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Cosmos Rejects Proposal to Lower Inflation Rate to Zero

Cosmos, a decentralized network of interoperable blockchains, has voted against a proposal that aimed to reduce the minimum inflation rate of its native token, ATOM, to zero.

The proposal, numbered 868, was submitted by Stakelab, a Cosmos contributor, who argued that lowering the inflation rate would benefit the network by alleviating inflationary pressures on the ATOM token, especially in scenarios where a large percentage of the coins are bonded.

Bonding is the process of locking up ATOM tokens in exchange for staking rewards and governance rights. According to the proposal, if more than two-thirds of the total ATOM supply was bonded, the inflation rate would drop to zero, effectively creating a deflationary scenario for the token.

However, the proposal did not receive enough support from the Cosmos community, who expressed concerns about the negative impact of reducing the inflation rate to zero on the network’s security and sustainability.

The Hub, the central blockchain of the Cosmos ecosystem, relies on ATOM tokens for transaction fees, security and governance. By lowering the inflation rate, the proposal would reduce the incentives for validators to secure the network and participate in governance, potentially compromising the Hub’s functionality and resilience.

The proposal was rejected by 48.6% of the validators, who collectively held 67.8% of the voting power. Only 25% of the validators, with 18.4% of the voting power, supported the proposal, while 25.9% of the validators, with 13.8% of the voting power, abstained.

Some of the notable validators who voted against the proposal included Everstake, Cosmostation, Chorus One, Allnodes, Stake.fish, Swish Staking, Forbole, Provalidator, Keplr and many others. Some of the validators who voted in favor of the proposal included Game, Informal, Stakecito, P2P, Polkachu, Pryzm, IrisNet, Leap and more.

This was the second proposal related to the inflation rate of ATOM in recent months. The previous proposal, numbered 848, was accepted by the Cosmos community in December 2023, and set a cap on the maximum inflation rate at 10%, down from the previous 20%. The proposal aimed to regulate the token emissions and align them with the network’s growth and demand.

Cosmos is one of the leading projects in the blockchain space, with a vision of creating a network of interconnected blockchains that can communicate and exchange value with each other. The project leverages a novel consensus mechanism called Tendermint, which enables fast and secure transactions, as well as a modular framework called Cosmos SDK, which allows developers to build customized blockchains for various use cases.

ATOM is the native token of the Cosmos Hub, and serves as the medium of exchange, security and governance for the network. As of January 23, 2024, ATOM has a market capitalization of $4.2 billion, and ranks as the 23rd largest cryptocurrency by market cap, according to CoinMarketCap.

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