[PROPOSAL] Set Max Inflation at 10%
This is a temperature check to change the max inflation parameter on Cosmos to 10%. This would instantly drop the inflation rate to 10%.
AADAO grantees are working on more in depth changes to the ATOM tokenomics. I believe that all empirical evidence shows that Cosmos is over paying stakers substantially for their services. Months of high inflation in the bear market have barely budged the staking rate.
Reducing the staking rate should be a boost to LSM adoption and will hopefully drive more users towards Mars, Inter protocol, Levana etc for higher yield.
This is just a param change proposal.
This will impact the rate of growth of the community pool and a separate proposal to increase the community pool take should be considered.
Agreed, it is best for the ecology to keep interest rates at a low level for a long time and must be lowered to below 10% immediately.
In my opinion, this question is overrated. Stakers are basically only rewarded with the difference between staking rewards and dilution from inflation and one could criticize the amount of expropriation of non-stakers, who should, however, be motivated to stake. DeFi could work largely with stAtom. I imagine what is still holding many stakers back is the (yet) unclear procedure regarding airdrops for Liquid staked Atom. However, since lower inflation makes historical price trends look better, a corresponding marketing effect in this regard might be an advantage. It is difficult to say whether this is sufficient to justify the risk of a change, which could again provoke criticism of the unpredictability of future developments.
Before I play red team, I’d like to say I support this and plan to vote yes. This combined with raising fees (a discussion for another time), is a start towards a simple, serious, sustainable future.
My only hesitation would be the realization that there may be a certain amount of stakers that are just permanently interested in milking staking APR, currently one of ATOM’s few use cases.
Obviously, the rational solution is that these stakers would simply just use the LSM and then get some additional yield via multiple farming and DeFi options across Kujira, Neutron, Osmosis.
Alas, people aren’t rational…and this is really just taking current staking APR from ~19% to ~13.5%. I’m interested to see how that will be received. Will those people use the LSM, or will they leave?
On the other hand…if they leave…do we care?
Overarching summary:
I think this a necessary change in the grand scheme, but don’t think this will have any material price impact outside of a marketing/narrative shift, it might even have the exact opposite effect near term.
IMO, question has been underrated since June 2021 when Osmosis launched. The atom staking rate is basically the ‘‘risk-free’’ yield in and around the Hub. Lowering it makes it easier for defi to lift itself up from the ground (where it currently resides).
example: Would you provide atoms to be lent on mars at a rate of 5.79% ? Most probably not, as you can get 19.13% simply by staking.
example : Would you LP into an Osmosis pool if the yield is less than 19.13% ? probably not, as you can get it simply by staking
ATOM being widely used in all the chains that welcome it is a desirable future and good for its reputation as IBC-money (which is only my vision).
I am in favor of a massive reduction of the inflation rate, max 10% is a good start.
As I wrote, the staking rate is not real yield because of dilution. I probably wasn’t clear with my comment about using LS-Atom in DeFi: if mostly LS-Atom is used in DeFi (like bCre in Crescents’ DEX) the inflation does not hurt. I am not against reducing the inflation rate, but I don’t see overwhelming benefits from a financial mathematical perspective compared to the marketing aspect and I have a hard time predicting the reaction to changes that are not clearly necessary. You are right, before LS-Atom, it would have been much more beneficial to reduce the inflation, but now we have LS.
Badly needed change. Full support from me
I don’t see how reducing inflation increases LSD adoption.
There needs to be more/better options for what you can do with LSDs. Currently there’s no real home for any meaningful amount of stATOM. The theory that you can generate additional yield with LSDs in defi simply isn’t true from what I see around the ecosystem currently. Not with size anyway.
Also sceptical that the other theoretical benefits of reduced inflation will materialise.
I suspect price doesn’t double simply because inflation halves.
Lower inflation probably disincentivises staking so the bonded rate probably comes down and apr finds a new equilibrium some where north of 50% of the current level.
What happens to this unbonded atom?
What does this do for ICS?
Should the validator set be trimmed in sync with the max inflation rate?
Why does the community tax need to increase if we’re confident that inflation has a positive impact on price?
I tend to think a gradual reduction is more sensible than a halving.
What are we trying to solve with it? Yes in theory it looks good but it does not work like this in crypto, especially in the cosmos. Juno. OSMO and Stargaze have made similar changes and nothing has changed positively on the price side.
I guess the main motivation of this comes from the continuous sell pressure but shouldn’t we add utility for atom instead of doing the number game?
If we are so afraid of the selling pressure because Atom lacks utility why don’t we set the inflation to 0 once and for all?
soi2tudio:Why does the community tax need to increase if we’re confident that inflation has a positive impact on price?
This! If the lower dilution is not expected to add corresponding value to the community pool, why should we even aim for that.
for @waqarmmirza and @soi2tudio ATOM Tokenomics Update (Blockworks Research - AADAO Grant) - Monetary Policy Research Historically, and I don’t mean only crypto but with other monies too : it’s not really about the price but more about liquidity. If you have a big and constant flow of newly minted tokens hitting the markets at some point there isn’t much bid interest to sustain the market and it has to reprice lower. This doesn’t mean that less supply means a higher price, but just marginally better market conditions. There was a time when big supply and big APRs were the trend (especially in the 2018 era of … ''Historically, and I don’t mean only crypto but with other monies too : it’s not really about the price but more about liquidity . If you have a big and constant flow of newly minted tokens hitting the markets at some point there isn’t much bid interest to sustain the market and it has to reprice lower. This doesn’t mean that less supply means a higher price, but just marginally better market conditions. There was a time when big supply and big APRs were the trend (especially in the 2018 era of masternode coins). What would often happen would be…
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Yes please. Personally I would say even 10% is too high. But its a good start.
Again, why focus on price, mainly? What matters is the market capitalization/the value of your portfolio. I’m not a fan of technical analysis but rather a fundamental investor, so I can live with a stable price if I get inflation and a premium as staking rewards and even DeFi yields on top. Depending on the mood in the market, often it is easier to keep the price in a constant range than to enforce a price increase for psychological reasons.
WillB:LSDs don’t work well with high yields because they’ll never trade at NAV because of the unbonding time * yield.
Not really relevant for long term investors and this should be even improved in connection with Babylons’ lower unbonding time.
I am for a change in inflation, 10% seems like a good start. A lot people are naive to think the L1 situation is “grow the pie” tell that to companies trying to compete with amazon. We need to be realistic and business centric and more focused on making due with what we have with ATOM. The community pool discussion can come at another time, but I agree as a staker, the yield is making the asset worthless. Its not sustainable, and we have seen far too many situations where high inflation bootstrapping is a timebomb. This is a good start to get the ball rolling
I think the goal is around 2-5 % inflation + whatever fee revenue the chain captures.
To draw a comparison people may be familiar with, Anchor’s 20% UST rate made it nearly impossible for other apps on Terra to attract UST deposits. In ATOM’s case, yes we could just use LSDs but 1) that adds another layer of DeFi risk, 2) ATOM liquidity is way deeper than all LSDs combined which is important for efficiency & alludes to the increased trust base ATOM has.
Realistically what is a high APR doing for the Hub right now? At most its for stakers to have an income which is reliant on the market to continue bidding the asset…people won’t burn their money forever.
Trix:that adds another layer of DeFi risk
Imo first good point, I would agree to that - hopefully it is only a small additional risk for using LSDs.
But but in terms of liquidity, liquidity of these assets could also be compared only for DeFi attracted Atom, where the same opportunities exist for each Atom as well as LS-Atom, there LS-Atom usually even has deeper liquidity.
And to your comparison of a 20% real “stable” coin yield with a much lower yield, diluted through inflation, I don’t think this is fair. (I used “stable” for UST, back then this was widely accepted)
The numbers have to represent something in reality. Math isn’t just some random numbers a crazy person puts in a notebook. They are supposed to represent something, model some real world process.
20% is supposed to incentivize increases staking percentages during a bear market. It is not accomplishing the task because if it did, staking percentage would go up and then inflation would decrease. If it isn’t then it means we are issuing too many tokens (overpaying for the desired behavior)
Decreasing the amount of tokens for sale will definitely have impact on the price. I agree with increasing utility but when you can’t increase increase utility, you have to decrease the supply to get the price under control.
Again, why focus on price, mainly? What matters is the market capitalization/the value of your portfolio. I’m not a fan of technical analysis but rather a fundamental investor, so I can live with a stable price if I get inflation and a premium as staking rewards and even DeFi yields on top. Depending on the mood in the market, often it is easier to keep the price in a constant range than to enforce a price increase for psychological reasons. Not really relevant for long term investors and this…
Price is not stable. ATOM is -33% this year, or -13% after staking yields are factored in
Hey Zaki, fully support this, I think all cosmos chains with high inflation should get this check.
great point，I support you！
fully support this proposal, infact I think 10% inflation is also too high but 10% is still better than 20%
what about the min limit ?
I agree wiht this proposal, ATOM as a center of AEZ needs to be more like reserve currency, inflation ideally from my point of view must be between 3 to 1%, anually, inflation at 20% is like inflation in 3rd world countries, DeFi can’t flourish if simple staking is better than any yield you could get adding layers of complexity, ATOM must define its primacy an be a reserve of value desirable to buy because it is the entry point to this ecosystem. 10% At least for now sounds good for me as starting point economics must adjust by offer and demand, flush out weak hands and speculators is a good thing to the project.
Hypothetically if the price reacts to the supply of the newly minted tokens linearly there shouldn’t be any problem, BBB bought 100 Atom at 10 USD for 1K USD and with 20%APY over the two years BOB has now 144 ATOM, and even if the price of Atom is 7 USD I have more number of tokens but that is equal to my BOB’s original 1000 USD. Now we have established in the example mathematically that if price reacts to inflation linearly nobody gets hurt. But, this doesn’t happen, It also depends on the market’s external forces, liquidity, and utility. Only the utility adds to the value of the token intrinsically not artificially, reducing the inflation by 50% at this point in time will not only hurt the existing investors who have already lost a lot in the bear market Considering ATOM ATH was 44 USD on Jan 2022. But also it is a haphazard step that has not been proven right in the past either. Another argument to not support this idea is the examples of JUNO, OSMO, Stargaze, and many more who have reduced the inflation greatly but that affected the price of said tokens negatively. Yes, there might be external factors contributing to the price drop of these tokens but no one can prove it…
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waqarmmirza:Additionally, Why do we want to support the LSM in the current stage, where we are making a king (Stride) and they only add to centralization by delegating to 32 validators only? And we see most of these 32 validators again and again as beneficiaries of the system. Maybe this is just a coincidence that these validators get all the major delegations from ICF and Stride. Whether it is a coincidence or not but we should all agree that Stride being a LSD leader should not have the technical capability to decentralize the stake as we have imagined other LSD providers pStake and Quicksilver although they have better decentralization policy where pStake stakes with 75+ validtaors and quicksilver Stakes with the entire set, are not ready for mass adoption. We need to let it cool down for a bit and improvise on the basis of the reasonable data set. So LSM is not at all a motivation for me.
I agree STRD is a ticking bomb.
zaki_iqlusion:Reducing the staking rate should be a boost to LSM adoption and will hopefully drive more users towards Mars, Inter protocol, Levana etc for higher yield.
I see ups and downs to this really, due to the fact that we’d increase overall leverage. But building out defi would be good.
zaki_iqlusion:This is just a param change proposal.
This is why I am overall supportive. If we don’t like it it could be changed back.
zaki_iqlusion:This will impact the rate of growth of the community pool and a separate proposal to increase the community pool take should be considered.
Unsure about this.
The whole point of $ATOM is that it is owned and operated by stakers. Without 2/3 staked there is NO IBC SECURITY in the face of HOSTILE TAKEOVERS. If $ATOM IBC isn’t secure, it has NO UTILITY OR PURPOSE. (actually scratch that, the only purpose is for rugging) The inflation is a punishment for not doing your job as an ATOM holder. You should be staking. If you aren’t staking, you don’t deserve to hold $ATOMs. Everyone who doesn’t grok this should just sell their atoms and leave, or stop complaining when the hub does fork to leave the herd behind. Nobody should be participating in a IBC hub that can’t understand systemic risk. Cosmos and Tendermint were created as a secure alternative to the status quo global elitist psychopathic banking dynastic criminal syndicates. What’s the point if we just make the same bullshit as the last generation? Either build upon first principles and do not budge in the face of profits, or don’t try to build financial infrastructure that sells security. If you don’t take seriously and sell security, you will have blood on your hands. It’s fine to remove the minimum bound of the inflation rate. With ICS and the earning of tx fees,…
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I think min inflation should also change and put to 0%
Let’s remove the lower inflation bound, and let it even go negative.
(but this needs to be tested). But leave the max alone.
Let this be a mantra for the hub.
“ATOM is not a monetary token. Stake or GTFO”
Literally, the more we repeat the mantra,
the more secure and awesome the hub will get.
I see this argument also.
What do you say to the claim that the adjustment rate is too slow?
Also let’s tally:
- icformulet: let’s publish everything and leave it waving in public (they’re irrelevant and risky and should be froze imo)
Jae: Keep the staked ATOMs at 2/3 or you’re just rugging people, so DO NOT DECREASE THE MAX 20%. ALSO, REMOVE THE LOWER BOUND. - Zaki: 10% max inflation helps us mature def in cosmos (@zaki_iqlusion you want to keep the lower bound where it is?)
- Wickex: let’s remove the lower bound
I don’t think anyone is exactly wrong here.
what if we lower the lower bound to 5% and raise the upper bound to 25% and make the system more reactive so that the hub craves stake?
But with global interest rates where they are, 7 could frankly be appropriate
I find the whole conversation very interesting and wish to urge that we ensure staking is always above US interest rates.
There is some kind of weird palpable tension there.
Jae: Keep the staked ATOMs at 2/3 or you’re just rugging people, so DO NOT DECREASE THE MAX 20%. ALSO, REMOVE THE LOWER BOUND.
Jacob, you’re misrepresenting what I wrote 100%. Surprise surprise.
zaki_iqlusion: This is a temperature check to change the max inflation parameter on Cosmos to 10%. This would instantly drop the inflation rate to 10%. Strongly against this proposal for several reasons: -EffortCapital is already proposing and discussing a similar idea, so why are you trying to rush things with this separated proposal now? -Excuse me but this doesn’t only affect stakers, it affects ALSO validators, especially the smaller ones which are buried already in CCs costs. While EffortCapital and others are suggesting ideas to improve this such as the VP tax, you just suggest to bury small validators further? -The 50% individual validator cap was never mentioned or discussed in the signalling proposal about the LSM, you quietly introduced this parameter. It is very telling that iqlusion is the only large validator voting no in the proposal to disable this parameter -The minimum 5% fee proposal passed so this would already decrease the overall APR for stakers and moreover the proposed VP tax would also decrease the overall APR. The 5% minimum fee would already lead stakers to the LSM for higher yields -All new consumer chain costs are covered by…
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I did not specify a time period for the scenario outlined, I rather spoke about the future, but thank you for the numbers this year. But what makes you optimistic that the outcome would have been better if the inflation parameter had been changed, before? In this proposal, the price is not even expected to compensate for the lower dilution let alone exceed it: “This will impact the rate of growth of the community pool and a separate proposal to increase the community pool take should be considered.”
jaekwon:Jacob, you’re misrepresenting what I wrote 100%. Surprise surprise.
edited. Surprise surprise. Wen federal lawsuit? surprise surprise
Here is a list of major L1 crypto assets I track (and a couple of DeFi tokens). On this list the token with the highest inflation is ATOM and that also happens to be the worst performer YTD from this group.
I don’t need to be sure about what the problem is. I know there is a problem and high inflation is one of them. That is one problem to fix and there seems to be an easy fix and we can start there. If that doesn’t work, we’ll think again.
If your answer is “create more utility for ATOM”, then that is easier said than done. Creating “utility” requires “investment” and is essentially a bet that some project will have product-market fit. We already tried to create utility for ATOM this year - interchain security. If ICS didn’t give utility to ATOM, then we shouldn’t be degenerate gamblers and spend more money on our next crazy idea.
I think the next move is cut the inflation and see how that works before we embark on our next pie-in-the-sky idea.
20% inflation has NOT guaranteed 2/3 staked. That is why inflation remains 20%, people are not staking the token. Not sure why you think 20% inflation guarantees 2/3 staked despite clear cut evidence to the contrary. This is a theory you had that is failing in practice. No one wants to stake a token that is rapidly losing value. For people to want to stake the token it needs to have stable value first and 20% inflation is not generating stable value for the token. Thus the optimal inflation percentage that guarantees the combination of stable value and 2/3 staked is probably some number lower than 20%. Right now, you are trying to do the same thing expecting a different result. I am perfectly fine selling my ATOMs to you for the price I paid for them (average around $12) + 5% in interest I would have gotten in Treasuries for 1 year and then you can go and stake them yourself since you understand the tokenomics design better. It is pretty obvious here that your weren’t trying to create a decentralized token or one that has positive value. Also for what reason did you allow ATOM to be listed on all these exchanges like Coinbase, Binance, etc and did you make clear to the…
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The inflation rate is literally 14% and 67% are bonded as we speak.
Jesus Christ.
Why isn’t the staking reward percentage decreasing then?
It’s supposed to reach an equilibrium.
If it decreased then the staking % would go down.
It’s literally working perfectly.
vixcontango:I think the next move is cut the inflation and see how that works before we embark on our next pie-in-the-sky idea.
Hard to follow advices of someone who says ‘liquid ETH is about 7% of ETH’, this is incorrect because rather than 7% is around 36% of staked ETH, you need to talk about staked ETH since the 25% global cap of the LSM refers to staked ATOM: Introducing the Dynamic Liquid Staking Tax (Blockworks Research) - Cosmos Hub Fiscal Policy Part 1 - #17 by Cosmic_Validator
So if we assume that inflation remains 20% forever and ATOM value goes to zero over time in your view that makes the Cosmos Hub secure because all the tokens are staked. Fine.
But you sold ATOM tokens for a positive price to investors and supposedly they made a rational decision buying this token expecting a future value of zero, correct? If that is the case, you might want to get ready for lots of lawsuits and jail.
I need an explanation of how you envision getting a larger than $0 price for the ATOM token. I would normally ask you how envision to get the ATOM price higher than my entry point, but I am engaged in a conversation here where you are telling me that token’s design has a future expected value of zero. What am I missing?
Ok, smarty pants.
I am intelligent enough to buy something for a positive price and then experience a substantial loss and think I have been defrauded no matter the numbers and percentages being put thrown in my face by some genius like SBF or Do Kwon.
Oh yes, it is absolutely my fault as an investor and I can take my losses, but… the people who put ATOM out for trading have to also think about how they will stay out of jail.
