Cosmos Inflation Rate Adjustment Sparks Community Controversy

Recently, the Cosmos community has engaged in intense discussions regarding a proposal to reduce the inflation rate of ATOM. The proposal aims to lower the maximum inflation rate from 20% to 10%, which means that the annualized staking yield will drop from approximately 19% to around 13.4%. Although this proposal seems beneficial for increasing the price of ATOM, it has sparked unexpectedly fierce controversy within the community.

Ultimately, the proposal passed by a narrow margin. The voting results showed that 72.6% of ATOM participated in the voting, with 41.1% in favor, 31.9% against, 6.6% vetoing, and 20.4% abstaining. The support rate was only 1.63 percentage points higher than the minimum requirement of 50%.

However, from the perspective of the number of voting accounts, the support rate is as high as 94.97%. Among 173,000 voting accounts, 164,000 chose to support. This phenomenon has raised some doubts, with some pointing out that there may be a large number of small holders participating in the voting. However, according to incomplete statistics, the number of supporting accounts in each holding range exceeds the number of opposing accounts.

The voting results are mainly influenced by the validators. Out of 73.16 million support votes, 70.43 million came from validators. Some large validators, such as ZKV, GAME, and Sikka chose to support, while Allnodes, DokiaCapital, and Cosmostation chose to oppose. It is worth noting that the votes of the validators are automatically counted towards the ATOM of other delegated users, but users can override the validators' voting results by voting for themselves.

Supporters believe that lowering the inflation rate will promote the adoption of the Liquidity Staking Module (LSM), increase ATOM liquidity, and attract more funds into the Cosmos DeFi ecosystem. They also point out that this may enhance ATOM's scarcity and market value, benefiting long-term investors. According to research, even when the highest inflation rate drops to 10%, validators can still maintain economic viability.

Opponents are concerned that lowering the inflation rate may reduce staking incentives and impact network security. They are also worried about the effects on small holders, believing it could lead to further concentration of ATOM holdings. Some are skeptical about the positive impact of LSM adoption and the development of the DeFi ecosystem, arguing that more evidence is needed to support this.

From the voting results, it seems that small holders are more inclined to support a reduction in the inflation rate, possibly expecting an immediate increase in the price of ATOM. On the other hand, validators and certain large holders may prefer to maintain a high inflation rate due to their own interests.

After the proposal was passed, Jae Kwon, co-founder of Cosmos and Tendermint, expressed dissatisfaction on social media and proposed forking ATOM. He believes that the current governance mechanism may not adequately represent the opinions of all token holders. Kwon's proposal sparked extensive discussion within the community, with many questioning the possibility of forking and its impact on the Cosmos ecosystem.

The recent controversy over the inflation rate adjustment highlights the challenges faced by the Cosmos community in balancing different interests within decentralized governance. It also reminds investors that when engaging in delegated staking, they should consider not only factors like yield and commission rates but also whether the interests of the validators align with their own. If they do not align, investors can choose to vote independently to override the validators' voting results.