Cosmos Hub Will Reduce ATOM Inflation And Increase Security

The Cosmos Hub has approved a proposal to reduce the maximum inflation rate of its native Cosmos token (ATOM) from 14% to 10%. According to the proposal, the authorized change would reduce ATOM’s annual staking yield from approximately 19% to approximately 13.4%. Cosmos Hub is the main blockchain system of interconnected Cosmos blockchains. The ATOM token is used for staking, governance and payment of transaction fees. The proposal passed by a narrow margin: 41.1% votes in favor and 38.5% votes against. It was expected to fail shortly before the deadline, but a last-minute influx of votes and some cancellations by validators slightly changed the result in favor of acceptance.

The proposal stated that the increased rate of ATOM inflation had caused the Cosmos Hub to overspend on security. It also claimed that validators could still achieve breakeven or profitability when inflation dropped to 10%. The most significant dissenting vote came from validator AllNodes, who outlined their opposition in a post on X. AllNodes argued that the change could negatively impact smaller validators, calling the proposal drastic, short-sighted and poorly researched, with the potential to harm retail and development businesses, trading and ATOM validation.

Cosmos Hub recently updated and launched a liquid staking module. Prior to the update, ATOM holders had a lock-in period of 21 days to move their funds once the tokens were unlocked. Thanks to the new module, staking ATOM can be used in the Cosmos decentralized finance ecosystem without compromising staking returns. According to CoinDesk, at the time of writing, ATOM was trading 3.5% lower, at $9.59. The cryptocurrency rose above $10 over the weekend but failed to gain a foothold above three-week resistance.

Image: Cosmos Network