Cosmos Hub votes on proposal aiming to set minimum ATOM inflation rate at zero
Quick Take Cosmos Hub community members are voting on a proposal to reduce the minimum inflation parameter from 7% to 0%. If approved, ATOM inflation will steadily reduce to zero if more than two-thirds of tokens are bonded on the network.
Community members of Cosmos’ central hub network have opened voting on a proposal seeking a drastic change in the network’s economic policy — reducing the minimum inflation parameter from its current 7% to 0%.
The new proposal, numbered 868, aims to decrease the InflationMin parameter to 0%. If the staking of ATOM -1.72% exceeds two-thirds of the network, inflation will gradually reduce to zero.
Stakelab, the proposer, seeks to eliminate inflationary pressures on ATOM, particularly if most coins are bonded, aiming for a manageable inflation rate.
This comes after the community recently accepted proposal 848 concerning ATOM supply and established a cap on the maximum inflation rate at 10%, bringing it down from 20% with the goal to tame token emissions.
The new proposal is similar. It wants a decrease in inflation rate towards zero if 67% of ATOM is staked with validators.
Potential challenges around the proposal
Yet the potential impact of this newly proposed change is significant. The current bonding ratio is at 64%. If it reaches 67% following proposal approval, rewards could significantly decrease — impacting validator revenue and the hub’s security.
Jacob Gadikian, CEO of Notional, a Cosmos-based infrastructure provider and validator, said that if inflation ever reaches zero, it could potentially impact the network's economic security.
According to Gadikian, if the proposal is approved, the bonding rate will influence the inflation rate because inflation is designed to motivate stakers to provide security.
"I think that would probably be bad because well it essentially robs the chain of its economic security," he told The Block.
On the other hand, the proposal states that Cosmos Hub is also looking at other revenue streams from servicing "consumer chains" linked to the hub and that could be used to compensate stakers in case the hub reaches a level of no inflation.
At the time of writing, 54% of community votes favor the proposal, against 40%, but a quorum has not yet been reached. The vote concludes on Jan. 23.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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