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Cosmos developers propose reducing the ATOM inflation rate

The minimum inflation rate for ATOM could potentially be reduced to 0% per annum.

Developers of the inter-blockchain communications (IBC) protocol Cosmos want to further reduce the inflation of its native token, ATOM.

According to a Jan. 9 proposal by StakeLab, a staking and relaying hub on the Cosmos ecosystem, developers wish to reduce the minimum inflation rate of ATOM to 0%.

ATOM’s current inflation rate is between 7% and 20% and will be reduced to 0% or 20% if the proposal passes.

A quorum of 40% of ATOM’s outstanding supply and sufficient yes votes are required before Jan. 23 for the proposal to pass. In outlining the rationale for the proposal, StakeLabs wrote:

“This minimum rate implies that, theoretically, even if 100% of the token supply were staked, the network would continue to produce an additional 7% of tokens annually. This situation raises concerns and, to my knowledge, doesn’t align with any other functioning blockchain model (even outside).”

StakeLab further explained that the community should consider the viability of transferring protocol revenue from emerging Cosmos consumer chains to ATOM stakers instead of issuing tokens outright.

the firm wrote:

“It may not make sense to maintain a 7% annual emission rate if the revenue from consumer chains becomes substantial,”

According to one concerned user, the 0% inflation proposal may discourage current ATOM stakers and affect ecosystem tokenomics, where over 60% of ATOM is currently staked.

“For example 2 chains that have 0 inflation that are based on Cosmos SDK are DYDX and Kava,” the user wrote“.

While DYDX is still in the transition phase Kava has been here for a while but has recently implemented 0% inflation. At the moment DYDX has around 7% staked and Kava has 12%.”

On Nov. 26, 2023, the Cosmos community voted to reduce annual ATOM staking yields from 19% to 13.4%.

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