Original author: Shenchao TechFlow
As inflation-fueled jitters intensify, Atom holders appear to be seeing a glimmer of hope amid widespread anxiety. Recently, the inflation halving proposal #848 was officially launched, aiming to reduce the ATOM inflation rate from approximately 14% to 10%. The passage of this proposal will affect ATOMs Stake annual interest rate, which will drop from approximately 19% to approximately 13.4%. While less inflation means less selling pressure, this has sparked a heated discussion about the pros and cons. Is it a good opportunity to improve the ecology, or does it harm the interests of certain stakeholders?
Research conducted by Blockworks Research points out that ATOM has exorbitant fees to pay for security and therefore recommends transitioning to a fixed supply plan. According to research, almost all 180 validator nodes would be able to break even or make a profit through commissions alone at a maximum inflation rate of 10%. Against this background, Zaki (currently the helmsman of Atom) put forward this eye-catching proposal.
Positive point of view (Yes)
For the Cosmos community, reducing the inflation rate is a long-term benefit, and investors do not like high-inflation tokens. For a long time, Atom itself has lacked the ability to capture value, and excessive inflation is one of the reasons for its continued low price. Interest in APR is also one of the few use cases for Atom. Historically, tokens with high inflation have also tended to have a bad reputation. If Atom continues to maintain high inflation, the following situation will occur: from 370 million today to 2 billion in 2035.
If this proposal is passed, it is expected to reduce the selling pressure of large players and nodes, while promoting the widespread adoption of LSM, allowing ATOM to be widely used in all chains that welcome it, rather than just staking, bringing positive development to the entire ecosystem.
Opposition point of view (No)
However, opponents believe that this proposal has a key flaw, which is to reduce the staking reward from nearly 19% to 13.4%. This large APR drop may dissuade many stakers, posing a threat to the security of the network. Therefore, they advocate that the inflation rate should not be suddenly halved in order to maintain a high level of safety.
On the other hand, the examples of projects such as JUNO, OSMO, and Stargaze have also become arguments for the negative side. The counter argument is that even though they have greatly reduced inflation, prices are still falling rapidly.
Competition for interests: giant whales vs. retail investors
This proposal triggered a fierce battle between retail investors and giant whales in the Cosmos network. Some large nodes were not welcomed by the community. All they needed to do every month was to dump hundreds of thousands of Atoms obtained through staking into the Cosmos network. market. The ultimate beneficiaries of continued high APR are still whales. As mentioned above, the vast majority of nodes can break even or make a profit with just commissions, but large nodes still support not changing inflation, and concerns about network security serve as their excuse.
Future Outlook and Decision Moments
The Cosmos network is playing out a game about the future, and the “NO” option currently has the majority of support. There are 11 days left until the end of the proposal. The choice we face is to continue to maintain a high inflation rate, or to push up the price of Atom by reducing inflation?
In my opinion, reducing the inflation rate is a key step for the long-term development of the Cosmos ecosystem. High inflation is not good for the long-term value of Atom and ecological health. Although it is a challenge to balance the issue of reducing inflation and maintaining network security, over the years, 20% inflation has not brought much good development to Atom, and it has only served as a zero-cost money printing machine for whales. Why not think differently? While reducing Atom inflation, use the Cosmos ecosystem to activate another kind of income from Atom? The proposal game has just begun, and the future trend is still confusing. Let the bullets fly for a while.