[PROPOSAL] Set Min Inflation at 0%

EDIT: PLEASE STOP MAKING RELATION BETWEEN THIS POST AND JAE VISION THE CURRENT PROPOSAL IS BASED ON NATURAL ECONOMIC NEED TO REDUCE THE EMISSION AS PROPOSAL 848 PASSED, WE ARE PRETTY SURE THERE WILL BE A NEED TO UPDATE THE MAX INFLATION IN FEW MONTHS TO ADJUST AGAIN Regarding the proposals discussed in the Cosmos community forum [PROPOSAL] Set Max Inflation at 10% and the current proposal found on Mintscan , it’s essential to address a specific concern. While setting a maximum inflation rate is a valuable parameter for encouraging staking and ensuring network security, the primary issue lies in the proposed minimum inflation rate of 7%. This minimum rate implies that, theoretically, even if 100% of the token supply were staked, the network would continue to produce an additional 7% of tokens annually. This situation raises concerns and, to my knowledge, doesn’t align with any other functioning blockchain model (even outside). The rationale behind setting the maximum inflation rate at 20% is to generously reward those who contribute to the chain’s security, especially in scenarios where a significant number of participants decide to leave the network. This encourages new…

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aree with this proposal, the best way

Good ideas. Because I can say anything here like how many people support this proposal that on ground team.

CONTEXT: In response to the recent proposals regarding setting the maximum inflation rate at 10%, there is a crucial concern about the proposed minimum inflation rate of 7%. While establishing a maximum inflation rate is important for staking incentives and network security, the suggested minimum rate poses an issue. The concern is that, theoretically, even with 100% of the token supply staked, the network would continue to produce an additional 7% of tokens annually, a situation uncommon in other functioning blockchain models. ANALYSIS: The rationale behind setting the maximum inflation rate at 20% to reward contributors and incentivize staking is valid. However, the introduction of consumer chains adds complexity to the equation. The proposal suggests adjusting the minimum inflation rate to 0% for flexibility. This would allow stakeholders to fine-tune the percentage of bonded tokens based on emission rate incentives, especially in the absence of significant revenue from consumer chains. CONCLUSION: While the proposal acknowledges the adaptability of Cosmos, it is crucial to consider a more comprehensive approach to the inflation debate. The current focus on minimum…

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why you don’t just copy/past the 3 or 4 Jae’s sentences saying “yes to min at 0” and “if you don’t like the current model, leave”

would be much simpler and people could see where your alignment goes

So if Jae leads a drive to lower Min Inflation to 0% we would have a situation where Min Inflation is 0% and Max Inflation is 20%. This makes the range of possible outcomes for the 10 year supply picture of ATOM even larger making it impossible for investors to plan ahead. In addition, he has expressed support for more rapid changes of the inflation rate. This increases the volatility/turbulence levels of ATOM supply making it more event driven. This event-driven 0% to 20% inflation range is basically what the Fed does to set interest rates for the US dollar. The Federal Reserve has a monetary policy making committee called the Federal Open Market Committee (FOMC) that sets interest rates. The committee is made up of representatives of the US government and the US banking industry. In the case of ATOM, the monetary policy making body (the FOMC equivalent) are the token holders like Jae and big validators who can determine whether inflation is 0% or 20% by bonding and unbonding their stake around the 66.67% threshold. Let’s not forget that Jae is one of the largest ATOM holders and he singlehandedly can move the staking ratio depending on his own bonding and unbonding decisions…

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So is it like, whatever Jea says is wrong and harmful for the Hub?

Endorse setting Min Inflation to 0.

Consider this to be part 3 of the Halvening trilogy.

Love this plan. This combined with changing the inflation rate of change with compliment other changes beautifully.

Stopping wallet providers from running validator nodes may be too ambitious, but we think if the community votes and approves something that says wallet providers must display validators to delegators lowest stake at the top of the list and highest total stake at the bottom of the list, it would be a great first step toward decentralizing the voting power.

Should wallet providers be running validator nodes? Governance Meta

Cosmos started out quite centralized at genesis, but wallet providers appear to be compounding the problem. We see a few main issues that we’re hoping to discuss with the broader community, and especially want to hear from small validators. We think this rapid accumulation of ATOM and voting power needs to be stopped to protect the ecosystem. Here are our thoughts: Wallet providers need to be prohibited from running validator nodes. As they provide entre to the ecosystem and are for-profit op…

People often think that validators with lower stake are more “unreliable”. They assume it’s probably some guy with a computer at home and who knows how good of a computer admin they really are. As such people think there is a higher risk of slashing. They would rather go with a validator that sounds more professional that probably has some IT staff that keeps the machine up and running at all times. Ordering by stake from top to bottom is likely to lead to less staking or lower bonding ratio. I have seen similar attempts at other chains (Avalanche) and I was turned off. Avalanche pretty much made it impossible to find the holders of the highest stake in wallet. It was a just a random list of unnamed validators - their identification was their blockchain address. I understand your intent and welcome it. However, I think to get this done you need to solve for people’s perception of validators with lower stake being unreliable. Maybe some uptime statistics can be collected and then the display shows an ordered list of highest uptime and then validator stake. So something like SORT BY Uptime DESC, Stake ASC I think that would work better at decentralizing stake. I think Stride…

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You need the equivalent of $95,000 to get into the active set, so I don’t believe there are very many low quality Hub validators. There are very few maybe even none that are just an address.

