Controversy Arises Over Cosmos Ecosystem Inflation Rate Adjustment Proposal

Recently, a proposal within the Cosmos ecosystem aimed at reducing the inflation rate of ATOM has sparked widespread discussion. The proposal seeks to lower the maximum inflation rate from 20% to 10%, and correspondingly, the annual staking yield will decrease from about 19% to around 13.4%. This proposal was ultimately passed by a narrow margin, but the entire process revealed the differing interests among various groups within the ecosystem.

After the proposal was passed, Jae Kwon, the co-founder of Cosmos and Tendermint, expressed his dissatisfaction on social media and even suggested the idea of forking ATOM. He believes that the current governance mechanism may not fully represent the opinions of all token holders. Notably, Kwon has had longstanding disagreements with other team members, having previously resigned due to differences with them on issues such as governance and project development direction.

According to statistics from a certain data platform, before the proposal was passed, the inflation rate of ATOM at 14.97% was nearly the highest among major PoS public chains. ATOM has a target staking rate of 67%, and the inflation rate is dynamically adjusted between 7% and 20% based on the actual staking rate. However, even though the inflation rate is already high, the actual staking rate remains below the target, causing the inflation rate to continue to rise.

A report from a research institution indicates that Cosmos may have paid excessively high costs in maintaining network security. The study found that even if the maximum inflation rate is reduced to 10%, the vast majority of validators can still break even or make a profit through commission income. Based on this research, a co-founder of a decentralized asset management protocol proposed a plan to reduce the maximum inflation rate of ATOM to 10%.

The proposal was ultimately passed by a narrow margin. The voting rate reached 72.6%, based on the number of participating ATOMs, with 41.1% in favor, 31.9% against, 6.6% vetoed, and 20.4% abstaining. Out of the 173,000 accounts that voted, 94.97% chose to support it. However, this high support rate stands in stark contrast to the actual voting weight.

Supporters believe that lowering the inflation rate will drive the adoption of liquidity staking modules, increase the liquidity of ATOM, and promote the development of the Cosmos DeFi ecosystem. They also point out that this may enhance the market value of ATOM, benefiting long-term investors.

Opponents are concerned that lowering the inflation rate may reduce the incentive to stake, affecting network security. Some believe this could lead to further concentration of ATOM holdings, while others express doubt about its positive impact on the development of the DeFi ecosystem.

From the voting results, it seems that small holders are more inclined to support a reduction in the inflation rate, possibly out of an expectation for the price of ATOM to rise. Meanwhile, some validators and large holders tend to oppose this, in order to maintain higher inflation rewards.

The process of passing this proposal reveals the challenges faced within the Cosmos ecosystem in balancing the demands of different interest groups. It also reminds us that when participating in delegated staking, in addition to considering factors such as yield and commission rates, one should also consider whether the validator's stance aligns with their own. If there are discrepancies, users can choose to vote independently to override the validator's decision.