Jae will have to explain in a court room where ATOM derives its value from and somehow I don’t think 20% inflation forever to “secure” the Hub is going to fly.
We raised $17M in a fundraiser in 2017.
Get a grip. Do you understand what a unicorn is?
A job subsidy scheme for unemployed devs?
You have to understand the logic of these props. Alas, they usually come from lack of wanting to think outside the box or similar (no offense to anyone here, apologies if it comes across as such - not meant to). The change won’t do anything short term or midterm, as such monetary mechanism as inflation reduction have literally 0 short term effects. BTW, 10 year observations of open and verified systems, seem to hint that such mechanisms also have 0 midterm effect and only come into play when systems are more or less grown and have clear usability. Alas, the proposed monetary policies (including the ones in effect) so far played 0 effect on ATOM and probs will carry on that way. The irony here is that none of these policies will actually change anything. What will is the growth of the ecosystem and carrying making ATOM similar to ETH and BTC, which btw, it is already is. Anyhoos. Just another unheard 5 cents over the last 3 years of ATOM policies. But reducing the current inflation will have 0 desired effect (overall, it’s the right thing to do. I’m just against taking away training wheels from a 3-year-olds bicycle, when that 3-year-old clearly ain’t showing signs of knowing…
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World’s monetary aggregates (USD + EURO + YEN + POUND) grow about 4-8% per year.
ATOM token inflation is higher than that - let’s say 14 or 20% per year as it is currently designed. Let’s assume that ATOM is about as big as it is going to get. Let’s say it has 1 billion consumers and can’t grow anymore. At that point, ATOM prints 14% per year while monetary aggregates print 4% per year. Mathematically, ATOM price will be trending down towards zero.
So far ATOM has had adoption (one fool after another buying it) that has resulted in its price going up. But if its adoption stalls, then given the 14% or 20% inflation rate, the token is bound to lose value vs the fiat currencies. And when it loses value people don’t want to stake it or own it at all.
As such at some point you need to fix the tokenomics and get them inline with the growth rate of the project and the global monetary aggregates to where the token can have stable value. Without it having a stable value, the system currently implemented can’t work. 20% inflation is NOT doing its job as an incentive to stake the token. The incentive system that ATOM uses only works if ATOM has a stable price.
“The temptation for a ruler to debase coinage is too great to overcome, because it’s usually the path of least resistance when faced with a problem. If the king knows that paying for a war by outright raising taxes would likely lead to revolution, but that paying for the war via gradual debasement of coinage will not, he can justify paying for his war by relaying on that second method.” - Broken Money, Lyn Alden I fully support the idea of reducing ATOM inflation. Over a longer time period it is much better for an investor to hold a scarcer money/asset. High inflation period we live in made people afraid of those assets, making them undesirable to invest. Last cycle showed on many coins from Cosmos Eco how high inflation hurts the project. The idea I’m looking into when investing is whether the project is bleeder against BTC and ETH. Why would you take on a more risk just so your investment gets outperformed by BTC or ETH? For a long time I was looking at the ATOM/ETH and ATOM/BTC price charts. Situation is not looking good there, as ATOM is putting a lower lows against against both blue chips. However isn’t a market cap more reliable valuation for a project as the supply…
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great point，I support you！
Insted of decreaseing max inflation could we adjust time it takes to reach minimum inflation?
Could we set the parameter to decrease inflation faster?
Currently we are at the very edge of 2/3. We are at 66.63 % of bound tokens. So in realaty we could be going back up or remain at current inflation.
What I am sudgesting is to make transition to lower inflation faster maybe to reach min or max in 6 months.
As for minimum inflation maybe lowering it to 3% or even to 0%. Don’t know if deflation is possible on the blockchain
Hi all, first time posting here, which I regret not doing earlier.
Im no validator/dev/gigabrain just an average user/staker.
But, I can share what atom community wants:
- Reduce inflation
- Set annual limit on funding/grants (users/stakers r bored seeing ambiguous props all the time)
- Set max supply on atom (at some point MC will stop going up as supply of atom increases and price will go down, why? simple inflation dilution of an asset).
- Atom utility (staking/LS) seems not doing the job.
Its not my job to solve above issues. I can give ideas, but technical knowledge I don’t have.
CONTEXT: Inflation is probably the most misunderstood economic mechanism. We believe this is mainly due to the fact that it has been a politicized over the recent years and mostly turned into a bad behavior: inflation dilutes the supply. Most of this problem actually comes from mixing price and value in a sense that for the same value any increase in supply will results in reducing the price of the underlying asset. What people need to understand is that inflation is nothing more than a redistribution mechanism. the question they might ask themselves is who gets the profit from that inflation. In the case of ATOM this inflation is distributed to stakers. Therefore it is basically a tax to non stakers who gets to profit stakers instead. It uses the supply to create a staking incentive mechanism, by varying price. The price variation involves diluting the value of token holders, but increases the value held by stakers. ANALYSIS: We think this whole inflation discussion is a distraction. The real debate instead should be focused on the Cosmos Hub’s value. Therefore we should all be focused on the ATOM’s market capitalization, not it’s price, which will only vary function of the…
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vixcontango: So if we assume that inflation remains 20% forever and ATOM value goes to zero over time in your view that makes the Cosmos Hub secure because all the tokens are staked. Fine. Do you understand that if most tokens are staked, and only a few not staked, then if an attacker tries to buy these tokens not staked to perform an attack price will increase a lot quickly since he is trying to buy all the little unstaked supply. Furthermore, assuming two thirds of supply is staked, even if the attacker somehow manages to buy one third of supply he could only do a liveness attack not a two thirds attack. For this two thirds attack he would need to buy all unstaked supply and in addition somehow get control also of a large portion of staked ATOM. Inflation is not 20% currently, if a lot of ATOM are staked then inflation goes down to 7%. If % of ATOM staked goes down then inflation increases to encourage staking and increase security. Look, we have an example of a token in theory with much bigger market cap than ATOM before and more inflation, indeed going to zero overnight, but this had nothing to do with the inflation but with other very different reasons. Also,…
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vixcontango: 20% inflation is NOT doing its job as an incentive to stake the token It does its job, earlier this year the staking ratio was lower around 60% or less, inflation increased and the ratio increased to over 67%, then the inflation started to decrease and it is much lower now. vixcontango: World’s monetary aggregates (USD + EURO + YEN + POUND) grow about 4-8% per year. ATOM token inflation is higher than that - let’s say 14 or 20% per year as it is currently designed. Let’s assume that ATOM is about as big as it is going to get. Let’s say it has 1 billion consumers and can’t grow anymore. At that point, ATOM prints 14% per year while monetary aggregates print 4% per year. Mathematically, ATOM price will be trending down towards zero. The ATOM printed go to those staking ATOM, the around 67% of supply staked. These ATOM holders have chosen to stake so it is likely that the new ATOM received from inflation would be staked too, not sold. If all new ATOM from inflation received by this 67% of ATOM holders were all sold and not staked constantly, then over time the total supply would increase as well as the liquid ATOM supply and the staking…
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Cosmic_Validator:Do you understand that if most tokens are staked, and only a few not staked, then if an attacker tries to buy these tokens not staked to perform an attack price will increase a lot quickly since he is trying to buy all the little unstaked supply. Furthermore, assuming two thirds of supply is staked, even if the attacker somehow manages to buy one third of supply he could only do a liveness attack not a two thirds attack. For this two thirds attack he would need to buy all unstaked supply and in addition somehow get control also of a large portion of staked ATOM.
Linking price action with an attack doesn’t make sense, since won’t happen. But still this is what we aim to?
Security reasoning part agree.
Strongly supportive of this move. To add to the discussion about encouraging LST adoption, one other benefit here is that lowering the staking rate also lowers the hurdle rate (the yield that LST holders need to get in defi to make up for the costs of holding the LST). Lowering the hurdle rate decreases the operational costs of the Hub’s LST service providers, meaning that defi incentives could potentially be allocated across a broader suite of products or, at the very least, acts as an additional incentive to convert your staked ATOM to LST-denominated ATOM. Would be keen to get @effortcapital ‘s opinion on this though. I think it’s important that we don’t have multiple parties trying to make the same changes and negatively impact eachothers’ work. This happened on Osmosis with sudden and radical incentives changes that interfered with existing initiatives. One other more controversial opinion. I think that this change should be accompanied by a reduction in the size of the Hub validator set by, at minimum, 30 validator slots. The size of the set is too large already and this is a great opportunity for the Hub to make a clear, unequivocal statement of that fact, while also…
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You have to realise that there is a lack of liquidity in global markets. People will start investing in crypto again when the Fed cuts rates and gets the old money printers out again. Bitcoin will pump and alts will follow. The bear market is for building the functionality of projects. 20% interest on ATOM is amazing and probably the only thing keeping its price up as well as it is. It is currently only 85% down from the all time high compared to other projects in the top 50 that are 99% down. Buying ATOM now is very attractive with its 20% interest rate knowing that when the bull market comes back it will pump once again. That pump will flow money down into all the other parts of the Cosmos ecosystem. I’m a buyer of ATOM at the moment but I wouldn’t be if the interest rate was halved.
I agree with this proposal and suggest it be reduced to less than 10%.
ATOM inflation should be halved, then halved again, ideally between 1.75% - 5%.
Small verification nodes can receive subsidies from the community pool to subsidize system maintenance.
The community pool should no longer fund projects that have nothing to do with the Cosmos Hub itself, but should instead prioritize economic development that benefits the Cosmos Hub.
20% of ATOM has high inflation, and the final result will be its own destruction.
Maybe a more gradual approche would make more sense. For example: gradual 2% decline in max inflation every year till 0% => which will make ATOM fixed max supply in 10 years.
or 3 or 4 % each year maybe to speed things up a bit till 10% and then see how to go from there.
BTW, actual inflation atm is already lowered to around 14% and ATOM didnt crash. So, worries about sell presure for ATOM when max inflation set to 14% inflation is unfounded and also when inflation lowered to 10% gradually it will not create problems imho.
ts not my first 4year cycle and I understand btc dom/alts blood etc.
Money will flow again in crypto, but its not 2017 with 1000 tokens, but 2023 with 10K tokens + 10K meme coins. Buyers now have more options than before.
Proof of stake are suffering from inflation unless a hard supply cap is placed.
Completely agree with all points. A strong NO or even No with Veto.
Initially supported the inflation cut to 10%, but now considering this. I think it makes more sense to remove the inflation floor. Jae, any ideas on what ranges it would be? Personally, I’d like to see inflation at single digits if >66% of atoms are staked. I want defi on cosmos to thrive, but it’s not gonna happen until atom staking rates fall. I prefer using native atoms over stATOMs, I’m sure you agree with this.
I most certainly have a few opinions to add into the discussion, and would love to hear the community feedback and what you all are thinking. However, to start it off, I believe that lowering inflation to 10% impacts the security of the token in a potentially major way, but that doesn’t have to be the case if we make necessary adjustments, which I will outline now. Here are the things that we need to discuss before lowering inflation: • a change to 10% inflation could significantly impact the bonded ratio, or make liquid staking a must, in order to earn further yields on $ATOM. • how will the LSM cap affect chain security in a lower inflation environment. Will a 25% liquid staking cap, encourage people to unbond if we hit the cap, and how will the use of $ATOM in Defi affect chain security. The thing to remember is, the Hub is selling itself as the security Hub of the Cosmos, can we afford to risk chain security for lower inflation? • would a canonical liquid staking chain, owned by the Hub, like Stride, allow for the LSM caps to be raised? If the Hub owns Stride, then that eliminates the need to export risk to other sovereign liquid staking zones, giving the Hub full…
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RoboMcGobo: Strongly supportive of this move. To add to the discussion about encouraging LST adoption, one other benefit here is that lowering the staking rate also lowers the hurdle rate (the yield that LST holders need to get in defi to make up for the costs of holding the LST). Lowering the hurdle rate decreases the operational costs of the Hub’s LST service providers, meaning that defi incentives could potentially be allocated across a broader suite of products or, at the very least, acts as an additional incentive to convert your staked ATOM to LST-denominated ATOM. If lowering the hurdle rate is desirable, there’s an alternative to drastically lowering the `InflationMax` parameter: you can drastically raise the `communitytax` parameter instead. The Community Tax parameter is 10% right now, so 90% of newly minted ATOM goes to staking rewards. Why not keep inflation parameters the same, but raise the tax rate to 40% or even 50% for a similar result? We can revisit inflation parameters and the high tax rate after waiting and seeing how the market responds and if the lower staking rewards actually do result in stakers moving into stATOM and DeFi yield-chasing.…
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Price: The price is currently suppressed because stakers/validators constantly sell their rewards. If we reduce the selling pressure, the price can stabilize and potentially rise. Price Inelasticity: In stocks, a $1 sell pressure can decrease the price by $3 due to price inelasticity. In crypto, this effect is even more pronounced. By reducing inflation to 10%, the price could increase by multiples over time assuming same demand. ATOM as Currency & DeFi: DeFi struggles because a 20% return on ATOM staking is too high to compete. Reducing it to 10% could significantly boost LSM as current stakers would be forced to look for extra yield. We want cosmos to be an interesting place and financial infrastructure is a must. Reducing inflation potentially: • significantly reduces sell pressure • changes narrative for atom inflation (gets closer to market avg but still on higher end) • pushes for LSM adoption • gives a lot more room for defi growth, that leads to more liquidity and more participants, more utility for atom as asset Most think in terms of what happens to them (validators/stakers), but the growth comes from attracting new participants. Lets focus on…
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Folks, I believe @zaki_iqlusion is only taking a temperature check here, and it does look like it’s quite heated … there are a lot of points which @jaekwon and all others made, but if you take the emotions out of play and really read into what’s said, the staking economics is working beautifully. We have a lot of adults in the room and many whales are quietly reading here, so hear me out. Is the thesis founded? I have my doubts that these communities overlap. Staking is for an audience that seeks for “safe play” returns, while Liquid Staking is more of a “defi degen” play. Though there are overlaps amongst some investors, but my hypothesis is that I don’t believe there’s much of an overlap. Liquid staking is an even bigger tax nightmare than staking. They could be different crowds. Staker impact and Validators 2x impact The staker impact is pure and simple… nearly 20% APR turned into 10%. Pure and simple. It’s a shock to their system, alternatively this could be designed to decrease over time. But for validators’ it’s a double whammy. Cosmic_Validator: -Excuse me but this doesn’t only affect stakers, it affects ALSO validators, especially the smaller ones…
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Effort Capital endorsed this effort
twitter.comD🍷
Zaki ⚛️🍷 @zmanian
No, this is a security business, like a bank.
We should make people stake more instead, to have this number go down.
I didn’t see any marketing to make people stake for a long time, and never since a year.
Pushing LSM like this adds a few layers of risk. There is a big security risk. I understand why you do it. But if Atom loses enough stakers it won’t be a security hub anymore.
IBC needs those stakers. And people don’t want a single point of failure, of risk. Otherwise, they can use plenty other chains.
Just let devs build useful things on ICS.
zaki_iqlusion:Effort Capital endorsed this effort
Of course Zaki, since it would be a head start to his suggested annual inflation rate of 1.5% for perpetuity as a “minimum security budget.”: ATOM Tokenomics Update (Blockworks Research - AADAO Grant) - Monetary Policy
We respect EffortCapital and he has great ideas like the VP tax, and we will be supporting him to implement this VP tax. However, other ideas that he has like bringing inflation to 1.5% we don’t support and he is already aware of this.
stakers can afford the decrease, but can the valoperators
The bottom 50% in the set can not.
These proposals don’t make sense at all, and during this bearish cycle, it is outrageous to do this type of experiment. These proposals look more like a symptom treatment rather than the diagnosis of an actual illness.
RoboMcGobo:Lowering the hurdle rate decreases the operational costs of the Hub’s LST service providers, meaning that defi incentives could potentially be allocated across a broader suite of products or, at the very least, acts as an additional incentive to convert your staked ATOM to LST-denominated ATOM.
A question, one inherent tradeoff in the LSTs, is that retail forfeits the voting right, now the retail may or may not use these LSDs in the DeFi but the voting power is concentrated from thousands of people to a few dozen people. Do we need to think governance decentralization is less important than liquidity? it can not be quantified. But we can not deny the effect. Why do we want to keep pushing for the success of these LS derivatives, when we know we are concentrating the VP in fewer hands?
This should be an organic process, but we are here trying everything possible to put an axe on our own foot.
I don’t personally think the impact on this will be significant. This is because:
-
The overwhelming majority of retail ATOM holders do not vote their tokens
-
The ones who care more about governance than yield can simply just keep their tokens staked.
All of that said, Stride is working on liquid governance that will allow you to vote with your LSTs. The challenge around this is ensuring that you dont create a situation in which aomeone can vote their tokens and then just sell their ATOM afterwards (which can lead to governance manipulation)
I read a lot of comments that small validators will be affected if inflation % drops (less earnings).
Majority of stakers last 2 years are just seeing their wallet value dropping . But they continue staking their nice money because they have a long tern view that atom will be profitable. Maybe validators should have that long view too.
Validators do have a long term view, doubly so.
ATOM stakers lose a % of their ATOM value. Validators have negative cashflow every month for a long time, esp the lower quadrants. Hence validators are paying $$$ for their hosting service (plus DevOps time), plus holding ATOMs and/or staking at the same time. Double/Triple committed 
Full support! enough is enough. atom is getting mocked and is one of the worst performers in L1s. just do what kujira does.
Thank you for sticking to a discussion of the issue instead of character assassination attacks. We are all in this forum from different cultures and we are using terms which some of us may understand differently because there is no legend somewhere that defines the terminology exactly (like for example LST percentages, etc). But with good faith discussion we will always get to the bottom of the problem. Regardless of whether the ATOM printed comes from only the stakers, the fact remains that the money printing rate (inflation rate) is in excess of monetary aggregate printing rate (currently negative BTW, as M2 supply in the US is decreasing). For ATOM to be held and for the printed ATOM to be an incentive and for the inflation percentages to function as incentive, ATOM needs to have a stable price. That stable price is denominated in the world’s reserve currency (US dollars). So it needs to have a stable dollar price. If US dollar M2 has negative inflation (Fed balance sheet went from 9 trillion to 8 trillion this year and is projected to decline by $900 billion for at least 2 more years by some estimates) and ATOM is at 14%, ATOM price is headed straight to zero because the…
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Real returns for ATOM stakers are -15% this year. 20% is a mirage because the principal is declining in value in excess of the staking return. If you have 10% inflation but ATOM price remains stable that will be a much bigger return for ATOM stakers compared to what they are getting now.
I was against the previous community tax increase. If there is one more community tax increase, I will have to get out of ATOM. Find somebody else to finance you.