In the forum post I linked to we pointed to Polygon MATIC as a case study. Their staking dashboard default is to display the validators with 100% uptime first from lowest stake to highest. As validators miss blocks they descend down the list and work their way back up over a 2 week period. Their dashboard also has the option to click a dropdown box and sort the validators based on several different metrics, including total stake.

Educating delegators is key, but not easy.

Minimum Inflation Rate : A 2-3% minimum inflation rate could be more appropriate. This ensures a steady token emission to incentivize staking while limiting inflationary impact.

Dynamic Inflation Mechanisms

• Inflation Rate Adaptability: we could Introduce a mechanism that dynamically adjusts inflation based on the staking ratio and the economic performance of consumer chains.
• Reference to Ethereum EIP-1559: let consider mechanisms like Ethereum’s, where inflation is offset by token burning, for a balanced approach.

Incentive and Revenue Diversification

• Incorporating Consumer Chains: If consumer chains generate substantial revenue, these revenues could be shared with stakers, offsetting potentially reduced rewards due to lower inflation.

Yes. I think Effort Capital wanted a 1.5% tail emission. Or maybe that was the ATOM 2.0 proposal? The 0% min rate is Jae’s idea that he mentioned in a Twitter discussion with @effortcapital. I personally am more of a tail emission guy. But that is for blockchains with set monetary policy. In this case we have programmable rules-based monetary policy. If we set the Min inflation to 0%, I highly doubt when reached this value would stay pinned at 0% forever. If it does stay pinned at 0% that means fees are good enough revenue for the stakers. So I am not opposed to a 0% threshold in principle, although at this stage in the game I think 7-10% inflation range is the correct range (around 8.5% average inflation over next 2-3 years). But you know, if we set the min threshold to 0% then we let the market determine the value. Until fees from consumer chains ramp up, I think we’ll be hanging out around 10% for a while.

I think setting 0% min inflation effectively creates a mechanism to discover when AEZ revenue has become sufficient that the ATOM supply can become fixed.

If ATOM holders feel incentivized to stake at 0% inflation, it means that revenues from AEZ activies have become sufficient to secure the network.

zaki_iqlusion: I think setting 0% min inflation effectively creates a mechanism to discover when AEZ revenue has become sufficient that the ATOM supply can become fixed. The token inflation rate is the price of decentralization. If you get out of staking and securing the network, your governance power is inflated away—this is a powerful way to keep a public network resilient against takeovers by the indifference of concentrated wealth. (The BlockWorks research on lower inflation rates on other chains fails to properly factor the level of centralization those other chains have relative to Cosmos—when you depend on lots of widely distributed individuals, inflation is the only way to coordinate them.) Setting a 0% minimum inflation rate effectively means that ATOM has reached a final (or foreseeably final) level of decentralization that everyone is happy with. This, coupled with 848’s inflation reduction, simply restricts further decentralization. In point of fact, the ATOM supply should never become “fixed.” Such an agenda simply turns ATOM into a speculative asset or security, not a governance token—or, for that matter, even a monetary token, which supply/demand do…

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@Lil_D Wasn’t Jae making the argument that high inflation transfers ATOM coins from weak hands (non stakers) to strong hands (stakers). That was the whole point of the high inflation he had implemented. That is an argument that inflation is increasing centralization - putting more of the ownership of the network in the hands of the large stakeholders. Validators are able to acquire even more stake than large stake holders because they skim 5% of the rewards of their delegators in addition to whatever they have themselves at stake. Generally speaking, inflation without active fiscal policy centralizes monetary power. This is called the Cantillon effect. Decentralization is only accomplished through some form of redistribution - the newly printed inflation is given to non-stakeholders (by law or “fiat”, hence the name “fiat currency”). This is certainly not happening in the programmatic rules of the Cosmos Hub where inflation goes entirely to the stakers. Jae made the good point that people are miscalculating the return. If the inflation is 20% and about 2/3rd is bonded, only those 2/3rds actually gather the inflation benefits and as such the return-on-staking (ROS) is actually…

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@zaki_iqlusion and @vixcontango bring up excellent points. I fully support the 0% min inflation floor.

Currently, I cannot say I support this proposal. In theory, this sounds great, but… • ATOM is a governance token. This time last cycle, ATOM was a little below half the price it is now. If the idea is to one day have such low inflation that demand outweighs supply, the price will go up. This is problematic for voting rights as the barrier to entry to have any voting power will be much higher. If we think we have a problem with whales throwing around their weight now, wait until ATOM never dips below $20-$35. • This isn’t to say that shared security one day can’t become the gold standard of staking and staking rewards - but I don’t see a world where I stake my ATOM and I get back very little or zero ATOM. While the rest of the basket of tokens maybe super great, if I stake ATOM, I want a percentage of ATOM worth my stake as a reward. While I am not against lowering the minimum inflation, I do not believe 0% is the number. I am thinking 2%-4%. • Individuals who stake ATOM will always see some level of ATOM rewards worth staking for with minimum inflation at at least 2%-4% of ATOM + the basket of other tokens. If I stake ATOM, I want ATOM. • It will keep a…

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1. I think right now every account can vote regardless of ATOM amount. I am actually of the opposite opinion that minimum economic interest should be present to vote. Let’s say $10. If you have that as a threshold, you can always configure the setting to be that number regardless of ATOM price.
2. You can always convert your rewards to ATOM. Maybe at some point having an option to receive rewards in ATOM (ie automatic swap from token to ATOM on an exchange) could be made once that becomes a real issue.

