New proposal for $ATOM to set the minimum inflation rate to 0%

Tags: Blockchain Breakdown, $ATOM,

Jan 16, 2024 • 2 min read

Why 0% minimum inflation rate?

Following the earlier proposal '#848 - ATOM Halving: Set the max. Inflation Rate to 10%,' the current ATOM now has a maximum inflation rate of 10%, resulting in a reduction of ATOM’s annualized staking yield from approximately 19% to 13.4%.

Back to the present, Cosmos developer propose with '#868. Decrease InflationMin parameter to 0%.' Basically, the proposal aimed to address a specific concern from previous proposal #848 on the "proposed minimum inflation rate of 7%". This means if $ATOM is 100% staked, there would still be a 7% of ATOM being minted. Hence, the #868 aims to set the minimum inflation rate at 0% providing a more sustainable supply for Cosmos's $ATOM.

The proposal runs from Jan 9th, 2024, through Jan 23rd, 2024, and is presented by StakeLab. Discussions have been ongoing on the Cosmos Hub forum since November 24th, 2023, with controversial critics expressing concerns about tokenomics changes. One of the early criticisms came from Pro delegators, stating...

“The current focus on minimum and maximum inflation rates might oversimplify the issue. There’s a need for a global inflation reform centered on a formula for adjusting inflation, backed by competent economic knowledge, data analysis, and mathematics. This approach would ensure a more nuanced and informed decision-making process aligned with the reference quality expected in Cosmos governance.”

Cosmos Inflation Formula Modeling by PRO Delegators

What could be an impact from this proposal?

VOTE - YES: This would result in a reduced supply of $ATOM, though it may come at the expense of lower security for Cosmos due to a diminished incentive to stake $ATOM.
VOTE - NO: The price is expected to remain stable, and the tokenomics will remain unchanged. However, in the long run, there might be an oversupply of $ATOM, leading to potential proposals aimed at improving its tokenomics.

Ultimately, the decision of whether or not to adopt the 0% minimum inflation rate proposal will lie with the Cosmos community. It is crucial to conduct thorough research, weigh the potential benefits and drawbacks carefully, and consider the long-term implications for the health and sustainability of the Cosmos Hub.

Don't forget to mark this date on your calendar: Jan 23rd, 2024.

Check out $ATOM Unlocks (emission)

https://token.unlocks.app/cosmos

Sources

Cosmos developers propose reducing ATOM inflation rate

Cosmos Hub greenlights ATOM inflation cut for security boost

[PROPOSAL] Set Min Inflation at 0%

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