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Inflation rate reduction proposal approved
On the 26th, the cryptocurrency Cosmos (ATOM) community approved a proposal to reduce ATOM’s inflation rate from approximately 14% to 10%.
As the inflation rate declines, the staking APR (Annualized Yield) of ATOM token will also be reduced from approximately 19% to approximately 13%.
Proposal #848 is approved 
The max inflation parameter will be reduced from 20% to 10%, bringing ATOM’s current inflation rate to 10%.
This decision comes with the highest turnout in Cosmos Hub history: 72.7% pic.twitter.com/03MPSsUsmx
— Cosmos Hub 
(@cosmoshub) November 25, 2023
The proposal was based on concerns that ATOM prices would decline in the long run if inflation continued to be higher than other projects.
Inflation adjustment has been an important topic for the Cosmos community in recent years. ATOM incorporates a dynamic inflation model, which allows it to fluctuate between 7% and 20%. The current proposal would change the cap to 10%.
The inflation rate is fixed at 2/3 of the staking ratio. If less than 2/3 of all ATOM tokens are staked, the inflation rate will increase to encourage staking.
The proposal is that ATOM’s inflation rate is high because Cosmos Hub, the central blockchain of the Cosmos network, is overpaying the validators who maintain the chain’s security. he claimed.
They also reasoned that even with a 10% inflation cap, validators would still be able to break even or even exceed the fee income.
Cosmos is a project developed by Tendermint that realizes interoperability between different blockchains, and its central blockchain is called “Cosmos Hub.”
connection: What is Cosmos (ATOM) that even beginners can understand? | Explaining important points and future prospects
What is a validator?
A validator is a node that participates in the consensus algorithm and verifies the validity of data recorded on the blockchain. Secure capital in the form of “staking” by locking the network’s native token. If you verify your transaction history and fulfill your role, you will be rewarded with virtual currency. .
Virtual currency glossary
Reasons for and against
The proposal passed with a narrow margin of 41.1% in favor and 38.5% against. The Cosmos ecosystem also recorded an all-time high voter turnout of approximately 73%. Just a few hours before the deadline, it was expected that the proposal would be rejected, but the situation was reversed in the final stages.
Zero Knowledge Validator cast the largest number of votes in favor of this proposal, and explained the reason for their support as follows.
Double-digit inflation is unnecessary for security and will cause the ATOM price to fall in the long term, hindering the use of ATOM tokens in DeFi (decentralized finance) and various other ATOM economies.
On the other hand, AllNodes had the biggest negative vote. In particular, they argue that small-scale validators may be negatively affected.
Low inflation is becoming a problem for smaller validators who are already struggling with the costs of consumer chains.
With inflation reducing funding, the validator community may become less diverse and more concentrated. This approach ignores the sustainability of small-scale validators, which are essential in a decentralized environment.
In addition, looking at the examples of other projects such as Fantom, a decrease in the inflation rate does not necessarily lead to an increase in the token price, and in order to increase the value of ATOM tokens, efforts must be made to promote network growth and practicality. He also argued that this is a better method.
They also opine that the market value of ATOM may decrease as people who purchased ATOM for staking purposes sell their tokens.
connection: Cosmos starts security sharing to expand the utility of ATOM token
connection: Introducing re-staking to the Cosmos ecosystem and jointly developing “Mesh Security”
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