Cosmos community approves capping Atom inflation rate at 10%

The governance body of Cosmos Hub ATOM -5.47% approved a proposal to reduce the maximum inflation rate of its native token Atom from about 14% to 10%.

The approved change would bring Atom's annualized staking yield from approximately 19% to about 13.4%, according to the proposal.

Cosmos Hub is the central blockchain of the Cosmos network, an ecosystem of interconnected blockchains. The native token of Hub is Atom, which is used for staking, governance and transaction fees.

The proposal narrowly passed with 41.1% of votes in favor versus 38.5% votes against, in the highest-ever turnout vote in the Cosmos ecosystem. It was projected to fail mere hours before the deadline, but a late surge of votes and some reversals from validators swung the outcome narrowly in favor.

The proposal argued that Atom's high inflation rate, relative to its peers, represented overpayment by the Hub for security. It further reasoned that validators would still be able to break even or turn a profit under 10% inflation.

Zero Knowledge Validator, which cast the largest vote in favor of the proposal, explained its support for the proposal in a post on X. "Double digit inflation is not necessary for security, weakens Atom price long term, and disincentivizes use of Atom in DeFi and elsewhere in the Atom Economic Zone," it said.

The largest vote against came from validator AllNodes, which explained in a post on X that small validators could be hurt by the change. AllNodes called the proposal "...an abrupt, short-sighted, and ill-researched idea that might wreak havoc on retail and businesses engaged in building, trading, and validating Atom."