Resetting the inflation rate represents a viable approach to imbuing ATOM with inherent value. As we anticipate a fundamental resolution to this issue, exemplified by the adjustment of API fees, we draw parallels with the Uniswap UI charge. Notably, the IBC service emerges as the linchpin infrastructure, bestowing unparalleled value upon the entire ecosystem at this juncture.
You are assuming price stays same when supply cut in half. Price could more than double and validators would be making more. Think of ‘btc halving’ narrative.
Current model is broken either way because: infinite supply pushes price to $0. Meaning stakers will exit slowly and won’t restake which is happening already. Validators just selling tokens or will sell when prices improve. But little new stakers if we inflate to infinity. Meaning we are going to have bonded rate moving to 0 as well.
While some are trying to ‘save’ small validators and picking on maintaining short term bonding rate, others are thinking long term design issues and how to solve that.
vixcontango: I think variable inflation rate from 0% to 7% in a negative M2 world would be just as effective as 7% to 20% rate in 4-8% M2 growth world. Let’s summarize: you suggest a major reduction in ATOM inflation and you are certain this will lead to a significant ATOM price increase. But, what if you are wrong and the opposite happens? -We have many recent examples and data proving that major inflation reduction doesn’t lead to price increases: multiple Cosmos ecosystem projects did major inflation cuts this year, much bigger than what is being suggested for ATOM, being certain that a great price increase would follow, they were all wrong. You say that for ATOM it would be different, an exception? I remember Sunny saying on twitter that the major reduction in OSMO inflation should naturally lead to a good price increase, since less supply, well we have the data about OSMO after the major inflation reduction, and for many other Cosmos projects -So, if ATOM price doesn’t increase as you suggest, or even drops further, after the inflation reduction, what will happen? Many validators will leave for sure, making the Cosmos Hub less secure and with less talent. Many…
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I am not looking for major price increase but for PRICE STABILITY. In other words, I am fine with 20% or 10% yields so long as the token price remains the same. I am investing in ATOM for the yield first (income) and for the capital appreciation second (growth). I view ATOM as an income investment. The problem here is that that the token price is not stable. It is decreasing. I am trying to fix this decrease and get a 10% to 20% yielding instrument. I am simply trying to balance the supply and demand for the token to a where the price is stable. Sentinel went through 2 inflation reduction initiatives, just did a 3rd one and it price bottomed at 0.00018 and is now at 0.00030. As far as I am concerned, they are are working on achieving price stability and accomplishing it. Another token that took care of its inflation problems was Akash. Akash is one of the best performing tokens out there this year with 300% returns. Its efforts to fix its tokenomics definitely brought supply and demand in balance which resulted in the token being investable. I am trying to do the same exact thing with Cosmos Hub, but this is a bigger community with different characters and motivations in it.…
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vixcontango: I am investing in ATOM for the yield first (income) and for the capital appreciation second (growth). I view ATOM as an income investment Makes sense you think about yourself and what’s best for you. But for most validators, such a big reduction in revenues is a very serious issue especially in the current circumstances, so it should be compensated with a price increase, which is not certain at all whereas the revenue reduction would be certain. Now you say you don’t want inflation reduction because price will increase, but because price will stay ‘stable’. You avoid discussing the example of Osmosis price after the major inflation reduction, and you reply with examples of much smaller tokens such as Sentinel, or tokens like Akash where price increase was mostly related to new tech developments rather than just inflation. vixcontango: Controlling the supply works (it’s Econ 101. Thank you John Locke!). There is also demand in this equation. Assuming demand is constant, if supply is reduced makes sense price would increase. But if demand also decreases as the supply decreases? Even if there is price stability, now the yield would be much…
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Comparing atom with osmo inflation just because they both have inflation doesn’t make sense imo.
Osmosis even if inflation goes to zero majority won’t buy to use it but only trade it.
CT has doomed it for upcoming months/years.
- Many people got burned at the pools (begun with UST, not osmosis fault that one)
- Devs/vals selling below May '22 ATL
- Devs/vals shitposting for atom and all cosmos
- Kuji (too many parameters here)
Cosmos is bigger than small validators that can’t meet ends. Mid size and large validators + atom stakers benefit from reduced inflation longer term. Small validators is a cost for decentralization which is excessive at this level of economic activity. Overpaying for decentralization/security.
I gave AKT and DVPN as examples because I understand the utility of these tokens. These are true app chains and their tokens have a very well defined purpose and market. I really don’t understand the utility of the OSMO token. I understand Osmosis as a product (an IBC token exchange) and it is a great product I use all the time. But I don’t understand the utility of the token. As far as I am concerned Osmosis is something that should be secured by the Cosmos Hub, part of the AEZ and ATOM should be used to pay for transactions. Cosmos had this project Gravity DEX a few years ago and basically Osmosis is the new and improved Gravity DEX. I have always agreed with the idea that Cosmos Hub should have an IBC token exchange but for technical reasons it should be a different chain (if it fails, the IBC transactions on the Hub are unaffected). BTW I don’t understand the utility of the Uniswap (UNI) token either. I generally wouldn’t invest in pure DeFi tokens. In ample liquidity conditions, all kinds of non-sensical things can get priced at high valuations. In scarce liquidity conditions, if the token doesn’t really serve a real world purpose, it’s price goes to zero. You could make…
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Seems like “pro traders” areshorting the hell out of atom because of its declining value deriving directly from its inflation.
But yeah sure…Reeducate them…It worked well in the past
With all due respect, I think you’re just wrong. The value of ATOM in terms of marketcap has remained steady and is actually on of the rare assets which managed to maintain the june 2022 lows even during FTX in november. Now if you looked at ATOMUSD, it seems more depressed indeed, but once again, you’re not looking at the right picture there. If you think the smart money makes such mistakes you really need to review this assumption imho.
TL:DR (at $7/ATOM and 10% max inflation, 5% commission, 67% bonded, and ~$600/mo to run a validator per chain): Validators 1-89: Profitable or break-even if this went through running 2 consumer chains Validators 90-115 would break-even or run at a slight loss since they cant soft opt-out with 2 consumer chains currently active Validators 116-160: Can soft opt-out and are profitable running just the Hub Validators 161-180: Unprofitable today and would be slightly more unprofitable if this went through I am in favor of this. The Cosmos Hub is overpaying for security relative to its peers and it is ALSO distributing this security budget poorly where top validators are making out handsomely while some validators in the lowest quartile of the active set are running at a loss at current ATOM prices (but not all). image 1600×630 53.2 KB With the recent increase in minimum commission to 5% and a drop down to 10% max inflation at 67% bonded, all validators with >150k ATOM delegated to them (160 out of the 180 validators in the active set) would STILL be running at a profit at current ATOM prices if they have opted out of running the consumer chains (any validator with less…
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Osmosis post-inflation price action was debunked in earlier comments. The reduced inflation was mostly reduced incentives which meant reduced liquidity & since most liquidity is in OSMO that means selling OSMO, so not much actually changed for supply dynamics.
People are focusing a lot on this as an aims to increasing LSD adoption but I’m not sure where that started. LSD adoption is aided by high staking yields so in reality this would decrease LSD adoption. If the Hub is going to limit LSD adoption by capping total supply, it needs to allow liquid ATOM to be viable for non-stakers, which means reducing the long term dilution.
On a related note, stakers aren’t the only “aligned” participants in the ATOM “network”. Holding ATOM even if liquid is putting your capital at risk, staking just adds another layer of risk. If we are forcing new holders to stake then there will be less new holders. The first step can’t be the riskiest step, liquid ATOM holders are still beneficial to the ecosystem.
Price will lag, that’s not a good short term indicator so let’s not throw this out bc “we won’t see an immediate price change”.
With all due respect, I have 13y+ experience in full time trading and without any pretention, I think I know what I’m talking about. Professionals will look at the market share, both in general terms (ATOM.D) and in a competitive environment (against DOT mostly). It will ALWAYS be measured in market cap terms, not in dollar denominated price. None of these charts shows weakness to me, support areas instead are there. But I agree with you that supports can be broken. On that front this is a matter of risk management, which I’m not going to get into here.
Lol…Okay, pro trader. Everything is a okay in ATOM kingdom I see.
Will keep my ATOM short open.
Let @effortcapital cook 
effortcapital:In conclusion:
- Hub is overpaying for security
- Hub is distributing this inflation poorly due to poor distribution of staker
- Overwhelming majority of validators would still be PROFITABLE or BREAK-EVEN with this decrease in max inflation when you consider the soft opt-out and the new min commission
- Lower inflation and implement VP Tax
Why not Implement VP Tax first and then lower inflation contingent on VP Tax proposal passed and implemented? Think about it, what if it is the other way around, inflation is lowered and then VP Tax is not approved? If to lower inflation the implementation of VP tax is a requirement then both proposals would likely pass. Otherwise, the likely outcome is inflation is lowered and VP tax forgotten or not approved. Or another option, add the change of parameters both to lower inflation and for the VP tax in the same proposal, so if it is approved both the VP tax is implemented and the inflation lowered at the same time
Regardless of VP Tax or not, overwhelming majority of validators are still in good shape if this passes.
If you are in the bottom 5% VP and are not opting out of running consumer chains, that’s a personal business decision and shouldn’t impact the wider Cosmos Hub inflation schedule.
IMO the VP Tax is not ready to go forward yet, but will be soon. It will not be thrown to the side regardless if this change of inflation passes or not.
What the hell is voting power tax? Tax that will urge big validators to launch another copy to distribute their stake among 2-5 their new additional validators? This idea is even more awful.
Push the prop asap please.
Sephiroth:What the hell is voting power tax?
Here is the idea presented by EffortCapital: Cosmos Hub Tokenomics - Fiscal and Governance Policy (Blockworks Research)
effortcapital:Regardless of VP Tax or not, overwhelming majority of validators are still in good shape if this passes.
Please consider also that the cost for your calculation is only the basic infra cost, but you need people to manage and run nodes, perform upgrades, study and vote on governance proposals and a lot more, so real costs are much higher than those in your calculations. Considering the real costs only a few of the biggest validators are profitable now and after the inflation reduction. Most of the other validators are in a big loss today and would be in an even worse situation after the inflation is lowered
Cosmic_Validator:Please consider also that the cost for your calculation is only the basic infra cost, but you need people to manage and run nodes, perform upgrades, study and vote on governance proposals and a lot more, so real costs are much higher than those in your calculations. Considering the real costs only a few of the biggest validators are profitable now and after the inflation reduction. Most of the other validators are in a big loss today and would be in an even worse situation after the inflation is lowered
Everything that goes beyond not getting slashed is discretionary to each validator. Props to you if you offer extra services though.
WillB:Everything that goes beyond not getting slashed is discretionary to each validator. Props to you if you offer extra services though.
Thanks. What I meant in the previous message was not about extra services which of course are additional costs, but ‘everything that goes into not getting slashed’ is higher costs than just the basic infra costs. Furthermore, you suggest that all validators stick to the bare minimum and stop participating in governance, improving the infra, performing upgrades fast, etc., since this goes beyond not getting slashed?
Some thoughts about the idea. First point is that I’m not sure if current market conditions are favorable to implement this change. I’m referring to other Cosmos projects that had a kind of halving this year, and the token price is suffering. In addition to that, this change would keep adding financial pressure on small validators. However, such a change in economics under better market conditions could be an interesting idea. There are different scenarios to consider with this change. Worst case scenario: • The Cosmos DeFi landscape is still not well developed, with not many interesting things to do with your ATOMs and not many use cases • The staking yield is now low, leading people to start unstaking their ATOMs to sell the token and leave • Validators do not earn much money anymore and still have to run ICS chains, which are costly: too many are not profitable anymore and decide to leave and sell their remaining tokens • Price decreases and economic security decreases, leading to a vicious circle • Cosmos Hub becomes a ghost chain that no one cares about anymore This scenario could happen only if nothing is done on the other side to bring more use cases to…
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By discretionary I mean that it is not directly demanded by the rules of the protocol.
When it comes to what’s ‘‘socially’’ acceptable, I wouldn’t expect a small validator to do more than the bare minimum while a top10 validator should probably be more involved than that.
And I think that demanding perpetual 2 digit inflation so validators can cover their activities is trying to solve a problem with the wrong solution.
Cosmic_Validator:Please consider also that the cost for your calculation is only the basic infra cost, but you need people to manage and run nodes, perform upgrades, study and vote on governance proposals and a lot more, so real costs are much higher than those in your calculations. Considering the real costs only a few of the biggest validators are profitable now and after the inflation reduction. Most of the other validators are in a big loss today and would be in an even worse situation after the inflation is lowered
TBH I find this hard to believe, but I’d also be lying if I said I knew for sure (as I don’t run a validator).
Since Chorus One, a large institutional-grade validator, says it costs them $1200/mo to run a chain, and then you have validators like Larry0x who says it costs him $15/mo/chain.
You should be able to amortize the labor cost (more chains doesn’t necessarily mean more labor at a 1:1 rate).
The truth is somewhere in the middle and I doubt the truth is higher than $600/mo for a majority of validators but would love to see evidence to the contrary
Thank you for link. If you want to see results of such idea with VP tax you can check Moonbeam or Moonriver staking where validators launch multiple nodes just to get higher APR and kick normal validators out of active sets because of that. This is what will happen with Cosmos if this idea is implemented.
I replied to you already in the other thread here (Cosmos Hub Tokenomics - Fiscal and Governance Policy (Blockworks Research) - #22 by Cosmic_Validator), the formula created by EffortCapital prevents what you mention both in the case of large validators mostly with self-stake and also validators with low % of self-take
Replied you there as well. If we take numbers from that screenshot with numbers in proposal I am not sure how it will be prevented.
This needs to be YTD performance of bags that are as fully staked as possible for each asset.
APY counts as performance.
Market Cap would probably be okay too.
But token price by itself is not a good metric for comparison.
Also BTC should be the base denom not fiat that gets central bank inflated w/ zero staking.
The resultant chart would be much more ‘actionable’ for Atom, whatever it looks like.
It’s not the inflation. It’s the lack of unified vision. All the Hub has is governance. And it’s an ugly mess. Literally any unified vision with broad community support would shoot the price up at this point. Is low inflation going to attract billions in new capital when it starts flooding into the next bull run? No. That won’t excite anyone. But a place to stake for security that protects its users, protects its community, has a warm fuzzy UX, has a long lock-up & low volatility, has a “Chamber of Commerce” that Joe user can understand, whitelists dApp urls, maybe offers member wallet insurance, sponsors tutorials, funds trusted user support channels, partners w/ tax reporting tools, owns mobile, and basically looks like all the good parts of Binance w/o the exchange - That would absolutely Dominate . The inflation would only bother “non-members”. Inflation would come down and staking would go up because staking would mean access to services that ppl want. Security as a Service is a whole suite of opportunities. But honestly if Hub governance all came together to fund a deep sea vessel or a line of really good toasters the price would still go up. Because not…
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remove min limit and decrease max inflation rate to 12 %
we got it 
I am sorry but it’s the inflation.
If there is a “unified vision” obviously the community is not very decentralized. What passes for “unified vision” in ATOM these days is turning the Cosmos Hub treasury into a decentralized venture capital fund that is blowing ATOMs on every crazy idea out there (ie Cosmos mafia’s friends)
The only difference between the Cosmos Hub venture capital fund and a real one is that there will be zero accountability to the ATOM token holders for the massive losses.
Top 15 validator proxy voting is far (far far) more centralized than any broad community consensus & collaboration will ever be.
Capital flight from Atom to speculative app chains won’t return just to chase lower inflation.
“Less inflationary” is a good goal but it sure isn’t a value proposition to anyone staking or looking to stake. Current state of things - it’s more of a value proposition to ppl looking to sell $ATOM for a higher price.
You want to make the price go up real quick? Roll out an update that makes 100 proxy votes = 1 direct Atom vote.
If Binance & Coinbase & Everstake want 40m votes instead of 400k, they can buy 40m Atom.
Agreed on this point. More taxes = I’m out.
Dude honestly most of this stuff wouldn’t matter if we didn’t have such a doomer community. Look at Solana, the chain doesn’t generate profits and was unprofitable for validators below the 30$ range, still the whole community kept shilling the chain and the stack and it pumped, look at LINK, the price action was even worse and the LINK foundation sold all the way to the bottom, did the Link community fud the chain or the tech stack? NO, they memed about it and continued to shill → one of the biggest pumps
Kuji is literally doing the same stuff in the Cosmos community and it had the best price action…
I personally think that a lot of the people joined during the 2020/2021 bullrun and they don’t have a lot of experience with bear markets ->doomerism. Right now we have to fix the narrative game, every mechanism/measure which improves the narrative is beneficial.
If we had the shillers we would definitely be above 10$
None of these chains have 14% inflation. Solana is at 7%. LINK has max supply of 1 billion. KUJI has max supply of 122 million. The supply pictures matters A LOT. The Cosmos Hub is very unique in that it doesn’t have max supply and moreover its inflation rate can vary greatly over 10 years making it very hard to calculate FDV and thus to assign valuation. All professional investors make calculations based on a 10 year horizon. That’s why the 10-year Treasury Yield is such an important benchmark. For price to go up, you need big money to buy the token. Professional money needs certainty. Demand is not certain so they crave supply certainty. They can’t buy the token at 7% inflation and 70% bonding rate and then a year later discover that inflation is 20% because some other big players unbonded, then go through 20-30% losses in the time it takes to unbond the token. In its current form and in tough liquidity conditions, the token is bottom of the pile in investment priority. People would much rather buy the bigger caps, more liquid, more certain supply picture. I will give you an example. I recently put one of my houses for rent. Couldn’t rent it for 3 months. 30 people came…
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That’s literally not how it works in crypto, narrative is everything, we had 2 years of memetoken mania, the market cap for SHIB, Doge is still in the billions, useless ghost chains like LTC, XLM, BCH still have billion dollar market caps. ATOM can literally have 100% inflation and people would still ape with the right narrative.
And my point was that we should lower inflation, even if it is just for the narrative…
And the inflation argument is irrelevant if you compare the chains, Solana is not profitable… the validators were not profitable, so how do you think this business model is sustainable? I think LINK generates less fees than the HUB right now, it is all based on speculation and that they will succeed with the integration of tradfi, Kuji… it probably wasn’t profitable in itself, my guess is that the validators subsidized the costs with the HUB profits, this is how it works with the smaller chains, they run at a loss and subsidize the costs with the hub.
Imo this is a reason why we should introduce a validator/chain bond mechanism. Chains which use HUB validators have to bond ATOM, validators which subsidize other chains have to bond ATOM
Right. Speculation.
Atom is worth it’s potential voting power.
Which is currently given away freely.
great sir
Will the fact that inflation drops to 10% also lead to a lowering of staking rewards?
thx 
Yes, to ~13% at the current stake rate.
Great to see Zaki with new proposal
Agree 100%
May this be the first of many.
