Cosmos developers propose reducing ATOM inflation rate

ATOM’s minimal inflation rate could potentially be cut to 0% every year. The creators of the Cosmos inter-blockchain communications (IBC) protocol intend to further reduce the inflation of its native coin, ATOM. $9.80 Developers want to cut the minimum inflation of ATOM to 0%, according to a Jan. 9 proposal by StakeLab, a staking and relaying hub on the Cosmos network. ATOM’s current inflation rate is between 7% and 20%, and if the proposal is approved, it will be cut to 0% or 20%. 

To pass the proposal, a quorum of 40% of ATOM’s remaining supply and sufficient yes votes must be obtained before January 23. StakeLabs wrote in its justification for the proposal: “At this minimum rate, even if 100% of the token supply is staked, the network will continue to produce an additional 7% of tokens annually.” This situation is concerning and, to my knowledge, does not correspond with any other operational blockchain paradigm (even outside of blockchain).” StakeLab went on to say that instead of issuing tokens outright, the community might consider allocating protocol revenue from developing Cosmos consumer chains to ATOM stakers. “It may not make sense to maintain a 7% annual emission rate if the revenue from consumer chains becomes substantial,” the company said in a statement.

According to one concerned user, the idea for 0% inflation may dissuade present ATOM holders and have an impact on ecosystem tokenomics, where over 60% of ATOM is currently staked. “For example 2 chains that have 0 inflation that are based on Cosmos SDK are DYDX and Kava,” the user stated in a post. “Kava has been here for a while but has recently implemented 0% inflation, while DYDX is still in the transition phase.” DYDX currently controls roughly 7% of the shareholding, while Kava has 12%.” The Cosmos community voted on November 26, 2023, to cut yearly ATOM staking yields from 19% to 13.4%.

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