Overview
The Cosmos network is made up of multiple autonomous blockchains, known as zones, which operate simultaneously. Certain zones function as central nodes in relation to others, facilitating interoperability among numerous zones via a common central hub. The top 5 protocols by total value locked amount to 1.6 billion in TVL as highlighted below:
ATOM, the cosmos hub’s native token, serves three primary functions:
- Prevent spam
- Act as staking tokens
- A voting tool in governance processes
A lot of dialogue has occurred as of late surrounding the inflation of $ATOM, the most recent discussion relates to Governance Proposal868 as we will discuss below.
Proposal868:
In the recent discussions within the Cosmos community forum and the proposals listed on Mintscan, a critical concern is the suggestion of a 7% minimum inflation rate. This rate implies that even with full token staking, the network's token supply would increase by 7% yearly. This approach is unique and not mirrored in other blockchain models. Furthermore, the idea of a 20% maximum inflation rate aims to reward those securing the network, particularly if there's a decline in participant numbers. It's a strategy to attract new participants and keep existing ones engaged.
However, with the introduction of consumer chains potentially generating significant revenue for ATOM token stakers, it might not be practical to maintain a 7% inflation rate, especially if there's full bonding. A proposed solution is to lower the minimum inflation rate to 0%, providing flexibility to stakeholders. They can then adjust their staking strategies based on the balance between emission rates and consumer chain revenues.
Conclusion
In summary, the proposals for adjusting Cosmos' inflation rates are a critical part of its economic strategy. The community's input is invaluable in this regard. Continued discussions over the next week are encouraged before moving forward with implementing any changes on the chain.
Disclaimer: This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.