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Cosmos Proposes Hard Fork Amid New Era of Blockchain Interoperability

Updated: Mar 14

Cosmos Hub faces a potential hard fork and investor uncertainty following the community's decision to lower ATOM's inflation.


Cosmos Hub aims to lower rising inflation of ATOM.
Credit: Ivan Babydov/Shutterstock

ZUG, CH – Cosmos Hub, the pivotal blockchain acting as a bridge among various independent blockchains within the Cosmos network, is at the forefront of a significant shift. This comes in the wake of a controversial call by Cosmos' founder Jae Kwon to bifurcate the blockchain, following the community's decision to adjust ATOM's inflation rate.


ATOM Inflation Reduction


ATOM, the native cryptocurrency powering the vast Cosmos ecosystem of interoperable and scalable blockchains, is currently experiencing moderate losses. This financial movement is a direct response to the recent upheavals in the Cosmos community. Just a day after Kwon's bold proposition for a "split," the cryptocurrency world is abuzz with the potential ramifications.


The catalyst for this proposed division was the community's approval of proposal 848. This proposal, which garnered 41.1% support from the voting participants, aimed to reduce ATOM's inflation from 14% to 10%. The rationale behind this change centers around the belief that ATOM's previously high inflation rate led to an overcompensation for network security and discouraged the use of ATOM in decentralized finance applications.


Potential Impacts


This approved alteration is anticipated to lower ATOM's annualized staking yield, a mechanism where users lock coins in the blockchain for rewards, from approximately 19% to about 13.4%. This change reflects a strategic shift in Cosmos' approach to incentivizing participation and maintaining network security.


Observers within the cryptocurrency community are divided on the potential impacts of the proposed hard fork. Some view it as a bullish outcome for investors, heralding a new chapter of growth and innovation within the Cosmos ecosystem. Others, however, express concerns about the implications of such a division, particularly in terms of network stability and user trust.


Regardless of the differing perspectives, this move by Cosmos Hub signifies a critical juncture in the evolution of blockchain technology. It underscores the dynamic and often unpredictable nature of decentralized networks and the continuous quest for balance between security, scalability, and user incentives.

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