Cheers
13% plus ICS rewards. Canbe huge in the future
Exactly! I have been buying ATOM because of the high interest rate.
there are no rewards in staking. it’s just an illusion. inflation compensation > rewards. and it hasn’t been compensating.
effortcapital:I am in favor of this. The Cosmos Hub is overpaying for security relative to its peers and it is ALSO distributing this security budget poorly where top validators are making out handsomely while some validators in the lowest quartile of the active set are running at a loss at current ATOM prices (but not all).
Overpaying? I would be glad to know this statement is made relative to which chain(s) ? For me, security and governance are the only 2 major things Cosmos is good at. Now do we want to operate at a bear minimum? if this is the case, some chains in cosmos are happily being operated by 25-40 validators.
Yes, distribution is not ideal but instead of making distribution right, we are pointing towards inflation. Because it is a param change and easier to do?
Theft is a theft, significant or insignificant. Robbing walmart with 1 KitKat is not going to hurt them, but “not going to hurt them” doesn’t make the action right.
Theft? What are you talking about?
How is this proposal theft?
I don’t see it is a right time to implement these kind of changes, when we all agree that these changes will start to show significant effect in 5-8 years. I believe in next 2-3q there will a time to have these changes but not anytime soon.
I said that metaphorically.
But, in reality, we are depriving people of the governance right by propagating LSM mainly through Stride, and we don’t see it as a problem. and we label it as “insignificant”
Did you not look at the graphic in the comment you replied to?
Yes. Hub is overpaying for security (by a factor of 2-3x).
Also - we proposed a solution to help fix stake distribution and even help scale Replicated Security to 5-6 chains at current ATOM prices via a Vote Power tax.
I suggest you read
TL:DR - As a follow-up post to our Cosmos Hub Fiscal Policy post here, where we introduce a Dynamic Liquid Staking Tax, Blockworks Research is proposing to change ATOM’s fiscal policy from a static 10% community pool tax to a multi-pronged tax approach that includes a (in addition to the LST tax): 1. Vote Power Tax 2. Dynamic Community Pool Tax Although outside of our scope for fixing ATOM tokenomics, Blockworks Research also proposes the idea of “Cubic Delegation”, which we go into more deta…
Personally, the added risk of using DeFi for often lower return than simply staking ATOM prevents me from LPing ATOM. Plus, I actively claim airdrops which i would forego by LPing. So, lowering inflation and staking APY will make DeFi more appealing en mass. We also believe lowering inflation will help to attract institutional capital. Will lowering inflation affect the bonded ratio and security? How will it affect validator profitability? We’d like to see more discussion on that. We run validators on 4 chains and ATOM is the only profitable one, and that’s only because we’ve chosen to opt out of running consumer chain infrastructure for now. High staking yield keeps the lights on, so if yield drops because of lower inflation, will token price really rise to offset it and keep things equal? I dunno. I agree with those who said the economic model needs to be clear first. We need staking yield to come from revenue, not inflation but where is that revenue? Lower inflation makes tons of sense, but the revenue model needs to clearly be working first. I’d heart that last sentence 100x if I could. Stake centralization needs to be figured out too. We could start by demanding…
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Hey, i looked at it before replying, but thank you for confirming.
You are oversimplifying it with your graphic. Share the graphic in terms of USDC and we can have a conclusive discussion where we are actually factoring the matrix that also matters.
vixcontango:20% inflation has NOT guaranteed 2/3 staked. That is why inflation remains 20%, people are not staking the token. Not sure why you think 20% inflation guarantees 2/3 staked despite clear cut evidence to the contrary. This is a theory you had that is failing in practice.
Love this conversation. I think it’s fascinating. According to Mintscan there is currently 66.4% of the oustanding ATOM supply that is staked and the current inflation rate is 14.18%.
While we are discussing ATOM supply, maybe the insiders can explain these massive token dumps over the past couple of years.
It seems that the real world ATOM inflation mechanism (7% to 20% depending on above/below 2/3rds bonded) came into play on Sep 1, 2023. We are not even 2 full months into it so nobody can claim whether it works or not.
If I really want to be a dick, I can point out that 66.4% is below 2/3rds (66.667%) so technically the objective is not accomplished and inflation is currently in the process of RISING. Inflation is not on a trajectory to go down to 7% at present, so the incentive mechanism is NOT working as desired, at least so far.
BTW, if I speculate that half the time bonded ATOM is above 2/3rds and half the time below based on how the the incentive mechanism works, that means that over the long term the ATOM average inflation will be the middle between 7% and 20% which is 13.5% (which is roughly where we are today).
So congrats, you are not holding a 20% inflation token, only a 13.5% inflation one.
lmao
This data you presented is inaccurate.
-
It says “circulating supply” yet it shows total blockchain supply. So there is no dumping since it shows how much has been minted. Also circulating supply should represent free atom that is not bounded. Currently it is around 25% of total supply.
-
Messari IMO is not trusted on showing data correctly. This isn’t the first time I see inaccurate data from them. By the looks of it it seems they had problems with their archive node at that time. Use Atomscan and Mintscan next time.
Kamikaza731: Messari IMO is not trusted on showing data correctly. This isn’t the first time I see inaccurate data from them. By the looks of it it seems they had problems with their archive node at that time. Use Atomscan and Mintscan next time. Maybe Messari is not great regarding research and showing data correctly, but it seems in sales they are better. They convinced the AADAO to pay them $25k per quarterly report about the Cosmos Hub, for a total of $100k of our money from the community pool for 4 quarterly reports, receiving $60k upfront: ATOM ACCELERATOR DAO TRANSPARENCY REPORT 4 | by Atom Accelerator | Sep, 2023 | Medium So far it seems only 1 of the 4 promised quarterly reports has been published. This first ‘research report’ is a basic and simple overview of a couple of pages of cosmos sdk, cometBFT, IBC, replicated security, discussing token supply, issuance, validators, how governance works in the Cosmos Hub, mentioning a few projects in the ecosystem, and a brief comparison with Ethereum. Anyone here in the forum can write a better report for free, and the AADAO gave them $25k for each of these 4 reports. The conclusion of this first Messari research…
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Can you post the link to Mintscan supply graph because I can’t find it. They only show current values - at least on the pages I visit.
mintscan.ioMintscan
Interchain explorer and analytics powered by Cosmostation.
I didn’t know posting links is allowed. As for the data on Mintscan I too can’t find it since they moved to new UI. There is some about the assets itself here Mintscan
As for the data I screenshoted it is from Atomscan https://atomscan.com/stats/blockchain
Thanks. Yeah, I mean the chart in that link largely proves my point that having 20% rewards isn’t really resulting in pushing down inflation materially. Inflation has been around 14% all year and at present, rewards and inflation are again increasing ever so slightly. Last year I thought the 20% rewards would have us somewhere near 7% inflation today or at least headed in that direction. Going from 14.46% to 14.16% inflation in a year is not much of a progress. If we take off 30bps of inflation per year, it will take us 23 years to get to 7%. lmao
The biggest problem IMO is the time it takes for the chain to lower/increase the inflation. When Atom staked sits at 66.7% it moves really slowly to 7% inflation. I think it was mentioned at Cosmoverse this year and if I remember correctly it would take about 5 years. And if was over 70% it would go faster. So a solution would be to set a period in which inflation would reach min/max inflation but the periods should be different for reaching min and max inflation. For example if there was more than 2/3 atom staked the period to reach min inflation should be 1 year. So if there was 66.7% or 90% staked it should not make any difference in the time it takes to lower the inflation. But if there was lower than 2/3 of atom staked the period it should take to reach max inflation should be 2 years. That way inflation does not go up fast and there are some extra rewards for those faithful to securing the network. This is an example if the inflation was at minimum(7%) or maximum(20%) so with the current inflation at 14% it would take about half a year to reach min inflation. So what I am suggesting is to have an inflation with fixed time parameters and to set a proportion of some…
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This discussion still on? I though we were past it + all logical arguments have been layed out =)
Has anyone looked hard at how a sudden drop in ATOM inflation would have ripple effects out across the Cosmos?
That’s a lot of IBC collateral to just go throwing levers on.
For instance every ATOM & stATOM LP everywhere would shift, every stAtom loan would get called in faster. Every IST & USK would face sudden volatility.
That’s why it MUST be done very slowly. Systemic security requires it. This isn’t Dexter’s Laboratory.
Get there sure, but never quickly.
I want to post some numbers here to illustrate how inflation is important in valuing the ATOM token. • I know people are questioning Messari data, but Messari is a reputable and major crypto research shop and many institutional investors (the whales with the big bucks) go get their information there. If you are some Wall Street guy that wants to learn about crypto, the first thing you do is go find the top 2 or 3 research guys in the space and talk to them. Messari would be one of them for crypto (the other big one is Delphi Digital). That graph above is what people look at. Choppy supply increases that amounted to about 33% increase per year over the past 2 years. That is huge inflation. • The 2nd thing they will learn is that the token has 7% to 20% inflation depending on the staking percentage. Then they will make a ball park estimate - since no one really knows the future - and kind of assume that long term inflation will be the average of these 2 numbers - 13.5%. Then they will try to determine the risk parameters around this estimate - the volatility band. They will come up with a best case scenario and a worst case scenario. • Best case scenario is a combination…
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This is a good point. Predictable supply is really important and it’s much easier to do projections with. I think part of Blockworks’ upcoming proposals shifts Atom to a fixed supply with progressively decreasing inflation until a minimum after a few years.
There is a lot of maths to consider in reducing the inflation rate, and this is just a random idea, but what if we had say a certain percentage max e.g. 10/12/15 or whatever. But a small portion of that % was rewarded as vesting tokens over 1 year, users would still get the majority of their rewards immediately, but a small portion would be vested, and of course vested can still be staked, which would help to keep the threshold above 66% which in turn would help to keep us below the max inflation rate. This may also help to reduce sell pressure. But there may be some flaws in this idea I haven’t considered. 
vixcontango:I know people are questioning Messari data, but Messari is a reputable and major crypto research shop and many institutional investors (the whales with the big bucks) go get their information there. If you are some Wall Street guy that wants to learn about crypto, the first thing you do is go find the top 2 or 3 research guys in the space and talk to them.
Does Messari display how liquid staking tokens like Lido’s stETH aren’t impacted by any dilution of value from inflation of the base asset? Is there any guidance on the advantages of holding stATOM instead of ATOM if you’re worried about inflation? Should there be?
Why doesn’t anyone try calling this props “change current inflation param” instead of trying to set max and mins?
Thought the whole idea of these parameters open is so that the economy can be adjusted to the situation, not to cement max and mins?
serejandmyself:Why doesn’t anyone try calling this props “change current inflation param”
‘current inflation’ isn’t a parameter. Inflation is recalculated dynamically every block based on 5 configurable parameters, two of which are InflationMax and InflationMin.
https://hub.cosmos.network/main/governance/proposal-types/params-change/Mint.html
docs.cosmos.networkx/mint | Explore the SDK
Contents
Do not forget big number of small stakers who don’t use Levana or Mars or other defi protocols.
Low APR —> less stakers
Less stakers —> less security
Less security —> ATOM is no more the security citadel for ICS chains.
Maybe you don’t care about small stakers but remember that small streams make big rivers…
The economic security design of the proof-of-stake system is to redistribute ownership from non-stakers to stakers via inflation over time. So non staked ATOM is an inferior holding vs stATOM as you are losing ownership in the network slowly over time.
If you want to use your ATOM asset as collateral in lending, stATOM is the better collateral, as far as you are concerned, because your ownership in the Cosmos Hub network remains the same. If you use regular unstaked ATOM, it diminishes which obviously goes against your economic interest.
After all the discussion and hearing it might go onchain soon, it is a No from me and validators I talk to.
Gavin:stakers can afford the decrease, but can the valoperators
valid question
waqarmmirza:After all the discussion and hearing it might go onchain soon, it is a No from me and validators I talk to.
I’d like to get the mempool/ibc tx size/block gossip situation cleaned up and then have another look at this.
Sure, please read my stance here too.
Hypothetically if the price reacts to the supply of the newly minted tokens linearly there shouldn’t be any problem, BBB bought 100 Atom at 10 USD for 1K USD and with 20%APY over the two years BOB has now 144 ATOM, and even if the price of Atom is 7 USD I have more number of tokens but that is equal to my BOB’s original 1000 USD. Now we have established in the example mathematically that if price reacts to inflation linearly nobody gets hurt. But, this doesn’t happen, It also depends on the mark…
Going down to the maximum 10% is a good proposal.
I know the validators and support the direct halving. Reduce selling pressure. It will be beneficial to the development of ATOM in the long term.
Lack of marketing, lack of utility token → lower demand → people unstake → inflation raises → blaming max inflation rate. They thought changing the max inflation parameter will magically solve lacking issues. By the way, removing the min inflation rate and adjust the bond ratio sound good, but when is the right time to do it? During the bear market? I’m not so sure.
To my mind, this proposal sounds like ‘‘pump my token’’.
What you will do if atom’s price doesn’t grow after the reduction of inflation ? Max inflation to 10% = possile big reduction of revenues for validators. Is the cost to validate the cosmos hub will also drop ? Some validators could cut it like they do on small chains where they operate at loss.
I agree that it could also happen in actual situation if the price go lower and lower but i will not bet on a Atom at 5$.
I would just point that inflation is not a bad thing even if the narrative of burn my token/reduce my inflation is appreciate in crypto sphere (the famous apple strategy to create an amazing bubble on apple action, i mean buybacks because they have financial gains for sure).
Could we just wait that the hub has financial gains before to put this question on the table ? The hub as a money multiplier seems to be the actual vision and money multiplier needs to create money to grow.
Moreover, the inflation on the cosmos hub nukes speculators but not stakers and operators.
sorry for my english,
sincerely
GreatMonkhey
I’m not sure they have similar mechanism with us, but I guess because of high staking rate will lower the reward rates? From my point of view, demand and utility matters much more than inflation, since only a few precents of world population own crypto. We are just trying to blame all the inflation while we forget other things. I own some deflationary tokens and they still perform like shit.
Don’t get me wrong, reducing inflation is good and sustainable in long run, but when is the right time to do it. I hope we will proceed this in pre-bull run or during the bull run when everybody is happy since we already had enough dramas so far. And if we would drop the inflation, I hope we would do it slowly to make sure everything is still under control.
sarcasm is a virtue my friend
how is inflation a drawback? you stake and make your capital illiquid for 21 days and in return your liquid capital is returned to you through inflation. the higher, the faster you get made liquid and capable of putting capital back to use around the ecosystem.
ATOM has no value proposition. No reason to buy it. reducing inflation provides one more reason to sell ATOM. where is the benefit to reducing max inflation to 10% that makes up for how much less attractive risking capital in ATOM?
Could it be because it includes the locked-up amount in the staking ratio?
The most crucial issue to consider is whether adjusting inflation will diminish the attractiveness of staking and impact security. If the DeFi rewards are significantly higher than before, the staking ratio is likely to decrease significantly depending on the ratio between STATOM and ATOM.
This can be seen by looking at Ethereum’s staking ratio. However, the real reward excluding inflation from the staking reward is similar for both.
If the locked up amounts are staked, they are included.
So 5000% inflation then?
One argument I haven’t seen here is that high inflation itself reduces the staked ratio. Let’s take an example with 1 user who has staked all his principal tokens which are 100. He has 100 tokens on Blockchain A which has 20% inflation rate. And he has 100 tokens on Blockchain B which has 10% inflation rate. This user invests in these tokens for yield which means he converts the rewards to cash immediately. (For example, validators are users of that type since they have to sell rewards for fiat in order to pay their electricity and cloud infra expenses). Let’s say that the person who acquires the tokens as a result of the sale does not stake them either. Let’s say the buyer is an exchange and needs the tokens for its active trading liquidity pools. What happens? After 1 year, Blockchain A has 100 staked tokens and 20 unstaked one for staking ratio of 80%. After 1 year, Blockchain B has 100 staked tokens and 10 unstaked ones for staking ratio of 90%. If majority of a chains users sell their rewards and those rewards end up sitting in the liquidity pools of various exchanges, a higher inflation chain will underperform a lower inflation chain in the staking ratio…
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If individuals A and B each invested 100 units in inflationary coins Alpha (20%) and Beta (10%) respectively, let’s assume A compounds his rewards annually to enjoy the compounding effect, while B sells his rewards.
After one year, A holds a 50% stake in Alpha rewards (120/240), and B has a 41.66% stake (100/240). After two years, A’s compounding effect increases his Alpha stake to 50% (144/288), whereas B’s stake decreases to 34.7% (100/288).
This is based on game theory, encouraging staking for long-term security by providing more rewards to stakers than non-stakers. Understanding this concept is crucial. When comparing to Beta, if the compounding gap diminishes, everyone might seek alternatives like DeFi, potentially posing a security threat that concerns me.
I completely understand the game theory aspect of the design. The only problem is that price of token A and B are not fixed in terms of USD or fiat. Yes, network ownership declines but if the price of the token of the network keeps going down then actually the more profitable (in fiat) strategy would be to continously sell the rewards since you are selling at higher prices of the token.
Ultimately, the incentive to own more of the network is the implicit assumption that network value increases and even more specifically that the price of the network token is at minimum stable (in fiat) and at best increasing. If the network and token loses value, the incentive becomes the exact opposite - you need to sell the rewards for fiat asap.
Network ownership in itself is not an incentive. See, I am 100% network owner of Stevie Vixx network and that hasn’t made me any richer… lol
You’re right. If the value declines, there’s a possibility it could act in the opposite direction. However, we believe we’ve endured a sufficient bear market. In my opinion, it might be worth considering a swift passage or adjusting inflation values based on the current price relative to high and low points.
Apart from concerns, if I were to say yes or no, I support this proposal because I believe more holders should receive greater benefits.
