The governing body of Cosmos Hub has given the green light to a proposal aimed at decreasing the maximum inflation rate of its native token, Cosmos. The proposal narrowly passed with 41.1% of votes in favor and 38.5% against. However, it signifies a strategic move to bolster the security of the Cosmos network.

Lowering Inflation for a Secure Cosmos

The endorsed modification targets a reduction in ATOM’s maximum inflation rate from 14% to 10%. This adjustment, as outlined in the proposal, translates to an annualized staking yield drop from approximately 19% to 13.4%. The Cosmos Hub, serving as the primary blockchain in the interconnected Cosmos network, utilizes the ATOM token for staking, governance, and transaction fees.

Initially poised to fail before the deadline, the proposal experienced a dramatic turn of events. A surge of last-minute votes, coupled with some validators reversing their stance, narrowly tipped the scales in favor of the reduction.

Overspending on Security Concerns and Divergent Perspectives

The proposal argued that the elevated inflation rate of ATOM led to Cosmos Hub overspending on security. It further contended that reducing inflation to 10% would still allow validators to achieve breakeven or profitability.

A screenshot of the proposal from Cosmos Hub's website.

Zero Knowledge Validator, the entity with the most votes in favor, expressed its support on X. They stated that double-digit inflation is unnecessary for security. Furthermore, they emphasized the potential long-term negative impact on the Atom price and discouraged the use of ATOM in DeFi and other areas within the Atom Economic Zone.

On the opposing side, AllNodes, a validator, voiced concerns that the proposed change could adversely affect small validators. In a post on X, they labeled the proposal as “an abrupt, short-sighted, and ill-researched idea” that might disrupt retail and businesses engaged in building, trading, and validating Atom.

Evolution of Cosmos Hub

In a recent upgrade, Cosmos Hub introduced a liquid staking module, revolutionizing the staking landscape. This module allows users to bypass the previous 21-day unbonding period, enabling staked ATOM to be utilized in the Cosmos decentralized finance ecosystem without compromising yields from staking. The upgrade marks a significant stride in enhancing flexibility and accessibility for ATOM holders.

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