Getting down to 0% inflation and replacing inflation income with fee income is hard for standalone chain - even the best ones - but with ICS, ATOM has the best chance of pulling it off, imho.

@vixcontango ,

1. The vote for addresses that have more ATOM staked, do they not carry more weight than those accounts with less ATOM staked?
2. If such a feature were implemented, would this not be detrimental to other chain’s tokens who participate in share security (i.e trade/sell pressure)?

1. I don’t understand your point. Whoever has more ATOMs has more voting power. That is how it works here. I don’t think you have proposed anything different.
2. Converting rewards to USDC (cash) or ATOM or keeping the investment is up to each individual investor based on their investment strategy. I don’t understand what your issue is. The point is you will get paid. You get paid with tokens. If you want these tokens to turn to cash, they can. If you want them to turn to ATOM, they can. As far as voting,
   if you keep the tokens → you increase your voting power in those protocols,
   if you convert to USDC → you lose voting power and
   if you swap to ATOM → you increase your ATOM voting power.

Makes sense to me.

• Correct. If less and less ATOM is being brought into the world, this over some given period of time will drive the price of ATOM up (good thing). This will make ATOM less accessible the more expensive ATOM becomes (bad thing). Lets say ATOM stays above $20 bucks in the future. It would cost individuals more to gain voting power. This isn’t a problem for a whale or someone who is already well off who can buy expensive ATOM. However, this becomes a huge problem for most individuals. It inevitability would centralized the voting power of The Cosmos Hub. Does that make sense? • Just because I am getting paid in a bunch of different tokens doesn’t mean it will equal what I would have gotten rewarded in ATOM. I stake ATOM for the voting power AND the cash value proposition. With your logic, you are wanting stakers to choose between having voting power or having cash value. Right now, we don’t have to choose as we still get plenty of ATOM. With this proposal, it will one day make voting a centralized affair. Take the power from the masses, they will revolt - in this case, selling off and making whales more powerful. The Cosmos Hub governance would become meaningless. Change…

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This is where we apply the Scarlet O’Hara principle of “I’ll think about it tomorrow”. I think we are very far from these scenarios and when we get there we’ll figure it out.

Fair enough.
I am still open to having my mind changed.

As the proposal stands, I will be voting “no”.
A “yes” vote from me will be a minimum inflation somewhere between 2.5%-4%.

Personally don’t think now is the time for this. I was for 848, but for now, if we do adjust the minimum, would feel more comfortable with 5, if at all.

Edit: would also like to see how the Blockworks proposals are received by the community next (?) month when they’re brought up for voting.

The more people delegate, the more the % bonding is going up so the more vote there is
Having it at 0% means there is enough incentive with consumer chains or just because of the political aspect of the Hub, which means we would have reach the goal.

Having a minimum above 0 means we already fail at providing/building well the narrative and the economic linked to it

What’s the specific point of 5?

• Not an economical choice
• Not a narrative choice

You make a point on the money side of things.

While I can see present day we already have to make a choice between value proposition vs voting power (hold your ATOM vs sell your ATOM), I can’t see how bringing less ATOM and or zero ATOM into the world is healthy for the voting power economy of The Cosmos Hub.

Reaching 0% staking yield in $ATOM would mean 100% of $ATOM would be staked, so I guess it would be ok! (Reaching this case would mean consumer chains would be very, very profitable for the Hub)

What would be the unhealthy part for the voting power economy if 100% of $ATOM where delegated? (would never happen anyway)

What would be the unhealthy part for the voting power economy if 100% of $ATOM where delegated? Yes, this is highly unlikely. The unhealthy part to the voting power economy would be the conflict of interest we are currently dealing with. While everyone who has bags of ATOM wants to see price go up, ATOM is also our governance token. • Less ATOM coming into the world, price go up. • Less ATOM on the market trading, price go up. • [additional utility cases for ATOM to rise in price not listed here] The concern is The Cosmos Hub will become centralized due to the barrier of entry to acquire ATOM. If it cost a premium to get ATOM due to the increased price, only whales or those who are well off will be able to accumulate the asset at a rapid rate. The chain would be decided and controlled by a few. We would be no better than the following at that point: • BTC being centralized/controlled by a few large mining companies. • ETH being centralized/controlled by a few large stake pools. • SOL being centralized/controlled by a handful of VCs. As contentious as the prior vote of moving the max inflation rate down to 10% was, it was our governance system working. This…

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If the minimum inflation is at 0%, it will scare the validator away, doesn’t it? It will be a too much risk for them to run a node.

