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News/Cosmos Co-Founder Calls for Network Split, Airdrops for ATOM1 Amidst Inflation Debate

Cosmos Co-Founder Calls for Network Split, Airdrops for ATOM1 Amidst Inflation Debate

Van Thanh Le

Nov 27 2023

8 months ago4 minutes read
Digital art of a chibi cubic robot contemplating amidst a neon-lit Cosmos blockchain representation

Cosmos Hub Approves ATOM Inflation Cut for Enhanced Security

Cosmos Hub, a pivotal player in the interconnected Cosmos network, recently approved a critical proposal. This decision aims to slash the maximum inflation rate of its native token, Cosmos ATOM, from 14% to 10%. 

This strategic reduction in inflation isn't just a numerical adjustment. It's expected to bolster both the security and sustainability of the Cosmos Hub blockchain. By recalibrating the inflation rate, the governing body addresses long-standing concerns about the network's financial health and security measures.

One of the key aspects of this proposal is its impact on staking. Staking yields for ATOM are set to take a dip. From the current annualized yield of around 19%, it's anticipated to fall to approximately 13.4%.
Source: Mintscan

Delving into the specifics of the vote, it was a nail-biter. With 41.1% voting in favor and 38.5% against, the proposal hovered on the edge of rejection. However, a last-minute surge in votes turned the tide, signaling a community divided yet ultimately leaning towards change.

The rationale behind this decision is multifaceted. A key argument presented was the issue of overspending on security. The proposal suggested that even with a reduced inflation rate of 10%, validators, who play a crucial role in maintaining the network, would still operate profitably.

In the debate, Zero Knowledge Validator, a major player with significant voting power, voiced a compelling argument. They pointed out that the high inflation rate was not only unnecessary for maintaining security but also deterred ATOM's utilization in DeFi and other sectors within the Atom Economic Zone. 

However, not all voices echoed in agreement. AllNodes, another validator, raised an alarm. They argued that this sudden shift might adversely affect smaller validators. Labeling the proposal as hasty and lacking foresight, they highlighted the potential risks involved in such a significant economic shift.

In addition to these changes, Cosmos Hub has recently innovated with the introduction of a liquid staking module. This feature allows users to unstake their ATOM tokens without the usual 21-day lock-in period.

Cosmos Co-Founder Jae Kwon Calls for Network Fork After Proposal Passes

Recently, Jae Kwon, co-founder of Cosmos, stirred the crypto community. He's urging ATOM holders to think about forking the network. This follows a divisive proposal to slash token inflation.

Currently, Cosmos operates on a dynamic inflation model. The annual inflation rate stands at 14.24%, linked to 65.7% of ATOM being staked. This system has been at the core of Cosmos' functionality. But the winds of change are blowing.

The proposal to cut inflation garnered mixed reactions. It secured 41.1% support, with 31.9% opposing, 6.6% vetoing, and 20.4% abstaining. This decision didn't sit well with Kwon. He's not just any voice in the crowd. His call for a network split carries weight, given his foundational role in Cosmos.

This move isn't abrupt. It's the culmination of years of internal tensions within the Cosmos ecosystem. Kwon hopes a chain split might ease these strains. He's eyeing AtomOne, a new network forking from Cosmoshub4. This isn't a complete overhaul. AtomOne plans to stay compatible with the latest Cosmos software.

The Cosmos Hub, a central cog in the Cosmos machinery, involves crucial functions like staking, governance, and transaction fees. Kwon's vision for AtomOne is transformative. He aims to revise governance structures, including a new quorum threshold.

This fork will lean on the existing Cosmos Hub network software, Gaia. It's not a step back. Key features like IBC and interchain security will remain intact. AtomOne plans to retain the original maximum inflation rate of 20%. 

This move aims to reward validators and stakers more generously. The proposed fee token, Photon (phATOM1), adds another layer to this new structure.

Kwon's proposition for AtomOne's governance is bold. He suggests a two-thirds majority for passing governance decisions. This is a notable shift from the current Hub's less than 50% requirement.

AtomOne isn't just a side project. It's separate from Kwon's other Layer 1 blockchain venture, Gno.Land. The plan is ambitious. AtomOne will primarily distribute a new token, ATOM1, to Cosmos stakers. This could lead to the largest airdrop in ATOM's history.
Source: Github

In the genesis supply of ATOM1, 10% will be premined. The rest, a whopping 90%, is earmarked for an airdrop based on voting activity. Kwon's strategy includes a novel twist. Those who voted against reducing maximum inflation may receive ATOM1 through an airdrop. This approach seemingly rewards dissent while penalizing approval of the inflation cut.

This proposed chain split might also rejuvenate the original chain. By removing elements of discord, it could spur innovation and growth. Behind Proposal 848 lies an analysis from Blockworks Research. Their findings suggest Cosmos might be over-investing in network security, especially when compared to other Proof of Stake networks.

Cosmos uses a delegated Proof of Stake consensus. This allows ATOM holders to delegate tokens to specific validators for staking. Advocates of the 10% inflation rate argue it's enough for both security and validator profitability. They believe this reduction is essential for maintaining network integrity.

chart (3).webp

However, the announcement of these changes had an immediate market impact. The price of ATOM saw a downturn, dropping by about 4.4%. This reflects the market's sensitivity to such significant governance and economic shifts within major blockchain ecosystems. 

Key Takeaway

The Cosmos saga is far from over. It's a story of innovation, dissent, and the relentless pursuit of a more secure, efficient blockchain ecosystem. Kwon's call for a fork is more than a technical shift. It's a testament to the evolving nature of blockchain governance and the complexities of balancing diverse stakeholder interests.

Frequently Asked Questions (FAQs)

1. What Does the Cosmos ATOM Inflation Rate Reduction Mean?

The reduction of Cosmos ATOM's inflation rate from 14% to 10% aims to enhance network security and sustainability. It reflects a shift in the economic strategy of the Cosmos Hub, intending to improve the token's value stability.

2. How Will the Inflation Rate Cut Impact ATOM Stakers?

The cut in inflation rate will lower the annualized staking yield from around 19% to approximately 13.4%. This may affect the rewards received by ATOM stakers, but is seen as a move towards a more sustainable economic model for the Cosmos network.

3. What Is Jae Kwon’s Proposed Network Fork, AtomOne?

AtomOne is a proposed fork of the Cosmos network by co-founder Jae Kwon. It plans to retain the original inflation rate of 20% and introduce new governance changes. The fork aims to alleviate internal strife within the Cosmos ecosystem and offer an alternative path for the network's development.

4. What Are the Key Features of AtomOne?

AtomOne will utilize the existing Cosmos Hub software (Gaia) while maintaining key features like IBC and interchain security. It will have a different governance mechanism, requiring a two-thirds majority for decisions, and plans to distribute a new token, ATOM1, primarily to Cosmos stakers.

5. How Might the Cosmos Network Fork Affect the Crypto Market?

A fork in the Cosmos network, leading to the creation of AtomOne, could introduce market volatility. It might affect the valuation of ATOM tokens and influence investor sentiment. The fork reflects the complexities and challenges of decentralized governance in blockchain ecosystems.

This article has been refined and enhanced by ChatGPT.

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