The max inflation parameter will be reduced from 20% to 10%, bringing ATOM’s current inflation rate to 10%.
This decision comes with the highest turnout in Cosmos Hub history: 72.7% pic.twitter.com/03MPSsUsmx
— Cosmos Hub ?? (@cosmoshub) November 25, 2023
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.