@ThePowerCosmic You have this backwards. Inflation is not making the Hub decentralized. Exactly the opposite - high inflation is making the Hub CENTRALIZED. That’s the explicit intent of high inflation according to Jae - the Cosmos Hub creator - put more ATOMs in the hands of the stakers and dilute the ATOM holdings in the hands of non-stakers. That’s why he wanted to have 20% max inflation - to dilute non-stakers faster. That is CENTRALIZING behavior away from non-stakers. I think implicit in the Jae thinking is that non-staked ATOM is the one held on exchange pools to facilitate conversions to fiat. The more ATOMs were held on exchanges for active trading, the more the inflation would increase to dilute the exchange held stake. So a high inflation would continuously prevent those exchange pools from growing in percentage terms and taking control of the Cosmos Hub. That’s still the case, we just limited the extent of that to 10% per year instead of 20% per year. Reminder again, the ATOM issued by inflation goes ONLY TO STAKERS. Even though let’s say 20% of new ATOM is issued it goes ONLY to the 65% who staked it. Inflation on its own absent a redistributive fiscal policy…

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I need somebody to address this issue for me because I can’t figure it out. Coin Gecko and Coin Market Cap show different market cap number for ATOM and have different circulating supplies. Coin Gecko shows 292 million (which is the same as the one shown in Mintscan) and as such shows $2.8 billion market cap and 30th place in the ranking. Coin Market Cap shows 377 million circulating supply which the same as the TOTAL supply of tokens shown on Mintscan and as such shows $3.5 billion market cap and 22nd place in the rankings. That is a big difference. This is also important for the calculation of the bonded ratio. 247 million is bonded. If the circulating supply is 292 million, then bonded ratio is 84% and ATOM is very much very secure. If the circulating supply is 377 million, then bonded ratio is 65% which is what we see on Minstscan. How can Minstscan simultaneously show 292 million circulating supply and 65% bonded ratio? It doesn’t make sense. There is 85 million ATOM discrepancy between CMC and CG. What are these 85 million ATOM? Who holds them? Why are they included in the bonding ratio by Mintscan? If they are not part of the circulating supply, how can they be…

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@vixcontango ,
My concern isn’t about high inflation (max inflation), my concern is about little to no inflation (min inflation) - the purpose of this thread.

You are thinking along the lines of “One man, one vote” governance, but that doesn’t work in blockchain systems where accounts are anonymous.

No, I am thinking about weighted voting. Your example of 1 man - 1 vote and blockchain anonymity is correct, it doesn’t work without some type of digital id system. Please reread my concern about the ability to acquire more ATOM above due to the premium price of ATOM in the future (i.e. my ability to acquire more ATOM than the next voter so my vote will OUTWEIGH their vote).

My suggestion of a separate governance token was merely to not go against what we are trying to achieve with ATOM (increasing its utility and price). If this is the future of ATOM (it having a price premium), we really need to be concerned with the centralization of voting.

lol. sometimes i have this feeling too. I have defo seen people just create opposite posts for the sake of it =)

OK. Let’s say you have a fixed price governance token. What’s stopping someone with lots of money from buying out all of them? Also more fundamentally, why should people without economic stake in the network have governance power over it? Voting is fundamentally centralized into the people who understand the network and its issues and who care enough about it to accumulate economic stake in it. For what reason should people who don’t know about the network, don’t care about the network have a very low barrier to entry to be capable of exercising governance power over it? What is that accomplishing?

Let’s say you have a fixed price governance token.

I never suggested having a fixed price governance token.

Also more fundamentally, why should people without economic stake in the network have governance power over it?

I never said they should.

For what reason should people who don’t know about the network, don’t care about the network have a very low barrier to entry to be capable of exercising governance power over it? What is that accomplishing?

Sounds like we are talking about two different audiences. My concern are those who are interested in the Cosmos Ecosystem (specifically The Cosmos Hub) and who want to have a voice. If the purpose/idea of a blockchain ecosystem is to remain decentralized, by raising the price of ATOM significantly, this will centralize The Cosmos Hub governance.

The concept of blockchain decentralization is technical and refers to “fault tolerance”. You can’t attack any one node, or a collection of nodes and take the network down. There is a measure called Nakamoto coefficient and ATOM’s is 8 which is middle of the road. It’s decentralized enough.

How do you define governance “centralization”? What is your measure? As far as I am concerned, ATOM suffers from governance “centralization” because account holders delegate voting to their validators and don’t vote themselves. ATOM is more than decentralized enough in terms of account ownership, but the fact that account holders don’t vote is the primary reason for governance centralizing into the hands of the validators. ATOM price is not the issue.

If anyone wants to vote in the Cosmos Hub, they can go buy a full ATOM or partial ATOM and that gives them the right to vote. There are thousands of sub 1 ATOM accounts that voted on Prop 848. So I am not sure exactly what you want to do? Give penny accounts higher voting rights? Do you want to implement quadratic voting to reduce the vote of big accounts? I am trying to understand your objective.

The concept of blockchain decentralization is technical and refers to “fault tolerance”. You can’t attack any one node, or a collection of nodes and take the network down. There is a measure called Nakamoto coefficient and ATOM’s is 8 which is middle of the road. It’s decentralized enough. I wasn’t speaking about decentralization from an attack, I am talking about decentralization from a few speaking for the masses. How do you define governance “centralization”? What is your measure? As far as I am concerned, ATOM suffers from governance “centralization” because account holders delegate voting to their validators and don’t vote themselves. ATOM is more than decentralized enough in terms of account ownership, but the fact that account holders don’t vote is the primary reason for governance centralizing into the hands of the validators. ATOM price is not the issue. I did say earlier our governance system could use some improvements and is not perfect. If anyone wants to vote in the Cosmos Hub, they can go buy a full ATOM or partial ATOM and that gives them the right to vote. There are thousands of sub 1 ATOM accounts that voted on Prop 848. So I am not sure exactly…

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I would think that the payouts from shared security tokens should still make it worth their while the closer we trend down to 0%.