The current inflation is ~14.5% but this is not the max inflation, this is the current balance between 7-20%. If the inflation range is halved to 3.5-10%, then I suppose the inflation wouldn’t be reduced to 10% but to ~7.25% since that would be the balance between 3.5-10%. So this wouldn’t be an already abrupt decreased from ~14.5% to 10%, but lower to around 7%. If the current inflation was 20% because the bonding ratio was low and the inflation range is halved then it would decreased from 20% to 10%, and stay there at the max inflation 10% while staking ratio is low. But given current staking ratio, why would inflation stay at the max new value of 10% if the bonding ratio is around 67%, seems it would stay at the new equilibrium of around 7%, so this would halve the current APR from around 19% to like 9%. It seems this is being sold as max inflation halved from 20% to 10%, but the actual current decrease would just be from ~14.5% to 10%, when actually it would be from 14.5% to around 7%, the new equilibrium in the range 3.5-10%, the new max 10% inflation would happen only with a very low bonding ratio which is not the case currently and very unlikely to happen, as the max 20%…
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In the L1 market, I consider the top competition to Ethereum to be Solana, Avalanche and Cosmos based on size of market cap and developer adoption. Solana and Avalanche have inflations of around 7% currently. Halving min/max inflation to 3.5-10% with equilibrium around 7% simply brings ATOM to what could be considered “industry standard” if you think of Solana and Avalanche that way. I personally think 7% is much better number for fiat pricing than 14% because global fiat aggregates increase about 4% per year (the official inflation target. US is 2-2.5% band (2.25% long term average), Europe is 1.80%. US is half the money supply, Europe, Japan and England is the other half and they print more than ECB). 14% inflation leads to instability of the fiat price of the ATOM token. 7% will go a long way to solve that problem. While macro is indeed the main driver of crypto asset prices, there is also great dispersion of performance inside the crypto industry. The benchmark - Bitcoin is up 100% this year. Since Oct 19th when ATOM was 6.5, ATOM has increased about 50% (from 6.5 to 9.5). In that time frame, Solana has increased from 21 to 58 or 176%, Avalanche has gone from 9 to 18 or…
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vixcontango: Solana and Avalanche have inflations of around 7% currently. Halving min/max inflation to 3.5-10% with equilibrium around 7% simply brings ATOM to what could be considered “industry standard” Sorry but Avalanche, Solana and others don’t offfer ICS so validators don’t have exponential costs in addition to the costs of the main chain as in the case of the Cosmos Hub now. Moreover, you only use isolated data that benefits your argument, show also the data of many chains with lower inflation and also significantly lower bonding rate that the Cosmos Hub. Once more, validators have high fixed costs and rising costs due to consumer chains, stakers DO NOT have any costs even if 100 consumer chains are added, so of course you see the situation very differently. If this gambling doesn’t work for you it is not such a big impact, but you would leave validators with the same fixed costs, raising consumer chain costs and half of their revenues, but of course you don’t care about this. vixcontango: While macro is indeed the main driver of crypto asset prices, there is also great dispersion of performance inside the crypto industry. The benchmark - Bitcoin is…
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If your costs are $600 per month to run a validator and you lose all of it every month, it will take you about 10 years to lose as much as I have lost in ATOM over the past 2 years as an investor. So don’t talk to me about gambling. My incentives to turn this situation around are far bigger than yours. There are many professional investors here sitting on far bigger losses so frankly your $7K losses a year aren’t really comparable. Second, you keep equating 14% inflation with 14% fiat yield as if you are getting 14% on a US treasury or a corporate bond. Both of these have their yields denominated in USD. ATOM yield is not denominated in USD. Injective has inflation of 10% and bonding ratio of 57%. I am not sure what your point is. Its inflation is lower than ATOM’s. As far as its performance, it is a small token and its performance was built off small base. I am not sure anyone outside of Cosmos ecosystem has ever heard of Injective. I am not here to debate random shitcoins that were on the hot list this week. I don’t think Injective is an adequate comparable to Solana, Avalanche, Cosmos Hub or Polkadot. Go to stakingrewards.com website and find me a single L1 token in the…
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I’m a relatively small-time and medium-term investor since about 2020. I doubt the narrative that reduction in APR will achieve price growth and maintain staking ratio. If the staking APR comes down, I have less incentive to stake. If it reduced to 5% I might stop staking and put in some limit sell orders waiting for the top of the current phase of fomo. I don’t see why the price would rise, either, as other chains have done the same and not seen this happen. I’m not impressed with the liquid staking module approach. To me this looks like ponzi economics, with additional third-party risk thrown in (not to speak of technological vulnerabilities…). Not attractive. But the real issue, compared to, say, Osmo, is that there the reduction in staking rewards has been compensated nicely by a new economic model; there’s incentive to stake and invest. This is what I don’t see in Atom without adequate APRs. Shared security has led to none of the promised benefits. I’ve accrued 0.0155 NTRN & 0.2374 STRD through shared security, on what some people can live off over a year in Atom. I mean, this is a crap deal for investors as far as I can see. A final issue is instability in…
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are you just pointing out that inflation is an arbitrary rate of repayment for lending your capital to the protocol?
Just out of curiosity, how did Jae Kwon determine that 20% is the correct setting for InflationMax? To date I have not heard a single first principles argument from anybody for why that setting needs to be 20% and why that would achieve 2/3 staking ratio. If 20% was the correct setting, why was ATOM inflation set at 7% during the lockup period? Why not set it at 20% then? Actually if higher yield is the incentive, why aren’t we INCREASING InflationMax to 5000%? ATOM inflation was fixed until the team let the market work at the start of 2022. 2 years later the market has not been able to achieve 66.66% bonding ratio because the token keeps slowly rugging and big investors keep unboding and dumping the token and the investors who acquire it don’t bond it. The reason why 20% is too high is because that is the same number that LUNA and Do Kwon used to attract capital in Anchor. Look what happened to Anchor and LUNA. It sounds to me both Kwons think the rest of the world are pretty stupid and 20% yield will attract them like the stupid little fish that they are. For any person that has done professional investing in any capacity (or as a matter of fact is licensed to be a…
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so your whole thing, the reason you are so sure that lower inflation is beneficial, is because other protocols have a lower inflation than ATOM? Thats it?
I think you should read my first principles arguments above. Inflation is not a random number. It is something that accounts for productivity improvements. Technology that is making productivity improvements ahead can have inflation. Technology that doesn’t have productivity improvements can’t. The problem with ATOM is that its inflation is too high for the amount of productivity improvements it is producing.
And yes. Other staking protocols of similar size, technological ability and maturity do provide a good study group/set from which to determine what “the market” thinks that the correct settings should be. At least it is a reference point.
I am very open to hearing for what reason Cosmos Hub thinks it can charge double the inflation of
a Solana or an Avalanche.
vixcontango:I am very open to hearing for what reason Cosmos Hub thinks it can charge double the inflation of
a Solana or an Avalanche.
who is being charged inflation? cosmos issues debt, repayment of that debt is the inflation.
cosmos is a validator slush fund and oligopoly, it is not as trustworthy as other untrustworthy protocols like solana or avalanche. your entire argument relies on an apples and oranges analogy.
Investors in the token are being charged inflation.
I don’t see how comparing Cosmos Hub to Solana and Avalanche are apples and oranges comparison. These are all proof-of-stake consensus protocols that issue a inflationary token to compensate validators.
Comparing Bitcoin or any other proof-of-work token to Cosmos Hub would be an apples and oranges comparison.
vixcontango:Investors in the token are being charged inflation.
vixcontango:These are all proof-of-stake consensus protocols that issue a inflationary token to compensate validators.
how are investors being charged inflation? they collect inflation, not pay it.
vixcontango:Comparing Bitcoin or any other proof-of-work token to Cosmos Hub would be an apples and oranges comparison.
comparing one fruit to any other fruit would be a valid comparison then?
vixcontango:I don’t see how comparing Cosmos Hub to Solana and Avalanche are apples and oranges comparison.
the same way comparing apples to oranges is a poor comparison…
Our take home profit last month was only $1300 and that’s only because we soft opted out of running consumer chain infrastructure for now. If we ran machines for Stride and Neutron we would barely be profitable. The other 3 chains we validate are money losers currently (KAVA, MATIC, HDX). We devote many hours to running the nodes and being visible for delegators and this propsal could definitely cause the chain to become even further centralized by putting small validators out of business. If you all care about decentralization, stake with us. If you’re reading this and don’t understand please check out this article: Why It's Important to Stake With Small Validators - Blocks United The only time I stake my personal tokens with validators in the top half of any active set is when it’s an airdrop that looks questionable, I don’t recognize a lot of the validators, and have a friendly relationship with the validators I do recognize in the top half of the set. Jae Kwon (Cosmos co-founder) is against this proposal and his opinion has merit. You can read his comments on the Cosmos forum here: [PROPOSAL] Set Max Inflation at 10% - #28 by jaekwon Jae argues to remove the lower…
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• We have operated with the current 7-20% settings mode for 2 years. Inflation has increased from 7% to 14% over this period of time. We have clear evidence that 7-20% min-max inflation range does NOT work in getting people to bond their tokens and achieve 66.66% bonding and does not help to attract investment capital. Blockworks points out many other protocols of similar size and abilities that have achieved their bonding targets with lower levels of inflation. • If Neutron doesn’t get you the fee revenue expected, why do you think that WASM on the Hub would get you the revenue? Technically it is the same thing. Neutron is secured by the Hub so lack of activity in Neutron is not due to lower security since the security is the same as the Hub. • Jae Kwon’s argument has no merit. Neither the 20% max inflation value was set using proper justification nor the 7% min inflation value. He “thinks” 20% will attract stakers because 20% yields on US treasuries sound attractive to him. It is ridiculous logic to compare the US dollar to ATOM. To this day Jae has not shared the economic justification for his 20% max inflation setting outside of redistributing tokens to stakes who are…
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Thanks for sharing your views and feedback as a validator.
What I have noticed about proposals that seem to cause a lot of drama is they are rather “heavy handed”.
Instead of taking an approach that would happen over a duration of time, these proposals tend to “shoot first, ask questions later”. We never want to make minor adjustments to see what are the repercussions of said adjustments over time. Not a fan.
I am on the fence as to how I will vote, but I need everyone’s help explaining to me the current voting of the validators that have already voted. To BlocksUnited’s point, small validators should be against this? Per Mintscan, it looks like the smaller validators are for it and the larger validators are against it.
Am I missing something or reading something backwards/wrong?
vixcontango:We have operated with the current 7-20% settings mode for 2 years. Inflation has increased from 7% to 14% over this period of time. We have clear evidence that 7-20% min-max inflation range does NOT work in getting people to bond their tokens and achieve 66.66% bonding and does not help to attract investment capital. Blockworks points out many other protocols of similar size and abilities that have achieved their bonding targets with lower levels of inflation.
because inflation isnt why people stick with a chain. you dont have evidence that 7-20% dont help attract investment, you have evidence that the chain hasnt attracted significant investment and are just arbitrarily attributing fault to the inflation rate.
Before you continue to pollute the thread with your stupid one liners, read the paragraphs I have written above. But I have a feeling that would be too much work for you.
your position is pretty repetitive and incoherent. it is just saying that bitcoin has a lower inflation and is doing well so to do well a chain has to have lower inflation.
the problem with atom isnt its inflation, its because there is no value prop. The only research being done is how to frame diluting/stealing from stakers sound less like a scam.
This is my last answer to you. This is YTD ranking of all crypto tokens I track. Of all these chains, ATOM has the highest inflation at 14%. And is at the bottom of the list by performance. The ATOM token now provides interchain security which it didn’t last year. As such lack of additional utility of the token is not a reason for its underperformance. That leaves only one factor: the inflation.
lol, your argument is hilariously fallacious.
so, if atom still has no value proposition and staking is made more risky because you get made liquid slower with lower inflation, how will lowering inflation change atom’s poor performance and encourage people to risk their capital, in a chain with validators that consistently change the rules in their favor to dilute and steal from its stakers?
otherwise let collective intelligence decide and come back after the vote. or leave.
Can you explain your “No with veto” vote on Prop 848?
In what way is a proposal to change a specific blockchain setting spam? This is also the first time since the beginning that a proposal to change the max_inflation parameter has been entered.
I would understand a “no with veto” vote if this is a duplicate proposal or the 10th attempt to change the inflation setting. This is the first time we are voting on something like this.
I understand that you disagree and for that you need to vote “No”.
“No with Veto” is not an appropriate vote here.
I thought NWV is a softer NO because it doesnt count toward the tally unless it reaches 1/3?
My understanding is that it is a HARD NO and when it reaches 33.33% it vetoes the proposal even if it has 50%+ YES vote.
BTW whoever redid Mintscan. Absolutely an amazing job. The UI is great.
vixcontango: Can you explain your “No with veto” vote on Prop 848? NWV is not only for spam proposals, please get informed and read the definition of NWV. This proposal contains several misleading and false facts and it may put the security of the Cosmos hub at risk: -Governance proposals should contain links to the forum discussion so people can make informed decisions. The authors of this proposal intentionally didn’t include the link to this forum discussion in an attempt that people only have their version of this proposal, this can be considered malicious. Even worse, the only forum link included in the proposal is not to this thread but to a different thread that also benefits the version presented in the on-chain proposal, which makes it even more malicious -Zaki tried to give the false impression of a general approval of this proposal by quickly voting yes after the proposal went on-chain and asking several other validators to also vote yes, this can also be considered as malicious and trying to manipulate voters -The proposal contains misleading information, they try to mislead and confuse the max inflation parameter with the actual inflation, by saying…
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I understand where you are coming from, although I’d challenge some of these notions. • Yes, you are correct, but not enough for VETO in my opinion • This is overanalyzing people’s behavior. It’s pretty normal for the initiators of a proposal to vote for it right after the proposal. • I don’t think the information is misleading. The immediate effect would be to cut inflation from 14% to 10%. Whether enough validators will now bond for inflation to go down and start averaging 7% is speculation. The only evidence we have so far is inflation INCREASING from 7% to 14% over 2 years despite rewards being very high. You are making the case that lower rewards will cause more people to unbond their stake. If that is the case then staking ratio will remain below 66% and thus inflation will be INCREASING. But in this case we have limited inflation to 10% so it will remain at 10%. You keep contradicting yourself. You can’t say that lowering max inflation to 10% will result in bonding target not being reached and then simultaneously expect inflation to decline to 7%. • Fair point. I would suggest giving us your estimate of what the average monthly costs are if $600 is not the…
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Based. And this is just one side of the against argument, not to mention the lack of any numbers proposed along with this. Any economics changes should carry some A/B testing / in depth calculus analysis of possible outcomes, etc.
There is absolutely 0 evidence that this proposal will have any effect whatsoever, and even more important, there is 0 way to measure it directly. The only direct result this proposal has is damaging small actors of the economical and social structure that is Cosmos hub. Therefore, reducing the current Nakamoto efficient.
As a modest investor with enough skin in the staking game to care, here are my two cents: • The very first priority should be to raise the price of ATOM. From this, all other things precipitate. Go back and review what led to ATOM’s $44 ATH and DO THAT AGAIN. If that means waiting for the next bull market to gear up, then wait. Do nothing else. Don’t touch a thing. Price is all that matters at this vulnerable point. We are like a premature-born infant on life support right now, coming out of this bear market. The slightest wrong move and we could lose the baby. Let’s heal first, get strong, and then consider what we are going to be when we grow up. • ATOM needs to be more than just a staking/security game. IMO, devs missed out on monetizing the best aspect of the ecosystem. Every IBC should be taxed (ever slightly), in ATOM, and pooled for distribution to ATOM stakers. ATOM itself should be immune to taxation through IBC, making it the preferred medium of exchange. This would create buying pressure as every entity would need to have ATOM to operate. I may be missing some nuances of IBC mechanics but seems to me that it is the greatest feature of the ecosystem with the most…
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vixcontango: lower rewards will cause more people to unbond their stake. If that is the case then staking ratio will remain below 66% and thus inflation will be INCREASING. But in this case we have limited inflation to 10% so it will remain at 10%. Exactly, more people will unbond, we have already ATOM holders here in this thread warning that they will unbond with a halving of rewards. So, the bonding ratio will greatly decrease below the 67% target increasingly putting at risk the Cosmos Hub. In this emergency scenario, the dynamic inflation would kick in, start to raise inflation and then bring back the security by stabilizing the bonding ratio around 67% again. Oh, but this wouldn’t happen if we already have a new max inflation of 10%, it cannot go above this value. So the bonding ratio will continue to decrease since there wouldn’t be any mechanism to encourage more staking. As the security of the Cosmos Hub decreases, the value of ATOM, which similarly to BTC is largerly based on its security (ie. how secure data is against tampering or how trustless the network is), will decrease accelerating even more the reduction of security. By then, when the situation is out…
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Very much agreed on every point.
another prop is coming soon enable the possibility to change the slope slider to reach target inflation more or less quickly depending on the staking ratio.
Everything you say here is speculation. If the monetary characteristics of ATOM stabilize at max 10% inflation, it may lead to higher staking percentages as people would want to stake a token that is increasing in value. That is the experience at other blockchains like Solana and Avalanche. For some reason you view 20% as some magic number that is the correct number and so far you haven’t given justification for it. I can tell you why 7-8% inflation would be a first principles correct number. I already made this argument elsewhere in this thread, but I will make it again, for one last time: Population grows at 1-1.5% per year for big countries. Population + productivity growth gives you about 2-3% GDP growth per year. Notice this number includes all people in the population - old, young, productive and unproductive, public and private sector. The most productive part of the economy - the best of the private sector - S&P500 - grows at 8-10% per year. The most productive part of the S&P500 is the tech industry which grows 15-20% per year. If you are building a system that wants to reach 1 billion people, you are most likely going to able to support only 2-3% inflation since 1…
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Good points but I think you forget that ATOM price is not fixed in fiat. If 20% rewards cause ATOM price to tank, then you are not actually getting the 20% rewards you were expecting. You could be making far more money as a validator at 7% levels. That is certainly what is happening right now for Solana and Avalanche validators. They are getting only 7% rewards but their income has doubled. In Solana’s case, income has actually quadrupled.
10% inflation * $20 ATOM price = $2 > 20% inflation * $7 ATOM price = $1.4
I want to point out that when ATOM hit $44, it’s inflation rate was 7%. I have been an investor in ATOM since 2020, so I am certainly not a fly-by-night investor. I don’t think anybody who invested in 2020 and 2021 when the inflation rate was more or less hardcoded to 7% thought that they are investing in a token that will end up with 14% inflation at the end of 2023. Pretty much everybody believed Jae’s reasoning then. The difference between 2021 and today is that we have 2 years of data of how the self-correcting inflation mechanism works and the problem is that it is not working. We are not on track to get to 7% inflation anytime soon.
Finally, to those who think that inflation reduction will decrease the bonding ratio, Sentinel chain lowered its inflation a couple of times over the past year with governance proposals, the last one being in July. Today its bonding ratio is 70%. The forced reduction in inflation ended up INCREASING the security of the chain.
Jae has been talking on Twitter about ATOM and this proposal. I don’t have a Twitter account and I don’t want to have one. But I want to address a couple of his comments here because I think it is relevant. If the ATOM token is not a monetary token, why is it traded on exchanges for fiat and why did Jae sell ATOM for fiat during his initial fundraising round. Why can I go on Coinbase and buy ATOM? Has Jae tried to get ATOM off Coinbase and other exchanges? How many sales of ATOM for USD or other fiat has Jae himself made? Was ATOM not sold to Bain Capital for US dollars? Jae is admitting here to defrauding investors and should be investigated. Moreover, Jae should absolutely be prevented from defrauding other people again if he tries to create another token to dump on people. Bitcoin does not have 7-20% inflation. Bitcoin has fixed future supply of 21 million. ATOM does not have fixed supply. There is already a dramatic difference between the tokens. In fact, the current ATOM inflation guarantees a price trending towards zero in the long run. Jae can’t compare ATOM to Bitcoin as there isn’t a single investor out there that views them as the same type of financial instrument.…
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同意，生态最好长期保持利率在低水平，必须立即降至10%以下。
With so many conflicting opinions. I think it would be better to go for something in the middle.
