The Cosmos Hub community has approved Proposal 848, also known as the “ATOM Production Reduction: Proposal to Set the Maximum Inflation Rate to 10%”, with 41.1% of votes in support and 31.9% against. This is the highest turnout ever recorded in the Cosmos Hub history, with 72.7%. As a result, ATOM’s maximum inflation rate will be reduced from 20% to 10%, bringing the current inflation rate down from 14% to 10%. Also, Cosmos Hub’s annualized staking yield will decrease from 19% to about 13.4%.
The proposal is important to limit inflation as part of the proposal. This will maintain ATOM’s value proposition on the market, and accelerate the adoption of IBC DeFi protocols, as well as seeing ATOM gain better traction both as collateral and a liquid gateway. Moreover, reducing inflation rates will help Cosmos’ security and growth potential.
At the same time, the current inflation rate of Cosmos Hub is overpaying for security relative to its peers, which harms ATOM’s monetary premium. It has also had the governance token under constant sell pressure, hurting price performance. With a maximum inflation rate of 10%, almost all validators are still at break even levels or profitable levels, while validators can increase their commission rate to cover operating expenses or make profits.
The results of the vote were shared on Twitter on November 25, 2023. Following the news, the price of ATOM has increased by nearly 9% in the last year Sunday morning, changing hands at $9.64. You can read more about it here.
