Cosmos Hub approves proposal to slash ATOM inflation

On Nov 26, 2023

The Cosmos Hub community is giving the green light to a proposal aimed at reducing the maximum inflation rate of its native token, Cosmos (ATOM), from 14% to 10% as a security enhancement measure.

The objective of this proposal is to decrease the annual interest rate for stakers, with the intention of fostering long-term profitability and facilitating price growth in ATOM.

The proposal, which garnered 41.1% support, narrowly passed with 38.5% of votes against it, marking the highest-ever turnout vote in the Cosmos ecosystem. The approved change is set to bring Atom’s annualized staking yield from approximately 19% to about 13.4%.

According to the proposal, the Cosmos Hub experienced excessive spending on security due to ATOM’s high inflation rate. It contended that by reducing inflation to 10%, validators could still attain breakeven or profitable outcomes.

The proposal received substantial support from Zero Knowledge Validator, while the largest vote against it came from validator AllNodes, In a post on X (formerly known as Twitter), concerns were raised that the proposed change might adversely affect small validators. Additionally, further reducing inflation could centralize the ecosystem without necessarily improving token value. Hasty, untested adjustments have the potential to compromise network integrity.

The Cosmos Hub serves as the central blockchain in the Cosmos network, which comprises a network of interconnected blockchains. The ATOM token is utilized for staking, governance, and transaction fees within this ecosystem.

With the approval of the ATOM halving proposal, the community anticipates higher profitability and potential appreciation of the token’s price in the long term. As of the current update, the price of ATOM stands at $9.54 on CoinGecko, reflecting a 5.0% increase for the day and a 5.70% rise for the week.

The Cosmos (ATOM) evolution

The Cosmos (ATOM) network has undergone significant developments shaping its trajectory in recent years.

In Sept. 2022, a new white paper was released at the Cosmoverse conference in Colombia, proposing substantial expansions for the Cosmos Hub and reimagining the role of ATOM, its native token.

The white paper outlines a revamped role for the Hub as the heart of interchain security, meaning other chains will be able to use the Hub to secure their own networks. The white paper also proposes changes to the utility and issuance schedule of ATOM, changes that the paper’s authors think will back up its informal role as an index of the broader Cosmos family of blockchains.

Last Sept., Cosmos Hub introduced a liquid staking module. This module allows users to circumvent the previous 21-day unbonding period associated with unstaking ATOM funds. Prior to this upgrade, ATOM holders faced a 21-day lock-in period when moving their funds after unstaking the token.

The introduction of the new module enables staked ATOM to be utilized in the Cosmos decentralized finance ecosystem without impacting yields from staking.

Additionally, it permits users to cancel ongoing unbonding processes, enabling ATOM to revert to regular staking and participate in the liquidity staking module. This upgrade was implemented at 1:00 pm UTC on September 12, reaching block height 16985500 and named Gaia 12.