Decrease max inflation to 15%, and continue to decrease this by 1% every 3 / 6 months, down to 10% Giving stakeholders ample time to assess if this is the right path forward, and allowing them time to adjust and submit proposals in the future to revert or suggest a better solution if needed.
Looking at who is voting for and against this proposal, it is pretty obvious why the staking ratio never goes above 2/3rd. The big validators are acting in cartel like fashion to keep the rewards high by keeping the amount staked just below 66.66%. The big validators are the ones voting against this proposal. It appears that they are simultaneously spamming the message boards with advocates making it sound as if small validators want higher inflation. The voting pattern, however, clearly shows that small validators want an ATOM to have lower inflation. Simultaneously big validators are dumping ATOM they get on the market for US dollars. With this entrenched behavior happening, it is not very likely ATOM inflation will ever go down towards 7% min threshold. We have seen repeatedly over the past 2 years that ATOM miraculously gets unbonded when the inflation starts declining. By lowering the price of ATOM, the big validators are acting against the small validators and trying to take them out of business. When small validators go out of business, big validators get the orphan delegations. What is going on here clearly isn’t a decentralized ecosystem, but an elaborate centralized…
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I do think it’s interesting how many of the small validators are a Yes on this so far. A big part of the justification some have given for a no is the cost of running infrastructure.
Well, obviously if shaving off ~4-5% of the current inflation rate is a death knell for these small validators, they’re not voting in their best interest.
The largest No is a validator who doesn’t charge a commission and will soon be forced to charge 5%. Wonder why they’d be so concerned about costs for these poor little validators. Hmmmm…
We see the point where the point of the proposal is to increase adoption of Liquid Staking Derivatives (LSDs) / LSMs here, but premise in doing so by changing the tokenomics may not be worthy of drastically changing a core fundamental “parameter” of ATOM tokenomics. Tokenomics affect Investors opinions We don’t think it’s lowering the max inflation to 10% is the main driver to help shift stakers out of staking security and into LSDs adoption. Tokenomics change is a highly sensitive topic to not affecting the economics only validators but how investors evaluate their investments also. TargetD: A final issue is instability in tokenonomics. What investors want is stability. A long-term goal/path to reducing APR could be a good thing, but suddenly changing it overnight will make the chain look erratic and uninvestable. This is not the first time I’ve heard from token investors. Very true across the board. Comparative Analysis with other chains While we can have tunnel vision within one ecosystem @vixcontango brought up a really good point comparing tokenomics and inflation rates of other chains. Setting a max inflation will likely not move enough stakers out…
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Tokenomics is “sensitive” issue when the supply is fixed and someone wants to increase it thereby devaluing the asset. In this case, we have programmed devaluation of 14% per year, making ATOM an uninvestable financial asset no matter its fundamentals and market adoption. No activity grows 14% in perpetuity. Tokenomics absolutely must be changed here to make them more rational and in line with the economic performance of Cosmos. You can’t be printing 14% inflation if your transactions and revenues is going down -15% quarter over quarter. The issue here is that I purchased ATOM when inflation was SET to 7% in 2020 and 2021 and bonding ratio was 70% and now I find myself holding a 14% inflation asset with bonding ratio of less than 66% because the self-corrective bonding/inflation mechanism does not work as intended. More specifically is being rigged by large validators to take out small validators out of business by dumping the token on retail. Validators are professional investors and know that 14% inflation is unsustainable and they are selling their tokens for fiat as soon as they get them. People’s business plans about increasing ATOM adoption are speculative. Last year we…
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A chart of how things work in practice is “not how thing work”?!? I don’t think Jae can confront what is happening in reality with his design. Here is how things work - big validators acting in concert have the power to affect the bonding ratio so as to maximize the rent they extract from this chain. As such they have pegged inflation to the unsustainable level of 14% and are dumping on retail like maniacs because Tendermint consensus doesn’t cost all that much to run ($1000 per month, fkn really, so cheap) and their profits from dumping ATOM are insane. None of these big validator guys want this gig to end and that is why they are voting YES on this prop. If you look at the voting pattern, it is basically 2 big validators outvoting something like 30 smaller validators. It is the big validators who are extracting windfall profits out of this gig. The smaller validators can’t make ends meet with a tanking price of ATOM. Instead of non-stakers subsidizing stakers Jae’s incentive scheme has morphed into small validators and retail stakers subsidizing big validators. That’s how things work in the real world. I wonder how long it will take Jae’s genius to figure out simple…
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I think you are missing one vital ingredient out of the equation, on the result of which you seem to base a lot of your judgements and opinions. particularly when it comes to validators and devs (and there is no steb in my words) - balls (you may read courage if you get offended by the use of that word). I’m serious. That changes perspectives.
I don’t get why this issue is so controversial, 20% inflation is not necessary and a complete outlier from the rest of POS and DPOS chains.
WE are however lucky that ATOM has now entered a bull market and will price up regardless of this particular proposal.
What is getting more and more clear to me is that ATOM holders and validators have often opposite incentives, Jae didn’t think the governance process through its a clear failure, same as his stance on this particular proposal, we shouldn’t be have such a high inflation, but i guess the argentine peso and turkish lira beat us.
@vixcontango Very respectfully in my opinion you are spamming the topic with your redundant posts. I am sorry if you are related to OP to propagate in that case it is completely okay what you are doing.
Additionally, everyone here has an ethical right to NWV on this prop just on the basis that OP has abandoned the idea and not cared to reply to people’s questions.
@waqarmmirza I have watched this board for a few years without any participation. I am only getting involved with this topic because it is extremely important in my opinion. I am sorry if my 10 posts look like spam to you, I have simply chosen to add more significant input at this juncture. I like to discuss the issue from various angles with everybody and people have raised various issues that need addressing. I know you probably like to solve the Pythagorean theorem in 1 way and be done, but I solve it in 44 different ways. I am not related to OP or Jae or anybody else. I like all the devs in Cosmos as they are great technologists. However, I think many of them have not worked on Wall Street and lack deeper knowledge of some aspects of finance and economics. I want what is best for the Hub and for me as ATOM holder. I am trying to articulate what that means to other people. It means articulating a strategic vision for the Hub that is perhaps different than what others have had to so far - the Hub being a buyout fund of successful products that is engaged in mainstreaming them instead of a VC fund that is subsidizing moonshots without product market fit. And it means…
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Looking at how this is playing out so far - 42 small validators YES and 15 big NO resulting in NO vote winning despite 73% of the validators voting YES - tells me that we definitely need to switch to quadratic voting at some point. Of the validators that are voting, supermajority (defined as more than 2/3rds) are YES and yet the proposal is failing so far. Small validators and stakers have a right to complain that this governance process is “rigged”.
There are 2 proposals set to follow this one that address the upper and lower bounds of the curve. They mention it at the bottom of the proposal text. I wish they had mentioned that up top, so people were more aware.
It’s really the 2 big "No"s that account for more than 60% of the “No” votes.
What’s frustrating about this is that the validators are using the staker’s voting power to exert their opinion over the network. The validators didn’t pay for these ATOMs. This is not their economic stake in the network. And I am pretty sure their stakers don’t agree with their viewpoint if the account stats are any indication. The voting is even more lopsided in the account category (which represents the stakers) where 94% of the accounts (73K out of 77K) are voting YES. Most people when selecting a validator usually pick a big validator that has low costs since the user wants to maximize his staking rewards. They really don’t think about governance and I am sure many are not even aware that their voting power is being abused this way.
I have been thinking about how to address this issue today and I will make a bigger post on governance reform in another thread tomorrow.
@zaki_iqlusion @effortcapital 222 comments and this thread can be easily summarized in ‘halve inflation so that ATOM price does +2x’. If this proposal is approved, and ATOM price doesn’t change or even decreases, because it is much more correlated with BTC price and macro factors than inflation, what is the plan? Will you put another proposal to undo the changes of this proposal?
No, because they think the changes will come in years but they will choose this time of the market cycle to create all the mess. Because they have been here before us and they think they know everything about the cosmos, market, and economics.
They will keep experimenting at the expense of retail investment. I wish everyone knew the actual agenda.
Will the price go up in months and years to come? Yes it will but the prop will have nothing to do with it.
waqarmmirza:No, because they think the changes will come in years
It is ironic that some people, in the low risk and comfort position of a good full time job and with a huge AADAO grant, want to engage in high risk gamblings at the expense of validators, who have been mostly in survival mode since mid 2022. If their employer or AADAO said to them: ok, do this gambling, but if you are wrong in your plan, to align with validators taking the risks, your salary/bonus will be cut at least in half and you will lose half of the AADAO grant. In this case, these people would have thought twice before putting this proposal on-chain. Their employer or the AADAO should have told them similarly as they are telling validators: it is fine, even if your salary, bonus and grant are cut in half or more, no problem you can leave your nice appartment and live in a tent in a park and eat rice every day, you will still be fine don’t worry
All the reasons in the proposal to vote yes are either whimsical or propaganda. Not a single reason to vote yes on this prop but the Cult will make the retail belive that this is in the benefit of retail. The media war of cult is strong. Appriciation for that.
Hey Cosmic - the concern of validator sustainability is absolutely valid, and as you know, we have already put out a post related to the Vote Power tax that we think can help with these concerns. I know you like this idea and we absolutely want to bring it to a vote. The plan is to put a signaling proposal up in January and then identify a team that will execute and implement it.
This proposal is not about “halve inflation so price can 2x”, its moreso about making the security budget fall more in-line with the rest of the PoS network market for long term sustainability.
Nobody is lobbying large or small validators to vote “yes” for this proposal. Many small validators are also voting yes for this because they believe its what’s best for the network.
At any point a community member can put up a param change proposal to move it back to 20%. Nobody is stopping that from happening.
effortcapital: we have already put out a post related to the Vote Power tax These are just future promises and there is 0 certainty this proposal will pass, in fact, the probability of the VP tax proposal passing is close to 0. Large validators can be fooled with this inflation halving proposal, fooling them into directly taxing themselves and their delegators will be a more challenging task. effortcapital: This proposal is not about “halve inflation so price can 2x”, its moreso about making the security budget fall more in-line with the rest of the PoS network market for long term sustainability. No, it is about halving inflation and hoping for ATOM price to increase by 2x or more. Did you study revenues of validators in other PoS networks so our revenues fall more in-line with their revenues? Because to calculate validator revenues there are several variables such as inflation, bonded ratio, token price, commission. Long term sustainability? I’ve been here before the Cosmos hub genesis launch and so far there is great sustainability after several years. effortcapital: Nobody is lobbying large or small validators to vote “yes” for this…
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@Cosmic_Validator I know the proposal is called “halving” but in reality inflation will go down from 14% to 10% as such the decline is about -30%. It’s a thirdening. The impact on validators is not as big as you portray. In fact because of this proposal ATOM is up from 6.5 to 9.5 which is a 50% increase which already compensates for the lower rewards. (14 * 6.5 = 91 < 95 = 10 * 9.5)
Can you please stop misrepresenting this proposal. It clearly states that inflation will decline from 14% to 10% in the first paragraph. Any further reward declines depend on bonding ratio targets being met and whether that will happen is speculative. I have every reason to expect big validators to keep gaming the bonding ratio and thus inflation will stay at the upper bound at 10%.
Cosmic_Validator:because it is much more correlated with BTC price and macro factors than inflation, what is the plan?
The proposal was made based of data that the hub overpays for security.
Your counterpoint is based off what data? Because a 2 minute glance at the charts clearly show ATOM’s price action has largely decoupled from Bitcoin in a negative manner.
I compared the ATOM price to the .BALTMEX index to figure out if the high inflation rate had a negative impact on the ATOM price. I couldnt find evidence that this is the case.
The proposal text is misleading in my opinion since its indicating that the high inflation has “led to constant sell pressure that has hurt its price performance”.
Since we dont want to change the hubs “monetary” policy based on a unfounded claim, we will vote NO on Prop 848
I am sure that if we put the same energy into the community and the AEZ utility as we have put into this topic we will have more success than if we adjust inflation.
By the way, I would be voting NO on a proposal to halve the MIN_INFLATION to 3.5%.
7-10% inflation band is the right level for Cosmos Hub at this stage of its development. I am more concerned with narrowing the possible supply outcomes 10 years out (that is how institutional investors model things) than necessarily driving ATOM inflation into the ground. Going to 4-7% band in 2 or 3 years might makes sense but for the 2024-2025 period 7-10% is fine. Last thing I would want is INCREASING the possible supply outcomes by making the spread between max and min inflation larger from 3% to 6.5%.
I want to see the inflation pegged to 7% for 3 to 6 months in an uninterrupted fashion before considering lowering the min_inflation parameter. I want the market to show me that it wants lower inflation first. At this stage the only thing the market is showing that it wants higher inflation and unfortunately to a degree that erodes the monetary stability of the ATOM token. We have fixed that.
I probably would want to speed up the rate of change so that it doesn’t take forever to go from 10% to 7% if bonding ratio target is met.
I want to address these two posts by Polkachu and Chjango about ATOM’s inflation. It seems that their thinking is influencing some validator votes (which is fine), but I feel like I need to question the merit of some of these arguments: • Inflation does matter. A lot. Polkachu says that inflation doesn’t matter, because the overall market cap is all that matters and the inflation is simply a redistribution mechanism from stakers to non-stakers. The relevance of a system in the real world is a function of its accessibility. If you want ATOMs in strong hands all the time, make the inflation 1500% and you will guarantee that the governing stake of the chain remains in the strong hands of the validators over every 3 week period (which is the unstaking period). If your definition of security is the current validators holding the controlling stake, that is what you will do. Inflation is not set at this level because then nobody will use ATOM because it will be inaccessible on exchanges which means its price will be zero. Also it won’t be able to claim that it is “decentralized” or a “public utility” since all the stake is held by a few people. BTW 180 validators is less than 500…
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Thats an awesome way to twist statistics. There are clear 2 camps of yes and no votes. No need to twist it my friend
A public reasoning for a “NO” vote from the Allnodes validator. Source: https://x.com/allnodes/status/1726222965258551684 (Posted on Nov 19, 2023) 1. Considering Small Validators and Ecosystem Diversity Low inflation challenges small validators, who already struggle with consumer chain costs. The validator community may become less diverse and more centralized due to budget cuts. The approach ignores tiny validators’ sustainability, which is essential for a decentralized environment. We’ve come across multiple mentions of Kujira’s “flourishing” environment. However, in the context of Kujira’s low inflation, it’s important to note that running a Kujira validator is not financially viable. Larger validators currently support Kujira by balancing their operations with profits from more profitable chains. However, if all chains adopted a “perfect low inflation” model, even these larger validators may find it unsustainable to continue their services. Ultimately, a system that fails to produce profit is unlikely to remain healthy or sustainable in the long run. 2. Ineffectiveness of Monetary Mechanism in Current Ecosystem Development Research on cryptocurrencies over the…
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effortcapital:This proposal is not about “halve inflation so price can 2x”, its moreso about making the security budget fall more in-line with the rest of the PoS network market for long term sustainability.
This is precisely how its being marketed (read “sold”) on social networks, discords, etc
NWV to Prop 848 – $ATOM Must NOT be Money. AiB will soon be voting NWV to prop 848, $ATOM “Halving,” which aims at turning the $ATOM token into a monetary token rather than a staking token. We value Cosmos’ core components of security, sustainability, and decentralization, and cannot support a proposal that may threaten its foundational pillars. Halving $ATOM max inflation at this time with insufficient research and discussion will lead to more undesirable outcomes, namely lowering the bonded ratio of staked $ATOMs significantly, hampering the growth of IBC and ICS adoption, affecting the rewards for validators, and placing the entire Cosmos network at risk. Prop 848 represents a significant shift from the established tokenomics of the Cosmos Hub that has kept our ecosystem secure and dependable since inception. While prop 848 argues that it would enhance the $ATOM Economic Zone (AEZ) and increase $ATOM’s competitiveness in the DeFi space, we disagree categorically and raise the following substantial concerns: Destabilizing the Security Model An IBC hub must not be secured by a monetary token. Securing the chain with a monetary token might make sense for non-hubs that…
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Abusing a large bag and influence is detrimental to proper governance. A parameter change isn’t worthy of a veto. Embarrassing conduct.
AiB: Halving $ATOM max inflation at this time with insufficient research and discussion will lead to more undesirable outcomes You can’t say this without precisely explaining what you mean. What type of research ? What type of discussion ? There have been plenty of those in the past couple of months, and really since October 2022 when ATOM 2.0 was proposed (which you voted against with a veto, before proposing an ‘‘Atom One’’ constitution that was heavily rejected, I think I never saw people being as united as when they voted against it. AiB: The proposal claims that the high $ATOM inflation rate makes DeFi yields less competitive. The proposal states, “However, due to the high inflation rate of $ATOM, DeFi yield can hardly compete which slows down user growth and adoption.” First and foremost this is a gross misunderstanding of the real yield from inflation, which as mentioned before, is with the maximum 20% compounded annual inflation rate, not at most 30% annual yield, but a net 8.33%. Secondly, the reasoning is completely flawed because if the yield from $ATOM is so high then it should increase user growth and adoption, not decrease it. This would be…
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Jae has not proved that 20% is the required inflation to reach 2/3rd staking percentage. This is his own guesstimate. The Cosmos Hub is not the only proof-of-stake chain out there. There are other POS chains with larger market caps that have been researched by advanced academic teams like Cardano (ADA) and Avalanche (AVAX) whose white papers have been written by Prof. Aggelos Kiayias of University of Edinburg and Prof. Emin Gun Sirer of Cornell. I have not seen academic research anywhere that states that 20% inflation rate is needed for 2/3rds bonding ratio. Cardano in particular has made a number of different design choices than ATOM. The ADA token is not bonded for any period of time and is not slashable. These are 2 design decisions that run opposite Jae’s decision to lock up the ATOM token for 21 days and make it slashable. Yet ADA has had more than 2/3rds staked at less than 5% inflation rate since it went into production in 2020. ADA routinely had 70% staked for as long as I have tracked it (which is since 2018). What appear to be disincentives to stake theoretically don’t actually work that way in practice. Cardano to this day has 3 or 4 times the market cap of the Cosmos…
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People out here thinking lower inflation = less supply = higher atom price = voting Yes. Other camp saying “lower inflation doesn’t affect price, look at the data”, voting no.