Higher price of ATOM and lower levels of inflation will lead to some current holders to sell some of their ATOM stake to new buyers, thus decentralizing the network. Let’s use an example. If you have 1,000 ATOM x $10, you have $10,000. If ATOM gets to $100, then you can get that $10,000 with selling about 100 ATOM, while keeping 900. Your monetary objective is met and ATOM now has 2 holders - you and the guy you sold your ATOM to. ATOM is more decentralized. If Bitcoin is any indication, higher prices lead to or come from more accounts in the network. The Metcalfe’s Law pricing model uses that relationship between price and active accounts. Today Bitcoin at these very high prices has 10x as many active accounts as it did when it was $500. So the answer is YES - at higher prices and less inflation, the ATOM network will be more popular and will have more active addresses and since it is a proof-of-stake network that will mean it’s governance will be substantially more decentralized if the new users self custody and participate in voting. 2023-12-04_183002 1406×772 147 KB I mean what ATOM has done over the past 4 years (high and unpredictable inflation without…

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Just because you have more accounts doesn’t mean the coins/tokens aren’t controlled by a few…
We just agreed earlier that this is a bug/feature of blockchain governance without digital id. Additionally, Bitcoin I believe is a bad example. The orange gang doesn’t vote with Bitcoins. Over the years, their governance has happen off-chain (i.e. the many forks of Bitcoin). Not that it matters, but not sure how those accounts are aggregated considering Bitcoin uses UTXO.

If people believe Bitcoin is this super decentralized blockchain, they are specifically speaking about a 51% attack. They aren’t mentioning the fact that a few hold majority of the Bitcoins (and or will). If people believe once the BlackRocks, Fidelitys, and VanEcks of the world put skin in the game and they aren’t going to be in the ear or pockets of the Bitcoin dev team, you guys are buggin’.

I am not convinced that governance won’t become more centrally controlled (even more than it already is to your own admission) if the price of ATOM keeps going up.

I put a post a week ago about implementing quadratic voting for passive stakers in order to increase the power of active accounts vs validators. Currently validators use passive stake to vote on a 1:1 basis and that amplifies their voting power greatly far beyond their own economic contribution to the network. I think what I suggested in that post is a good, simple and practical way to decentralize voting to a level above the status quo today. Outside of that, I am not sure how you make passive stakers vote unless you implement penalties for non participation, which I am sure will be very unpopular. I don’t feel like I have a qualified opinion on many proposals here - don’t have the time to study them and deliver an opinion. Or I just don’t have the expertise. On things like inflation and fiscal policy I feel like I have specialized knowledge about that I can contribute but on some technical matters, I would be clueless. A lot of times I let my validator vote for me assuming that he has a more qualified opinion. As far as your opinion on how decentralized Bitcoin is, that is obviously your opinion, and I don’t think it is particularly widely shared. Nobody knows who is what on…

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As of this moment Cosmos hub most of the revenue comes from inflation. Fees from ICS are still very low.

That being said lowering it minimum inflation to 0% does not make sense at this moment. In the future we can reconsider these parameters, but right now i think minimum inflation should be set to lowest 1.5% or up to 3.5%.

Lowering inflation to 0 can find synonyms in your nickname - it will be kamikaze =)

Agreed about revenue + this

No need to complicate things

1. Appropriate minimum and maximum economic ratio range, such as 4% - 10%
2. The consumer chain sells the distributed rewards through DEX, buys ATOM and destroys it to resist inflation.

If the reward of the consumption chain is enough to destroy a large number of atoms, the price of atoms will be highly anticipated, and those who pledge will be more interested! Inflation will go towards 4%, and vice versa, it will go towards 10%

The purpose of staking is to obtain atoms, and price stability is positively related to staking. If atoms are unstable, it is meaningless to allocate rewards from the consumption chain to persuade people to pledge atoms!

@StakeLab ready to put this on chain?

Think it was a bug a now corrected

What percentage of stake is required to trigger 0%? If we are talking %100 , then it makes sense. There should not be anything left to reward staked assets and more Atom should not be produced to continue because Atom would become diluted.

I’m suggesting that Cosmos should consider having a minimum inflation rate that is less than zero.

This is essentially like a fee for burning tokens.Reason for this Proposal: The main idea is to help maintain the token’s value, especially when there’s an oversupply.

It’s a method to encourage people to hold onto their tokens, similar to saving money in a bank.Benefits for the Future: Implementing this could strengthen Cosmos in the long run. It’s important for the network’s stability and growth.Learning from

Examples: We can look at other cryptocurrencies that have tried similar methods. This could give us insights into how to effectively implement this strategy in Cosmos.

agree with this proposal,thanks!

Good morning,

Just like the first proposition, this one lacks a metric allowing us to have a prospective vision.
0% inflation means we no longer need new tokens. Isn’t this giving up on the growth of the cosmos?
How, for example, can we finance new projects if we reach this stage?
Also, at what rate can we achieve this 0% inflation?
If 0% stacking generates 10% inflation, how much inflation for 66% stacking? 3;33%? Is the interpolation linear?
This proposal lacks depth, I will vote no.

Bonding above 67% is what triggers decline towards 0%. Presumably if yields are too low, people will just unstake ATOMs which will make inflation/yields go higher again. It is very unlikely that yields will actually hit 0% if stakers aren’t getting properly compensated against alternatives. Many also may be happy with 0% yield so long as number goes up. I personally think the min inflation should be 1.5% (tail emission) but I don’t see how setting it to 0% is a problem. If 1.5% is the right tail emission, the market will set it there. If there is a market failure, then I might be for a hard set at 1.5% (or some other number), but first we need to see market failure.

