Cosmos (ATOM) Approves Proposal to Reduce Inflation Rate to 10%
After several days of unexpected developments, the proposal to minimize the inflation rate of Cosmos (ATOM) has officially been approved.
Cosmos (ATOM) Approves Proposal to Reduce Inflation Rate to 10%
Proposal 848 was approved by the Cosmos community on November 26th. The results of this voting session were narrowly in favor with 41% of the votes supporting the proposal versus 31.9% opposing it.
Proposal #848 is approved ✅
— Cosmos Hub ⚛️ (@cosmoshub) November 25, 2023
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
Following this proposal, the inflation rate of ATOM will decrease from 14% to 10%. This reduction implies that the Staking APR interest rate on the network will decrease from 19% to 13.4%.
In the coming period, two additional proposals are expected to further reduce the inflation rate for the governance token, ATOM. The 10% inflation rate is calculated based on the capital adequacy and initial yields of Validators within the network. Moreover, to ease operational costs, Validators may also request higher staking fee discounts from users.
Despite a high voter turnout of 72.7% (the highest in history), the previous Proposal 848 faced the risk of not being approved as it initially lacked the required 40% support with the voting deadline approaching.
ATOM Showdown 🔥
— Cryptocito | Cosmos ⚛️ (@Cryptocito) November 25, 2023
Voting on 848 ends in a couple of hours after 2 weeks of being on chain. Over 70% of the ATOM community casted their vote which is a huge turnout and shows that the Cosmos Hub is very much alive.
I dont want to tell you how to vote, but I think it‘s important… pic.twitter.com/aPTqnHPIIj
Nevertheless, with a large last-minute surge in support, Proposal 848 met the necessary conditions for approval. This phenomenon can be attributed to the diverse opinions within the Cosmos community.
Reducing the coin inflation will alleviate upward selling pressure on ATOM. However, prior analyses indicated that even with 20% staking rewards, Validators, particularly smaller ones, struggled to break even. This disparity might attract long-term capital holders to delegate ATOM, potentially affecting network security.
Read more: Cosmos and the Interchain Security Narrative
The issue of capital adequacy remains a significant barrier to the development of the Atom Economic Zone (AEZ), with the Interchain Security mechanism demanding higher-than-usual technicalities and fees for maintenance.
Following the approval of Proposal 848, ATOM has shown positive reactions. Specifically, at the time of writing, the coin is trading around $9.83 USD, marking an increase of approximately 10% within a 24-hour period.