Meanwhile, traders big and small are like “oh, yield is going down, maybe I should move some ATOM to DeFi”. Liquidity goes up, ATOM strategies become reliable, and AEZ-based DeFi protocols start earning revenue.
This prop is not about the supply side y’all.
Validators lack understanding of supply/demand impact to price. They are short term focused given we were in bear market’ survival mode’. Change in inflation for them is considered a haircut on their revenue. Which is true for some period of time. But if you take 1-3y, validators would win massively. But that’s still uncertain in their eyes, why change? Add AiB delegations and we have plenty of No votes.
Indeed a different perspective.
But please do not hesitate to name Stride (as a winner of the said situation. But, why does anybody want Stride to flourish with existing tech, where they are unable to delegate to the larger set of validators instead they chose 32 vals, Why we are making the already distributed VP concentrated in fewer hands? Why VP concentration does not matter here?
Why every time we want to get it going on expanse of everything?
Hey, sorry for the late reply, and, thank you for writing the response thoroughly.
Ideological impasse, so we should not continue the discussion on the current topic, I sincerely hope we meet on a different prop discussion to have another chat. Additionally, I am sorry if you felt attacked.
The forum i know has some norms and values where OP or colleagues usually respond to people and after getting all the data and answering all the concerns they go for an actual vote. In this prop, the OP is supposed to be one of the Cosmos leaders with multiple projects in the cosmos and personal interests in t the HUB, that person left the discussion without answering the questions. Yes, it is a community effort to make things bright for HUB but don’t the leaders have any responsibility? From my perspective they have, they can’t keep experimenting at retail’s expense.
But, thankyou anyways for the reply.
Can you just explain to me why this is the right time to make these changes? when everyone knows the result will come in ~ 3 years (if any).
I am unable to understand the timing.
ETF within few months with 90% odds. That brings a lot of liquidity to whole ecosystem. Validators’ revenues are driven not my inflation rate but market cycles. Plus attracting new atom holders/stakers. Reducing inflation focuses on new people via defi and in general atom.
If one assumes can time the market, he will learn soon he is failing continuously. Like starting gym, why in 3 years? Best time is now, because continous positive change compounds from day 1. The sooner one starts the better.
Also, ‘working’ system like atom is slow death as inflation at this level pushes price to 0 assuming infinite time. So it needs change either way. Even Jae agrees it is faulty re 20% and current ‘printing’ mechanism not tax efficient, which is not revenue but non staker tax.
Somehow seems there is big resistance to this proposal due to personal reasons that it came from Zaki. Proposal won’t do massive impact, won’t break atom, but more likely improve situation and could be catalyst that we need.
People look who wins more and assume it is bad and not fair. We need to look at net outcome. Is this positive for everyone? If yes, we vote yes. The problem is time preference. Most are short term orientied, while systems should outlive current people, so decisions needs to be at least few years ahead. I see most people can’t overcome this.
Hi there, My name is Alex, cofounder of Cenit.Finance a company specialized in Tokenomics simulation. Recently, my team has been working on a simulation for the ATOM economy using agent-based methods that compares ATOM 1.0, ATOM 1.0 (10% max inflation) and ATOM 2.0 (rejected last year). Hopefully we can be of help on this matter. • Simulation: https://templates.cenit.finance/?template=07-cosmos • Blogpost: www.cenit.finance/blog/atom-tokenomics-a-dive-into-scalability-and-sustainability We have been studying the effect of this proposal and we have seen that ATOM 1.0 with maximum inflation capped to 10% yearly generates a 10% improvement in the minimum token price and treasury health. The token price here reflects the organic token price, with no speculation taken into account. Given a simulation of a timeframe of 80 months, we obtain the following: image 407×113 7.13 KB However, it is important to understand that a big part of the token utility depends on the token price because most of the staker profits come from the token-denominated incentive rewards. If the token price goes down, there could be a vicious cycle where fewer stakers are interested, the buying…
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I get that, the problem is most people see ATOM as “Money” like BTC but I believe that ATOM is a governance token. For money, even 10% inflation is too high but for a governance token, we need more bonded tokens for the security of the network and governance.
Think, Atom is money and Inflation is bad let’s do a param change and make the inflation to 0, What will happen? you will get the answer.
Now if it is about finding a sweet spot between security/bonded tokens/inflation and Atom price this means experimenting and no one actually knows the answer but just speculating.
point 1: atom will never be money. BTC is money. If you have illusion it can be, you have to rethink this part. Bonded rate vs inflation has no established relationship for now.
point 2: lets change inflation to 1,000,000% and see what happens, your answer there. Btw, current model is exactly it, just slower death. Systems do not operate in isolated environments. We have peers.
point 3: well pointed regarding experimentation to find equilibrium. We should have more trust in Hub’s robustness vs other systems. We need stability in price so validators can be ok, defi be ok, atom holders be ok, stakers be ok. Current rate is point 2.
‘You’ don’t know the answer. Please don’t project (or as the Russians say “mirror”) your lack of knowledge onto others. BTW, I know this will sound like heresy to Jae, but if the unbonding period is lowered from 3 weeks to 2 weeks, the bonded ratio will increase. When you go to interview at a Wall Street firm, one of the questions you will get asked will be “Explain me why time is money”. Time is indeed money and the longer you lock up money, the more you have to compensate people for it. This is called a “term premium”. People want more liquid instruments, not less liquid ones. By increasing the lock up time, you have to increase the interest you pay them. For that reason, Cardano with its zero lockup staking can get 70% bonded by paying only 3% in inflation. If for example, ATOM was to increase its unbonding time to 4 weeks, bonding ratio will fall to sub 60% as many investors will find even 20% not enough to compensate for the extra week of lockup. The issue here is the volatility of the ATOM token which is north of 100% per year. 20% doesn’t nearly compensate for that type of volatility. If you let the system run as is, inflation will be trending toward the 20% upper limit…
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Nobody ever said unstaked ATOM should be money. That’s why there is this whole drive to create stATOM comes from. STAKED ATOM IS MONEY that can be used in DEFI, unlike unstaked ATOM.
Bonded rate does have a relationship with inflation, I put the formula in a prior post. The fact that some people don’t believe in gravity and refuse to acknowledge evidence, doesn’t mean it doesn’t exist and can’t be formulated.
By definition staked ATOM can’t be sold on exchanges, only unstaked ATOM can. The linkage to fiat (ie pricing in fiat) happens through unstaked ATOM. The total market cap of ATOM and validator earnings are calculated using the fiat prices of unstaked ATOM. For that reason, the fiat price of unstaked ATOM is critically important. The importance of the fiat pricing of unstaked ATOM on exchanges is spelled out in the Sunny Agarwal white paper that Jae shared in his post above. For some reason, a lot of people either don’t know about it or choose to ignore it.
point 1: stAtom is not money. You consider casino chips in casino as money. While it is money within that narrow ecosystem, it is not outside. BTC is outside money while stAtom is internal eco money. I remain with my position.
point 2: you described your confirmation bias. Statistically there is no relationship inflation vs bonding rate. But if there is one, it is more psychological and low sensitivity. What you spoke a lot about is duration risk. Locking period. That has a lot of senstivity to inflation rate, i believe that.
point 3: not sure what you mean.Price and liquidity is super important. Especially connection to CEXes and real world.
If the Fed raises rates to 20% what happens? Everybody locks up their money in 1 month Treasury bills. The bonding rate of US dollars increases. So yes, there absolutely is relationship between inflation and bonding rate. Term, inflation, bonding rate are all part of the same formula. In ATOM’s case because it is not official money (ie legal tender), you need to add fiat price on exchanges. If you increase the term while keeping inflation constant, bonding rate goes down. If you increase inflation while keeping term constant, bonding rate increases (which is what Jae is trying to do). The problem is fiat price - fiat price goes down in this scenario. Just look at any bond pricing formula. When I said that stAtom is money what I meant is that (if you assume Cosmos Hub network has constant market cap) it is a non-depreciating token that can be used for non-staking purposes in DeFi, for lending and other activities. Obviously it is not “money” like a US dollar or a Bitcoin. But it has stronger monetary properties as Jae and Sunny define them in their paper vs the unstaked ATOM which Jae specifically wants to rob of monetary properties (what he really means is eliminate its…
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I agree on most points even if we could argue on nuances. Real world impacts atom a lot given peers act differently.
Very good point re atom price and inflation like a bond. For example, we could discount atom price by inflation. Atom price / (1+20%)^x. It clearly shows how inflation significantly impacts price. Easy to understand for non financial people. We should market this idea to public.
Looks like gno is winning again…
First #82, now #848
Maybe 8 is an unlucky number for the anti-gno cartel?
It’s reason. Everybody who is voting yes on #848 is confused, and the reason is spelled out in this post. WillB: You can’t say this without precisely explaining what you mean. What type of research ? What type of discussion ? There have been plenty of those in the past couple of months, and really since October 2022 when ATOM 2.0 was proposed (which you voted against with a veto, before proposing an ‘‘Atom One’’ constitution that was heavily rejected, I think I never saw people being as united as when they voted against it. You all can’t even calculate income correctly, and the AIB post describes how to fix it. The entire premise of your past research was destroyed by one post and you haven’t updated the past research analysis in respect to this revelation. Please read the whole post and grok it and update the research before claiming that you have done the research. The foundation of your research has been shrunk by a factor of 3.6. WillB: Odds are you don’t participate in cosmos defi for you to say something so deliberately out of touch, and looking at your address activity that’d be right. I don’t need to participate in order to speak from…
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CONTEXT: Reflecting on the recent on-chain vote for Proposal 848 on the Cosmos Hub, it’s evident that the proposition, aiming to set the max inflation parameter, has encountered significant challenges. The proposal is expected to be rejected by a closely contested vote. The tone of discussions in the forum has escalated, revealing a lack of preparation and a notable level of controversy. ANALYSIS: The post highlights a fundamental problem with Proposal 848, emphasizing that it was poorly crafted and should have been presented as a temperature check rather than a proposal. The level of animosity in the discussions reflects the inadequacy of the proposal’s preparation. Many comments in the forum lacked informed perspectives, and misleading statements further complicated the debate. Acknowledging the minority who contributed meaningful data and information like @effortcapital @Alex_Cenit and @AiB @Sephiroth @jacksteroo and few others, this post recognizes their valuable input as a testament to the quality standard of hub governance. However, it underscores that these contributors were unfortunately in the minority, and the overall engagement lacked a broad-based consensus…
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hey @Govmos, thanks for your analysis.
why are you voting abstain (as CEXs do) on every single proposal?
I don’t understand this post. Just look at our votes. In connection to Proposal 848, we have opted for an ABSTAIN vote to uphold political neutrality on this intricate issue. This choice aligns with our commitment to delegators, pledging to abstain from politically motivated or contentious votes. Simultaneously, we actively inform our userbase, encouraging them to independently cast their votes after conducting thorough due diligence and research.
ho sorry, i thought as you said prior to launching your validator, that you would never vote something else than Abstain.
my bad, nevermind.
Hi, your posts are well thought-out but I thought I’d just share a few corrections to the data you present. Solana’s inflation rate is currently 5.66%, not 7%. The 7% figure you are using is the staking APY, which is higher than the base inflation rate (because inflationary rewards are captured only by the ~70% of SOL that is actually staked). Solana’s inflation rate reduces by 15% yearly, so by this time next year it will be around 4.8%. Also, Solana’s “unbonding period” is about 2 days 2 hours (it fluctuates betwen 2 days 1.5 hours and 2 days 5 hours depending on the epoch. In the past it was higher, up to 3 days, but technical improvements in the network have brought the epoch length down to a more expected and consistent 2 days 2 hours). The only complexity with the unbonding period is that it can in situations of very high “de-staking” exceed thresholds which would then only allow 25% of stake to destake per epoch, which would result in the “25% per epoch” figure you stated. However, that has never happened in Solana’s history and would only occur in situations of incredibly extreme stake movements. While you cannot discount the possibility that it could occur, it seems…
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Temperature check is important. The rest doesn’t make any sense.
A lot of non-voter validators still left in the 10 to 30 ranking area that can swing this. Get out and vote. I don’t expect big exchange validators to vote (Coinbase, Binance, Kraken, etc), but all the other ones should vote. There is about 20 million ATOM votes there.
This is easily the most important vote in the Cosmos Hub history (even more so than ATOM 2.0). You have to cast your vote, or else you don’t care. Even ABSTAIN (I consciously delegate the decision to my stakers) is better than a non-vote (I am asleep and I don’t give a shit about participation in governance).
This shows 2 things:
-
Take any percentage of the staked ratio, you can’t predict APR/Inflation. Historically, you don’t get the same percentages of APR/Inflation for the same staked ratio percentage. Not even once. Halving won’t fix this.
-
The speed of the adjustment of the inflation curve is too slow. There is a problem with the formula. Halving won’t fix this.
Conclusion: We should vote no, study the formula, and do tons of simulations to fix this problem as soon as possible.
Isn’t this supposed to be finished by now? Mintscan times are probably UTC. 1 more hour.
…
Wait. It is finished. It passed.
Time for some Eagle Rare. Cheers!
This is an address to Jae. Jae, I know you are probably very upset right now as Prop 848 didn’t go your away. Leadership slips from a man when he is not leading his people in the right direction. People can suffer for a goal, but they can’t suffer forever. Once all the tactics are exhausted, people start to question the strategy (the goal) and that is when a leader gets sidelined. This routinely happens in the world and has always happened. A leader can then exit gracefully or ungracefully. My grandfather didn’t give me a lot of advice but the one that he did give me was “Don’t burn your bridges”. For you, this is the type of situation where you want to exit gracefully and you don’t want to burn your bridges. Economically, one has to always ask himself the question - would I rather be 100% owner of a $1 million business or 1% of $1 billion business. Financially, Option 1 of being Big Man in Your Own Pond is $1 million in the bank account, and Option 2 of being 100th man in Stalin’s army is $10 million in the bank account. Ego can be a pretty expensive characteristic! In your case, you have a very engaged community that wants to take your product to the next level into the…
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Anyone know the timeline for this fork? Just saw Jae Kwon’s announcement. Also, congrats to those who had a victory today! Kinda scary the direction this is going now tho.
Well done, the twitter harassment strategies seemed to work by forcing many validators from no to abstain and then to yes/weighted vote. Now, the strategy is shilling hard on twitter about the ‘ATOM halving’ hoping for a quick ATOM pump, good luck with that. It will be funny to see all those twitter bullies fooled by the price pump narrative waiting for the pump, and validators who voted yes waiting for the recovery of their revenues. The markets/traders could had expected earlier this proposal passing, and if there was an expectation of an ATOM price pump they would had traded this much earlier and ATOM price would had increased before the proposal passed. No professional traders expected any price appreciation after this proposal passing, that’s why nobody traded any futures/options or anything betting on the passing of this proposal, even when it was close to passing, which would had increased ATOM price much earlier before the passing of this proposal Also the hypocrisy claiming that this proposal is to be more ‘in-line’ with other PoS networks, and not about a 2x ATOM price pump. And then on twitter, showing charts of ATOM price, and shilling ATOM price pump because of this…
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Am sure you will find a way to cope. Perhaps asking for more funding for your videos?
I suggest taking an Econ 101 class (John Locke economics, demand theory of value) then some more advanced economics classes such as Marxism (labor theory of value) and perhaps some Monetarism (Milton Friedman), Modern Monetary Theory (Kelton), General Theory of Interest Rates and Money (Keynes) and Quantity Theory of Disaggregated Credit (Werner) thrown in and perhaps the fog will lift and hopefully you will start to understand the posts in this thread. I have aggregated all of this knowledge and applied it for you with my posts on this thread. I used to get paid a lot of money at big investment banks for this type of work (programming these economic models into enterprise financial apps) and you are given all of that for free. But because it is free it seems to be going over your head. The fact that you were involved with Cosmos early doesn’t mean you understand economics and more specifically applied economics. ATOM is not money, it’s a commodity and in the worst case scenario depending on how bad Jae wants to be - a security. For both tax reasons and for criminal prosecution reasons. Hopefully that clears it up for you. Please stop insulting people as being day traders. Most…
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Well, my impression is professional traders and investors don’t want to even touch ATOM because of the rampant and unpredictable inflation. Of course this inflation reduction (and other upcoming tokenomics changes) aren’t the be-all-end-all thing that will “make number go up”. But you can have the best value accrual potential in the entire space and investors will still shy away because hyperinflation is a major problem. ATOM NEEDS to get back on people’s radars or else it’s going to fade away and join the ever growing pile of dead coins. I guarantee you any investor worth their salt will carefully analyze investment returns coming from asset value appreciation vs inflation. The issue surrounding smaller validators struggling is definitely a real problem that needs to be addressed. But that is a decentralization issue, not a tokenomics issue. Reducing inflation is just a first step towards solving tokenomics issues. There will (hopefully) be further proposals to target decentralization and value added issues. You already have actual data scientists, programmers, and finance professionals laying out why high inflation is a problem. Care to explain why “Yes” votes in your mind…
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@zaki_iqlusion
Now since the proposal has been passed, may I ask WHEN will the implementation start and HOW will it be executed?
WHEN
- Will the implementation start once the other proposals on min finlation and inflation rate change got passed? Or will it be updated first?
HOW
- Will it be updated via a gradual change using the inflation rate change (Therefore would depend on when will the inflation rate change proposal being passed)? Or will it be changed automatically via the NextInflationRate function, which means the inflation rate will be dropped immediately to 10% as the
current inflation > inflationmax
Its already implemented
So right now the max inflation in the network is 10% already?
yeah, and your staking APR decreased from 20% to 14%
Bonjour, je viens tout juste de m’inscrire sur le forum du fait de l’importance de ce sujet.
Le taux d’inflation max est un paramètre à étudier dans un ensemble de proposition.
Je regrette que cette proposal soit passée sans avoir les 2 autres citées.
L’objectif est de conservé un taux de stacking à 66%, je ne pense pas que cette seule mesure soit suffisante.
Une vision globale et mesurée aurait été appréciée.
J’espère que ca le sera pour la suite.
The proposal itself modifies the setting on the blockchain. It is a specific type of proposal called “parameter change” that automatically changes the setting upon passing.
