The Cosmos Hub community recently voted to set the maximum annual inflation rate for its native token, Atom, at 10%. This decision marks a reduction from the previous rate of about 14%, and is expected to bring Atom's annualized staking yield down from approximately 19% to 13.4%. Cosmos Hub is the central blockchain of the Cosmos network, which serves as an ecosystem of interconnected blockchains. Atom is used within this network for staking, governance, and transaction fees.
The proposal to cap the inflation rate passed narrowly, with 41.1% of the votes in favor and 38.5% against, marking the highest-ever turnout vote in the Cosmos ecosystem. The rationale behind the proposal was that Atom's high inflation rate, compared to its peers, represented an overpayment by the Hub for security. However, it was argued that validators would still be able to break even or profit with a 10% inflation rate.
Notably, the largest vote in favor of the proposal came from Zero Knowledge Validator, which supported the reduction, suggesting that double-digit inflation is unnecessary for security and can weaken Atom's price in the long term. Conversely, the largest vote against the proposal was from AllNodes, which raised concerns that the change might negatively impact small validators and disrupt retail and businesses engaged in building, trading, and validating Atom.
Disclaimer: Please note that the information provided in this article is based on the referenced research articles. It is essential to conduct further research and analysis before making any investment decisions. The cryptocurrency market is highly volatile, and investors should exercise caution and consult with financial professionals before engaging in cryptocurrency trading or investment activities.
