Key Takeaways:
Cosmos as approved the reduction of ATOM's yearly inflation from current 14% to 10% which will also result in decreasing its yield from 19.3% to 14%. However, this move is aimed at improving security in the blockchain.
The proposal was passed with a narrow margin as several validators voted against a reduced staking yield with several validators voted against the proposal.
The Cosmos Proposal #848 seeks to do a few changes to the Cosmos Hub which is the blockchain of its ecosystem.
The proposal would decrease the ATOM token inflation rate from 14% to 10%. Inflation rate is the percentage of new tokens minted every year. Reducing the rate of inflation would mean that there is a reduced token supply which is bound to increase the value of each ATOM holder.
The decision was taken mostly from a security point of view. At the current inflation rate of 14%, Cosmos was overspending on its security, which would be somewhat controlled in the newly proposed 10% inflation rate.
Though this move is set to reduce the annualized staking yield from 19.3% to 14%, Cosmos claimed that validators would be able to breakeven with their costs.
NOTE: A breakeven is the point where the net income from any activity is equal to the total expenditure. At this point, there is no profit, nor any loss.
Even though Cosmos Validators will now receive reduced yield rates most of them have voted in favour of the proposal. The proposal was passed with a narrow margin where 41% voted in favour, 31.9% voted against, 6.6% voted as VETO and 20.4% abstained.
Below is the list of validators who voted in favour and against the proposal.
Allnodes, the largest validator to vote against the proposal posted in X (formerly Twitter) about the proposal, saying that it would negatively impact small validators. A total of 78/180 validators voted in favour while 38 validators voted against.
#NOTE: In Proof of Stake blockchains like Cosmos Hub, validators are the ones who verify transactions and receive rewards. They also have to keep some crypto as collateral and whenever they fail any task, a part of that collateral is taken away as fine.
Staking on such platforms in open to everyone who can get a share in the rewards of validators by staking crypto under a validator.
The proposal #848 is the first of three proposals to boost Cosmos's security.
For those validators who are worried about their margins, they might eventually resort to increase their commission rates from those who stake with that validator. Cosmos says that nearly all 180 of its validators will break even with their costs.
A decreased circulation would surely impact the prices but, will it impact ATOM's prices when the cryptocurrency have already been in a negative trend?
In 2023, the price of ATOM has been in a downward trend from $15 on Feb 09 to $6.25 in October 20. However, before this news, the price climbed up by nearly 50% to $9.22 as of November 27, 2023.
Let us take a look at its technical charts to see if there are any buying opportunities. We have considered using daily charts to see the direction of ATOM's price.
ATOM's price climbed to $10.45 on Nov 26, 2023 but it has already been showing signs of price weakness.
Overall the near-term price trend seems to be negative with near term price coming down to $6, if the price goes down below $8.5.
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