What’s wrong with political tensions? Political tensions build the world as we see it. Lack of political tensions is called “totalitarianism”. In any case, if Jae wants to build a different hub that’s fine. That’s the whole point of Cosmos tech after all. However, I need to mention that Jae would not be the only early Cosmos founder/member that has struck on his own. Sunny did that too with Osmosis and now OSMO is a bigger IBC hub than ATOM. Axelar (AXL) is now a bigger IBC hub than Cosmos. If Jae wants to build an irrelevant IBC hub, that’s fine. Let’s see how long his band of validator stick with him and his 20% inflation token whose open market price goes to zero. Good luck! The only way Jae leaves the Cosmos Hub is by selling his ATOMs. And I am not sure he will want to miss out on the financial upside. But who knows. BTW, do you remember that Elon Musk had to be kicked out Paypal (a company he founded), fired as CEO in order for the board to make the sale to EBay which then gave Musk his first $400 million with which he built Tesla and Space X. Yep. It was other people that had to make Musk LIQUID despite himself. And believe it or not, having money in the bank is…
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One last comment in this thread, this time about the ATOM One proposal. Jae proposed this last year and it got overwhelmingly rejected by the ATOM community. If he wants to go in that direction, fine. That proposal showed you how popular his idea is - not much. I think most of the validators will stay on the Cosmos Hub and may be a small portion - those 20-30 that voted NO on 848 will follow him there. ATOM1 will be dramatically more centralized than ATOM at the start with 20% inflation that will centralize stake even further. But just like after the Bitcoin Cash fork, 6 years later now Bitcoin is $700 billion market cap now and Bitcoin Cash only $4 billion, the same will happen with ATOM and ATOM1. ATOM is in fact moving towards a more conservative, rational and better regulated market based monetary policy that enhances the monetary properties of ATOM while ATOM1 wants to preserve the perpetual venture capital insider dump that Jae originally designed. Jae overtime will find that investors don’t want to be dumped on. In its essence, this is a conflict of interest between venture capitalists (Silicon Valley) who want to extract rent forever from Wall Street (investors deploying…
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Really think Jae should get over Prop 848 and focus on Gnoland (GNOT) where he does have a new and unique offering to give to the world. Atom One’s offering is 30 validators securing fixed-issuance liquid staking token which is essentially stATOM if the LST threshold is 100% instead of 33%. stATOM might actually have a larger set of validators and thus be more decentralized. ATOM currently can determine how much of ATOM should be liquid staked which means there is a pretty large amount (67%) from the remaining hard staked ATOMs to act as buffer in attacks. So ATOM has the ability to configure the size of the buffer which is not something Atom One will be able to do. In all aspects, 0-10% inflation ATOM with faster rate change and the current LST offering is better than Atom One as proposed. It’s just gonna be sour grapes, an inferior product and a waste of time. Gnoland is a better place to spend your attention.
Learn to lose with dignity. You win some, you lose some. How Ethan handled his loss last year should be an example for you how to handle a loss.
I really don’t want the drama to leave the Cosmos Hub. I like it dramatic.
me too, support so much
So proposal 848 just passed and we lost already Noble because they are concerned about validators revenue. Right after the inflation is cutted in a half, Noble says that is not going to adopt ICS now, beacuse they are concerned about validators.
https://forum.cosmos.network/t/noble-ics-v1-update/12312
Good job 848 supporters! Now the Cosmos Hub is not appealing anymore for consumer chains, looking forward for Noble to launch on ATOM1.
Please stay calm and don’t tear the community apart.
Looks like Jae got Eloned. He is about to dump his tokens. About 6 million ATOM got unbonded from big accounts last night. Jae has like $100 million ATOM stash. Like Elon he is going to be forced into retirement with a $100 million retirement package. lmao
I wish he stayed. In any case, I wish him all the best in his next project. May he turn out like Elon.
I don’t think that’s the AIB wallet unbonding. This is theirs:
mintscan.ioMintscan
Interchain explorer and analytics powered by Cosmostation.
Reality is probably more boring.
The one ending in d3d is Polychain winding down their node. Them being a VC probably means their market behavior is going to be fairly moderate / predictable.
The one ending in 8e7 I think it’s either informal or some ICF related entity, based some of their earlier transactions and transfers into vesting accounts. So they probably won’t do anything crazy. Maybe it’s just end of the year accounting activities or something.
The other two I am not sure of. Why would an address be so much longer than the others for the one ending in u28?
At any rate, I’m guessing that resistance at 10 USD is going to be more resilient than before, but probably not some massive dump (barring the market just generally shitting the bed)
So it looks like it wasn’t the inflation. 
We would be down more without the reduction of emission considering all things equal.
Only normies would believe it had something to do with sell pressure. The security budget has been hilariously over-funded for years relative to other large L1’s and the risk-free “yield” of staking is another reason deFi in Cosmos has seen lackluster participation.
Security remains overfunded at 10% here. Max inflation needs to keep getting cut. Prob 7% should be the next max setting.
My recommendation:
Back to default.
Some people really badly want ATOM to be worthless, don’t they?
because thats kinda obvious =)
it did hit a lot of projects though and keeps on doing that (
SpaceMonster:inflation
Yeah I don’t really think it was
[PROPOSAL] Set Max Inflation at 10% Hub Proposals It’s not the inflation. It’s the lack of unified vision. All the Hub has is governance. And it’s an ugly mess. Literally any unified vision with broad community support would shoot the price up at this point. Is low inflation going to attract billions in new capital when it starts flooding into the next bull run? No. That won’t excite anyone. But a place to stake for security that protects its users, protects its community, has a warm fuzzy UX, has a long lock-up & low volatility, has a “… Amazingly it’s still not too late for this PMF. Which would still f’n kick ass. Capital concentrated for its community not just by its community – ~ Add’l 2¢ ~ A decentralized fiat custodial service sure would make waves… with near-free ramps for stakers, best in class fee service for non-stakers. “Compliance wall” that away with its own app-chain (good PMF). Or contract it regionally. Why should you still need a CEX for this? Seems like corporate protectionism. What about directing hub capital at some highstreet legal services to explore RW service ideas like that? Add value & stake-gate the membership. Triple A for…
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Cardano and Polkadot are far more unified in their vision and they fail just like ATOM. Both Cardano and Polkadot are trading at 2019 prices as well. The reality is Solana has emerged as the clear cut winner in the Ethereum Killer wars. Solana’s 7% inflation and adoption by devs is simply far more attractive for investors than ATOM’s 10% inflation and lack of adoption. ATOM is going to keep down over time if its community continues the gross mismanagement of its inflation. It’s inflation is too high vs alternatives.
BTW, if the prop to cut max inflation didn’t pass in November, ATOM probably would be trading at $1 now. The inflation cut rescued the price for a few more months. In my opinion, ATOM has to keep cutting inflation until it becomes more inline with industry standards (around 7%).
One more thing: if the Cosmos Hub community wants to go back to the Jae’s 20% max inflation setting after being disappointed that the 10% max inflation didn’t result in number go up, it is very likely that major exchanges like Coinbase and Binance will delist ATOM since this token’s price is projected to go towards zero given the token’s high inflation dynamics and retail investors are facing complete loss of value regardless of the utility of the token. At minimum, the token needs to be rated as highly risky and access to it gated to qualified investors. At 10% max inflation the situation is not as bad as it was at 20% but the dynamics are largely similar. Long term very businesses sustain a 10% growth rate forever and ATOM doesn’t seem to be one of those business. In the Ethereum Killer sector, ATOM is hardly a top ranked player. While the IBC ecosystem is very strong and growing, ATOM doesn’t really monetize that growth so nobody can really claim that ATOM’s prospects are the same as IBC’s ecosystem prospects. And if they do, they are lying and probably should be sued for misleading investors. BTW, I am pretty sure most new investors don’t know that IBC transactions aren’t…
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I don’t necessarily think that is accurate. Do you have information to back up that claim concerning a delisting? I think that some of the most dramatic declines in Cosmo’s market cap have occurred since bringing this measure into place. So that you’re fully aware, I think that market cap matters much more than unit token price. Staking was always designed to favor the stakers who are providing security to the network. As a yes voter on this particular item, I also want to make you aware that I do understand and respect your point of view . It is simply that over time, I have come to A different understanding of the situation. I’m actually quite happy to discuss it with you . I also just want to let you know that my interests are absolutely not served by the price of atom going to zero. However if there are more atoms and market cap goes up, volume is flowing to stakers as intended. Anytime that market cap goes down, then I feel that we have made a failure. And that is actually the reason for my about face on this particular matter . So again, to be clear, I could easily be convinced that it is better to keep inflation exactly as it is. It’s just that currently…
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• 30% of ATOMs has almost never been staked which means that there is significant population of token holders who are steadily being devalued. If the ATOM market cap stays the same, ATOM price goes down 10% a year simply because of 10% of new issuance. • Nobody is buying ATOM’s market cap, they are buying the ATOM token. The ATOM is the security sold to investors. And ATOM is most definitely a security since there is a protocol treasury and pretty active continuous issuance and sales of ATOM on crypto exchanges from that protocol treasury and other entities associated with the Cosmos Hub. • There is no disclosure anywhere clarifying that “market cap matters much more than token price” to investors purchasing ATOM on Coinbase, Binance or any other exchange. I am pretty sure the guys at Coinbase in charge of listing tokens probably aren’t aware of your ridiculous claims. You are random guy on the internet making excuses for a token which is programmed to go to zero. • At the very minimum, going forward purchasers of ATOM on regulated exchanges like Coinbase and Binance need to be made aware that Jae Kwon floated a token whose price is intended to go to zero and has no intention…
Excerpt (1197 of 2740 characters). Read the whole post on the forum ↗
There is nothing to tear apart good sir, I’m just looking to the conversation around the forum, and we are hitting all-time low in term of community.
Good products coming and people just focus on doing drama and hold the Cosmos Hub from becoming a chad chain.
Im’ even surprised this convo is still happening after almost a year
One more thing: your market analysis is literally idiotic blaming the lower ATOM price singularly on the inflation cut. If anything that action preserved the ATOM price over $5 over the past 9 months, otherwise it would have been lower. There are number of factors that changed in the market environment over the past 2 years that are leading to a lower usage of ATOM: • Noble USDC came on the scene and to acquire IBC assets investors no longer had to purchase ATOM first on Coinbase or Binance. Now they can purchase USDC, move it to Osmosis and trade for the token they want there. USDC is now the biggest asset on Osmosis. • Many IBC tokens are now listed on Binance and Coinbase. Previously they weren’t and you could only purchase them by first purchasing ATOM, moving the ATOM to Osmosis and making DEX purchase there. • Terra and Terra USD (UST) imploded removing a lot of fictitious “liquidity” from the Cosmos ecosystem. The high prices of ATOM in 2021 were accomplished using purchases with UST which was counterfeit US dollar - it had no real backing. As such the price spike were never real to begin with. Right now you get what you can call “real” pricing of IBC assets as they…
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vixcontango:market analysis is literally idiotic blaming the lower ATOM price singularly on the inflation cut
God no. I think there are many, many other forces at play.
But it doesn’t seem that inflation is highly impactful here.
And wdyt discuss mkt cap instead of unit price?
jacobgadikian:I don’t necessarily think that is accurate.
Do you have information to back up that claim concerning a delisting?
its not. there is no such ifo. in fact if anything, the exchanges are greedy and will jump onto it
jacobgadikian:market cap matters much more than unit token price
this, this, this
Alas, people hate being wrong. And will almost never admit it. Its a prop that damaged Cosmos, imo, stronger than others. And killed several projects at infancy and satoshi knows how many more it will kill yet
As soon as Cosmos Hub completes its integration with Babylon, I think max inflation should be reduced to 7%, min inflation to 3% and lock up period reduced to 2 weeks.
We would like to remind you and everyone else about the actual functioning of the x/mint module which is in charge or the inflation mechanism for the chain. TLDR; here is a list of the adjustable parameters as they are currently operating in Gaia: Key | Type | Example | MintDenom | string | “uatom” | InflationRateChange | string (dec) | “1.000000000000000000” | InflationMax | string (dec) | “0.100000000000000000” | InflationMin | string (dec) | “0.070000000000000000” | GoalBonded | string (dec) | “0.670000000000000000” | BlocksPerYear | string (uint64) | “6311520” | ANALYSIS: Focusing excessively on the `inflationMax` parameter is ill-advised. It’s crucial to remember that ATOM inflation is not detrimental, as it is distributed proportionally among stakers, thereby not diluting their holdings. Instead, it serves as an incentive for users to stake, which is a fundamental requirement for a security-based network. The `inflationMax` parameter solely functions as a safety measure, preventing excessive inflation that could have adverse effects . The preoccupation with ATOM’s price depreciation due to…
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OK, why is the bonding goal 67% (or 2/3rds)? Plenty of chains have much lower bonding ratio and haven’t been attacked successfully. At present, Cosmos Hub can have 50% bonding ratio and an attack on it can’t happen. For example, I see no issue with 60% bonding ratio. Why is it 67%? Also once Bitcoin timestamps arrive on the Cosmos Blockchain, we can very effectively prevent “long range” and “double spend” attacks. The reason for the 3 week bonding period is because attackers can build an alternative chain and it requires consensus between validators to prevent the alternative chain. For that a 3 week period is provided to build social consensus. Once you introduce timestamping, you can eliminate the “long range” attack because it is clear from the timestamps which is the real chain and thus the bonding period can be reduced dramatically. The bonding period could 2-3 days instead of 3 weeks. But also you can lower the bonding ratio. 10% inflation remains very high and it is a problem and ATOM slide will continue. Ultimately, we need rational explanation why the bonding ratio should be 67% and why the bonding period should be 3 weeks if you can introduce Bitcoin timestamping via…
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vixcontango: The reason for the 3 week bonding period is because attackers can build an alternative chain and it requires consensus between validators to prevent the alternative chain. For that a 3 week period is provided to build social consensus. Once you introduce timestamping, you can eliminate the “long range” attack because it is clear from the timestamps which is the real chain and thus the bonding period can be reduced dramatically This is indeed a viable solution on the pipeline. This can effectively help reducing the bonding period on the Cosmos Hub, as well as other chains using Babylon’s aggregated time-stamping service. At least now we are discussing potential improvement on rational terms. vixcontango: why is the bonding goal 67% (or 2/3rds)? Plenty of chains have much lower bonding ratio and haven’t been attacked successfully. At present, Cosmos Hub can have 50% bonding ratio and an attack on it can’t happen This governance parameter can be subject to adjustment based on community consensus, should we identify a need for change. If reducing inflation is a priority, modifying this parameter may yield the desired outcomes. Contrarily,…
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Govmos: The importance of incentivizing staking within the Hub stems from its role as a shared security consensus. Consequently, the denominated asset’s staking is crucial for the hub to prioritize security over liquid form utilization as money. The primary function of ATOM is to ensure security. The `GoalBonded` is set at 67% to adjust or maintain inflation as we move above or below this threshold. While the parameter may appear arbitrary, it’s been carefully balanced. We would advise against altering this parameter, given its current equilibrium. The challenge lies in the delayed adoption of liquid staking. • If ATOM is insecure at 61% bonding ratio like right now, I think people should attack it and raid it while there is some value in ATOM. ATOM market cap is plumbing new 4-year lows at 1.9B now; pretty soon there will be nothing to steal and nothing for the ATOM token to “secure”. There is plenty of other chains that are more trusted as IBC hubs such as Osmosis. No IBC chains have achieved 67% bonding ratio. Of the top 10 chains in map of zones over the last 30 days, Osmosis has 52% bonding ratio, Celestia 72% with 8% inflation, dydx is at 23%, Axelar 62%, Sei 62%,…
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We’ve made efforts to clarify misconceptions regarding the essential economics of the ATOM token and its function within the Cosmos Hub blockchain. However, you continue to hold a different view, we can agree to respectfully disagree. The truth will ultimately prevail. Wishing you a pleasant day.
Any reasoning behind this? As far as the price is concerned we haven’t seen any improvement with the last changes. Initially (for a few days) it started to really and everyone including Zaki posted the achievement on X. Now no one is talking about that. If price is the standard of gauging (that was touted during the initial discussion), ain’t we failing?
Govmos:Focusing excessively on the
inflationMaxparameter is ill-advised. It’s crucial to remember that ATOM inflation is not detrimental, as it is distributed proportionally among stakers, thereby not diluting their holdings. Instead, it serves as an incentive for users to stake, which is a fundamental requirement for a security-based network.
I wish it was easier to make it understandable for the masses.
If you ask Jae Kwon, the price is supposed to go down to zero in order to ensure cheap IBC transactions. As far as Jae is concerned, price going down is succeeding. In January there were 4.6 million transactions, in July there were 620K.
Mission accomplished. Price is going down and nobody is using the chain.
Maybe you misidentify me as the Jae Kown advocate.
Reading your posts, I am not sure what you are an advocate of.
If you think 20% max inflation was the correct setting, put up a proposal and if people think that is better, they’ll vote and so be it. I am done arguing Econ 101. If you think flooding the market with more ATOMs will result in higher prices, that’s your prerogative. I don’t think so and I will go and invest in something else. I really have no desire to go around in circles arguing the same thing over and over again. Investing in ATOM a couple of years ago was a mistake. Moving on. People were right that this community is a total shitshow.
weak hands to strong hands .
plz leave and let atomers make hun great again ( without you )
constantly the same people who were and never bring anything to collective intelligence
And what exactly is your contribution to collective intelligence? 13 words?!?
Good job. “strong hands”. lmao
That’s the problem you are stuck on Economics 101, but it is more complex than that. Also, you are part of the shitshow as a dear community member.
Do me a favor Mr. Tarikat and explain how it is more complex than that.
First of all, why are you calling me these names? Don’t you have any ethics? We can have a healthy discussion when you learn some ethics of discussion.
A tarikat is a person who knows the mysteries of the world. It is not an insult. In the Osman empire, it was an adjective for a smart person. So I am still waiting for you to write a paragraph explaining your position. Your only contribution so far is one line sentences that say something along the lines of “I know better”. So Mr. “I know better”, what is it that we don’t know?
Watch your language.
vixcontango:If you think 20% max inflation was the correct setting, put up a proposal and if people think that is better, they’ll vote and so be it
It is not about this or that inflation, it is rather about division and fragmentation. Jae and others were very involved and participating in the forum and supporting with ideas the progress of the Cosmos Hub. The inflation proposal and all the circus on twitter to make the proposal pass led actually to no ‘winners’ but all lost with that. Because now it seems Jae and others don’t care about the Cosmos hub and instead are focused on another fork, this is the only outcome of that inflation proposal. And even some people might not like Jae, the truth is that the consensus algorithm used by the Cosmos Hub and many other projects was invented by him, and the whole Cosmos ecosystem was created originally by him. Those geniuses advocating for the inflation proposal now give ideas to fix the mess you have created
Gee, I didn’t realize the Cosmos Hub is a personality cult. What good is ATOM’s much advertised governance if the community can’t change the settings? If Jae didn’t want the inflation to be changeable, he could have coded it that way. Why didn’t he?
And you wont see. Those manipulations have 0 evidence of work becuase they… dont work. The amount of times i have expressed this on the forum over the last ears is astonishing. Yet people use it to their advantage. Especialliy very large token holders. Alas, a lot of smaller token holders get dragged into this, without underrating how inflation works in web3. What mechanics work, etc.