It is a no for me on the prop 868. There is simply not enough evidence that 67% staked ATOM will be achived in case 0% inflation is in place. For example 2 chains that have 0 inflation that are based on Cosmos SDK are DYDX and Kava. While DYDX is still in the transition phase Kava has been here for a while but has recently implemented 0% inflation. At the moment DYDX has around 7% staked and Kava has 12%. And for example here DYDX gives % of fees from perps to the validators and stakers and at the moment staking APR is about 12% and I think i saw on twitter that 2 million USDC were given to the delegators. And I just remembered Kujira has around 54% staked but I could not find how much is staking APR without airdrops. What kind of reward system will there be for Cosmos hub if 0% is in place? Current ICS rewards are not significant and could not even parry DYDX in this example. Until there is more reaserch on how will 0% inflation affect the security of the chain, validators and how much will users actually stake my vote stays no. If I am mistaken please correct me but the only kujira has somewhat higher stake at almoust 54 %. How will Cosmos hub secure 67% bounded ATOM…

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We are leaning towards Yes. but i have questions before voting.

With the new proposed parameters the inflation will be 0-10%, it will remain 10% if the bonded rate is less than 67% and it will start to reduce as soon as the bonded ratio (currently 64.3%) is achieved. Theoretically, by the time we reach 100% bonded ratio the inflation would be 0%.

Another, question is have we ever gone above 70% bonded ratio?

At the moment inflation change rate is 1% meaning with every 3.3% increase in the bonded ratio above 67%, there will be a 1% reduction in the inflation. right?

hi! i’m curious (not opining) assuming that there’s a day when rewards drop to (nearly) zero, stakers stay staked, and validator operators are running at a loss. what do we think the possible outcomes may be? especially curious what @zaki_iqlusion thinks the reason for these rewards is to attract sufficient stake to secure the chain. so part of me thinks that once we’ve achieved our target, we should only care about efficiently retaining that amount of stake. another part of me wonders how the set of operators will change as a result. who will be operating a Cosmos Hub validator at a loss and why? i start to think about things like exploiting outsized governance influence in various ways. but adjusting fundamentals like issuance to account for secondary effects like funding validators seems like an overcorrection, and there doesn’t seem to be an elegant way to reward validators independently from stakers. i imagine that setting the floor to 0% (or even a negative) issuance rate will be a forcing function that leads to updates in staker and operator behaviours guessing that at 0%, gradually the active set will predominantly be validators controlled by a range of…

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I would rename to “Set Minimum inflation parameter to 0”. It would avoid confusion for voters/validators that don’t understand or at least prompt them to read further. A graphic might help here to illustrate that minimum inflation would only happen after X% of tokens is staked, even as an example it would clear a lot of misconceptions that Im seeing in this thread.

Throughout this discussion, we’ve pinpointed various posts that appear to significantly misinterpret the operation of the inflation mechanism in the Cosmos Hub. To address this, we’ve initiated a separate topic: The x/mint Module and understanding the Inflation Rate Calculation with the aim of promoting awareness about the actual inflation formula. Additionally, we’ve shared a straightforward model we’ve developed to illustrate how it would behave with different parameter adjustments in the upcoming years. We encourage everyone here to engage with it, as it can swiftly rectify some of the misconceptions we’ve encountered.

Here is a link to the model: Cosmos Hub Inflation Projection - Google Sheets

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Good proposal . Keep Cosmos adaptable. Eager to hear further findings this week

so validators will just arbitrarily inflate $ATOM by printing it through governance?

There are 3 posters here that don’t quite understand how the blockchain inflation works. The compensation validators get for practically any chain is a combination of inflation (new tokens being issued) and fees (tokens used to pay for transactions). When a chain is young and doesn’t have usage, compensation comes primarily from inflation. When a chain has a lot of usage, the validators get revenues from the fees. Bitcoin’s inflation is reduced through a process of halving over time with the idea being that as the chain gets older and more established more of the compensation will come from fees and less from inflation subsidies. This supply issuance design is obviously a bet that a chain will be popular in the future which may or may not happen. If a chain never becomes popular, the fee revenue may not compensate the validators appropriately and they will then stop validating the chain. Proof-of-stake chains are different than proof-of-work chains in that the validators give most of the earned tokens back to their delegators. For example, if validator has commission of 10%, the validators keeps 10% of earnings (inflation + fees) and gives 90% to the delegator. So if inflation…

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support this prop, natural next step after capping the inflation

it’s expected validators would receive real revenue as staking rewards when this day comes

Why 0 as a min and not something like 1%, 2%? 0.5%?

I think as inflation falls, it would focus the minds of validators on alternative revenue models for validators and stakers.

This would include revenue from protocol owned liquidity, AADAO investment returns and ICS revenue.

I think this focusing function would be very valuable.

