflation rate resulted in the Cosmos Hub overspending on security. They also argue that validators could still achieve breakeven or profitability with inflation reduced to 10%.
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Opponents of the proposal argue that the change could negatively impact small validators and discourage the use of ATOM in DeFi and other areas within the Atom Economic Zone.
Cosmos Hub Unleashes Liquid Staking Module
The proposal comes as Cosmos Hub recently upgraded to launch a liquid staking module, enabling users to bypass the previous 21-day unbonding period by unstaking ATOM funds.
Before the upgrade, ATOM holders had a locking period of 21 days to move their funds after unstaking the token. With the new module, staked ATOM can be used in Cosmos’ decentralized finance ecosystem without compromising yields from staking.
On the Flipside
- A reduction in ATOM’s inflation rate might bring about a sense of stability in the token’s value, attracting long-term investors seeking steadier returns rather than short-term gains.
- The high inflation rate reduction could potentially limit the network’s ability to incentivize participation, impacting the overall security and decentralization of the Cosmos Hub.
Why This Matters
The decision to reduce ATOM’s inflation rate marks a pivotal step in balancing security measures within the Cosmos Hub. This move, while contentious, seeks to redefine the landscape for validators and users alike, impacting the dynamics of staking yields and fostering deeper engagement within the Cosmos decentralized finance ecosystem.
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To delve deeper into QuickSwap’s strategy to unify Polygon and Cosmos through Kinetix, read here:
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