Opposition votes unexpectedly gaining the upper hand? Cosmos’ proposal to reduce inflation rate triggers a community civil war.

Surprise Opposition Victory Cosmos' Proposal Sparks Civil War as Inflation Reduction Measures are Debated

Written by: Deep Tide TechFlow

As inflation-induced anxieties intensify, Atom holders seem to see a glimmer of hope amidst the widespread anxiety. Recently, Proposal #848 for halving inflation officially went live, with the aim of reducing ATOM inflation rate from approximately 14% to 10%. The approval of this proposal will impact the Stake annual interest rate of ATOM, reducing it from around 19% to approximately 13.4%. Although reducing inflation means reducing selling pressure, it has sparked a fierce debate about the pros and cons. Is it an opportunity to improve the ecosystem or does it harm the interests of certain parties?

Background

Research conducted by Blockworks Research indicates that ATOM has excessively high costs in terms of payment security, and therefore suggests transitioning to a fixed supply plan. According to the research, nearly all 180 validator nodes can achieve a balanced or profitable revenue purely through commissions with a maximum inflation rate of 10%. Against this backdrop, Zaki (the current helmsman of Atom) proposed this eye-catching proposal.

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Pro-side viewpoint (Yes)

For the Cosmos community, reducing inflation rate is a long-term boon, as investors do not like tokens with high inflation. Atom has long lacked value capture capabilities, and high inflation is one of the reasons for its sustained low price. The interest in APR is also one of the few use cases for Atom. Historically, tokens with high inflation also tend to have a bad reputation. If Atom continues to maintain high inflation, the following scenario will arise: an increase from today’s 370 million tokens to 2 billion tokens in 2035.

If this proposal is approved, it is expected to reduce selling pressure from large holders and nodes, while promoting widespread adoption of LSM, allowing ATOM to be widely used in all chains that welcome it, rather than just being staked, bringing positive development to the entire ecosystem.

Con-side viewpoint (No)

However, the opposition argues that this proposal has a key flaw, which is reducing Staking rewards from nearly 19% to 13.4%. This significant decrease in APR may discourage many stakers, posing a threat to the network’s security. Therefore, they advocate that the inflation rate should not be halved abruptly in order to maintain a higher level of security.

On the other hand, examples like JUNO, OSMO, Stargaze, and other projects have become counterarguments. The opposition argues that even though they greatly reduce inflation, prices are still dropping rapidly.

Battle for Interests: Whales vs Retail Investors

This proposal has sparked a fierce battle between retail investors and whales within the Cosmos network. Some large nodes are not welcomed by the community, as all they have to do each month is dump the hundreds of thousands of Atoms they receive from staking onto the market. Whales continue to benefit from maintaining a high annual percentage rate (APR). As mentioned earlier, the majority of nodes only need to earn commissions to achieve a balance or make a profit, but the large nodes still use concerns about network security as their excuse for opposing inflation reduction.

Future Outlook and Decision Time

A game concerning the future is playing out on the Cosmos network, with the “NO” option receiving the majority of support. There are 11 days left until the proposal ends, and the choice is to either continue with high inflation or reduce inflation to drive up the price of Atom.

In my opinion, reducing the inflation rate is a crucial step for the long-term development of the Cosmos ecosystem. High inflation is not beneficial for the long-term value and health of Atom. Although finding a balance between reducing inflation and maintaining network security is a challenge, a 20% inflation rate has not brought much development to Atom over the years; it has only served as a cost-free money printing machine for whales. Why not try a different approach? Reduce Atom inflation while using the Cosmos ecosystem to activate another type of income for Atom. The proposal game has just begun, and the future trend is still unclear. Let the bullets fly a bit longer.

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