I partially agree with what Zaki said Regardless of the context, validators have a duty to research alternative revenue models for the creation of additional value in the hub. Validators hold the sovereignty of the chain and should bear some heavy responsibilities in this regard, in my opinion. However, I have a slightly different perspective when it comes to inflation. Connecting issues related to network security with other sources of income in any situation seems like a risky idea. If we were to link external incentives to staking, for example, temporarily generating income for the hub and successfully growing external chains or businesses, it could align in the short term. However, in the long run, if the vision does not align or if there are no longer reasons to rely on the hub’s security, there is also the possibility of detaching from AEZ. Increasing variables that pose a threat to the network’s security should be avoided, even if it temporarily has a positive impact on the price of Atom. Alternatively, if the hub is generating substantial added value during the process of reaching a fully bonded state, dynamically adjusting the tax rate to absorb liquidity and…

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I think a great example of who will operate is prop 712 on OSMO right now (I know its not Cosmos hub, but its a great example)

Halving of inflation parameters would be better setting from 20/7 to 10/3.5 makes more sense imo, at current revenue this prop would cause people to start unbonding rapidly if inflation actually started to drop too much de incentivicing stakers. The 0% lower bound should be revisited in the future if/when the hub starts to make sustainable revenue.

P/s I personally don’t believe in fluctuating inflation and think that it should be static at around 4 to 7%, which we can revisit in future to lower further dependent on revenue streams. Static inflation will help people know exactly how many atoms to expect staking. And lower confusion around this topic

We appreciate and fully support the vision of transforming ATOM into Interchain money and security hub. However, we believe that these changes cannot be rushed, as doing so may potentially harm the Cosmos Hub rather than strengthen its position. We have the following concerns: • A recent proposal to change the inflation rate has been successfully implemented, altering the long-established dynamics of the hub. The Cosmos Hub has not yet fully adapted to this recent change. • Validator income for most of the active set is already minimal and, in some cases, even negative, especially when validating consumer chains and relayers on top of the Hub. The income from the proposed inflation model may fall short of covering operational costs. • Although the concept of AEZ shows promise, the current revenue generated from it is not substantial enough to justify a yet another dramatic shift in ATOM’s inflation dynamics. • Should the proposal pass, in this current state of affairs, the only incentive for individuals to buy and stake ATOM tokens appears to be airdrops, which is neither guaranteed nor may meet the expectations of potential investors. In conclusion, while a…

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I think variable inflation is absolutely fantastic. No other chain has it and inflation can be adjusted based on market conditions and preferences of stakers (do they want number up or income - it can change from year to year and based on cohort turnover). The only question is the range.

It is an innovative idea and has proven to work well at maintaining staking ratio at roughly 66%, my concerns around it are unpredictable supply and rewards when looking out a year+ ahead. Also that if lower bound inflation is too low like 0% that is being proposed would cause the staking ratio to stagnate right below 66% incentivicing larger stake holders to unbond if it goes over. With static inflation supply and rewards would be predictable and if staking ratio hit 70+% it could stay there indefinitely with no reason to unbond. I would reduce the static inflation based on revenue streams over time. Which can be revisited yearly.

I think the inflation rate should be based on linear control rather than PID control. Maintaining a setpoint may not be realistic in the future, and the inflation rate will just drift to the min/max values. I would set the max inflation rate to 20% at 50% bonded and min inflation rate at 0% at 80% bonded. That would set an inflation rate of 10% at 65% bonded and fluctuate between 0%-20% for 80%-50% bonded. I am unsure how easy or if possible or if it already is in place, but I would also limit staking to up to 80% bonded to ensure there is always at least 20% liquidity.

ohh like these ideas, like maybe the protocol treasury periodically airdrops to validator operators

I would be in favor of having the inflation hit 0 at 100% staked

Doesn’t look like this one will pass. Validators big and small are against it.

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Curious to see what happens this time.

Some quick questions. If it were to pass, would that position the Atom token as more bullish for the current run ?
Im worried about the long term repercussions this would bring such as centralization, as well as the loss of staking reward revenue, and maybe other issues Im not aware may be possible (Token collapse?).

The picture you painted about the Atom governance being like the FOMC but with less knowledge experience and training is a scary though!

Lower inflation means higher coin price, right? But does that come with a cost to its decentralization?

I want to see cosmos succeed and last in the space! Thank you for your time.

Well, yes, lower inflation (ie lower token supply) means higher price if you assume network activity levels are the same. Most of the coins out there have programmed inflation schedules (they get reduced in a certain way) - Bitcoin, Ethereum, you name it. On net they should be far more centralized. Only ATOM allows the inflation to change based on market conditions, ie the preferences of the stake holders. If the market wants, ATOM can provide yield (more inflation). If the market wants, ATOM can provide principal growth (less inflation). People stake and unstake and that determines the inflation levels. That’s what makes ATOM really unique in the crypto industry. The yield part is really important - most market participants (ie Joe Schmo with 401(k)) - want yield. They are income investors. That’s the largest cohort (ie group of people in the market). ATOM’s yield is an attractive offering for them if they can figure out how to access it. Things like Bitcoin appeal to a much smaller cohort who are more interested in counteracting sovereign currency devaluation. Bitcoin hodlers are like that samurai that killed everybody to accumulate a pot of gold and then bury it into the…

