Cosmos proposal to cap ATOM inflation rate at 10% passed

Fibo Quantum

  • The Cosmos Hub community has approved a proposal capping ATOM’s maximum inflation rate at 10%
  • Per the proposal, validators can still break even or turn profits at 10% inflation
  • Reducing inflation rate will help Cosmos’ security and growth potential.

The latest Cosmos news is that the community has approved a proposal that seeks to cut the maximum inflation rate of ATOM to 10%. The Cosmos Hub X account shared the results of the vote that ended on November 26.

Proposal 848, dubbed the “ATOM Production Reduction: Proposal to Set the Maximum Inflation Rate to 10%” passed with 41.1% of the vote in support and 31.9% against. Vote turnout was more than 72%, the highest in the Cosmos Hub’s history. 

ATOM’s maximum inflation rate to reduce from 20% to 10%

Approval means the cryptocurrency’s maximum inflation parameter will be reduced from 20% to 10%, bringing the current inflation rate down from 14% to 10%. Cosmos Hub’s annualized staking yield will also reduce from 19% to about 13.4%.

Per the proposal, capping the inflation is crucial to Cosmos (ATOM) maintaining its value proposition in the market as it looks to attract more consumer chains.

High inflation has meant Cosmos’ DeFi yield is dwarfed by competing chains, affecting user growth. The proposal to reduce the inflation rate therefore not only has the potential to accelerate adoption of IBC DeFi protocols, but also see ATOM get better traction as collateral and a liquidity gateway.

The other argument is that at the current inflation rate, Cosmos Hub is overpaying for security relative to its peers, which harms ATOM’s monetary premium. It’s also had the governance token under constant sell pressure, hurting price performance.

According to the proposal, nearly all validators will still be at break even or profitable levels with 10% max inflation. Validators can also opt for increased commission rates to cover operational expenses or turn profits.

The price of ATOM was up nearly 9% on Sunday morning, changing hands at $9.64.

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