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Friends, I really glad that we have Proposal #868 in Cosmos hub mintscan.io Mintscan Interchain explorer and analytics powered by Cosmostation. Because of this proposal, I understand how inflation works in Cosmos SDK: https://docs.cosmos.network/v0.46/modules/mint/03_begin_block.html Thank you StakeLab I will try to explain with easy words: At first, very important to understand, that this proposal is about decreasing “Minimal Inflation parametr” to 0% “Minimal Inflation” is not Inflation Also, exist “Maximum Inflation” For now, “Minimal Inflation” is 7% And "Maximum Inflation: is 10% And for now, real Inflation that we have in Cosmos Hub is already 10% So, what do we need to get bigger Inflation? We can’1 get more than 10%, because “Maximum Inflation” is 10%, and we already got it How to get less Inflation? When and why real Inflation will go down? Inflation will go down, after we will have more than 67% of $ATOM in stake (bonded) If we have less than 67% $ATOM in stake - real Inflation go up If we have more than 67% $ATOM in stake - real inflation go down Now, 64.5% of $ATOM in stake And Inflation try to…

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Going to leave the same comment i left in the other thread here:

I wonder what is the correlation between a the desire of an actor to sell, i.e. asset owner’s needs and the amount of an asset issued per day to a given market. My guess it roughly = 0

probably because you are conflating sell with sell at a loss.

This sounds amazing to me to be honest.

We voted yes, as we see it good for cosmos Tokenomics.

i think i will sell all atom, cause this is stuck in tokenomics and too many people only need it for incentive. i think this is good reason to set minimum at 2-3% but 0% it doesnt meant we are free validators,

Is the issue that validators are being paid far to much and could easily cut rewards while still paying for their overhead? This seems antithetical to the idea that ATOM needs a 5% minimum commission rate.

I get a risk free 5.2% just holding USDC on coinbase, so there is no justifiable reason for any user to risk their capital staking ATOM for similar APR and just hope that validators dont arbitrarily raise CP taxes to 40%, lower inflation to 1.3%, or print 40 million ATOM before i can unbond and hope i dont have to sell at a loss.

Nope. Please do not reflect from the a clouded, to a healthy thought there.

To each is own my friend .

Statistics speak louder than words, we have broken down the numbers in a separate post for those who are interested: Statistical Analysis of Prop#868 Rejection (Set Min Inflation to 0%)

Set Min Inflation at 2%, that may be a better choice or 1%～5%, at least 1%. Most people want to get some interests by staking token.

we cut the max inflain rate by 2x, then why not the min inflation rate as well ? 3,5% to 10% seems to me a good choice

From what I understand, the teams in charge of reshaping atom inflation should soon be proposing something on the forum

@Youssef

isn’t it

2.5% may be a good solution for the lowest inflation, but it depends on many factors.

Has anyone actually done any mathematical calculations for the inflation curve which included “other” factors, or is everyone just randomly saying numbers? Asking for a fren

“One potential solution is to adjust the minimum inflation rate to 0%. This adjustment offers flexibility and allows stakers and investors to fine-tune the total percentage of bonded tokens based on the incentives provided by the emission rate in the absence of specific revenue from consumer chains”.

So that means it is just a random number without research, created by someone that has OCD in counting, so it must be absolute zero, that’s why this failed.

I think if the proposals was for Min Inflation of 3.5% (halving), it would have passed. While the 0% lower bound is theoretically the right way to go, neither the community nor the technology overall was mature enough for a 0% lower bound on inflation.

the teams in charge of publishing a new tokenomic change proposal should come forward. No communication regarding this.

Agreed. Been a while without updates on that front. @effortcapital wen?

@Guinch_Roze @tknox35 We have made a dedicated post on the forum and publicly shared our model to play with all the parameters and see projected effects on the inflation itself:

The x/mint Module and understanding the Inflation Rate Calculation Governance Meta

CONTEXT: We have seen recently a series of on-chain proposals regarding the reform of certain inflation related parameters. We were very surprised to see among the comments a large share of users that didn’t really understood the formula behind. On this context we have provided our initial negative feedback on these proposal on this post, highlighting the fact that the logic would have guided us to discuss the inflation reform as a fully comprehensive formula debate BEFORE voting on the adjustme…

No one should consider a parameter change proposal unless considering a full scope of the x/mint module and the whole inflation formula.

I support the idea of maintaining the maximum inflation at 20%, and I can agree to reduce the minimum inflation rate, but I strongly oppose setting it to 0%. It’s important to recognize that inflation is not inherently bad; its redistributive and engagement-encouraging effects are critical for the network’s health and community vitality.

Reducing inflation to zero overlooks the benefits it brings in terms of participatory incentives. From the perspective of potential profits, lower inflation would actually diminish the value of staking ATOM, potentially leading to a further decrease in its price due to reduced demand. This would not only affect validators but all stakeholders who contribute to network security through staking.

If the goal is to decrease the supply to increase token value, implementing an independent system like EIP-1559 to burn tokens would be a more appropriate approach. This system would adjust the token burn rate based on transaction volume, effectively reducing supply without eliminating inflationary incentives that support network participation and security.

Hello citizens!

We moved to 0% as minimum on Chihuahua Chain, here are some details for people that think it will kill their return:

• Current bonding rate: 42.60%
• Current APR: 9.49%
• Current max inflation: 4.20%

Having the hub staying at 20% max inflation with a 0% min inflation rate would have better return than the current implementation on the Cosmos Hub

Happy to have all voters review again our proposition and get to post it again now that people got some better overview

I never doubted this.

StakeLab:

One potential solution is to adjust the minimum inflation rate to 0%.

Fully support lowering the minimum inflation bound. In addition, could continue increasing the tax on the Cosmos Hub Community Pool.

Being an advocate for stakers, vs. passive holders of ATOM, is truly appreciated @StakeLab. Thank you.