Jae Kwon, the founder of Cosmos, is rallying community members to fork the network.
On Nov. 25, Kwon urged his followers to join forces and organize a “split” in response to Cosmos governance passing a proposal to reduce inflation from staking rewards for its ATOM token.
Cosmos uses a dynamic inflation mechanism that increases ATOM’s supply by between 10% and 20% depending on how many tokens are staked. With 65.7% of ATOM staked at present, inflation is growing at a rate of 0.45% every year.
Per proposal 848, ATOM inflation will be capped at 10%, reducing inflation from its current rate of 14.24%. Staking rewards will also decrease from an annual percentage yield (APY) of 19% to 13.4%.
“With ATOM’s historical inflation being much higher relative to its peers, this has not only harmed the perception of ATOM’s monetary premium, but it has also led to constant sell pressure that has hurt its price performance,” the proposal said.
The proposal passed with 41.1% support, compared to 31.9% votes against, 6.6% vetoes, and 20.4% abstaining. Nearly three-quarters of ATOM’s supply was mobilized for voting, with 80% of validators participating. Validators backed the proposal with 54.5% support, while 95% of other tokenholders supported the measures.
However, major actors within the Cosmos ecosystem are unhappy with the result.
“Despite our voting… 848 has ended up passing, something that isn’t too surprising (though it would be good to know whether the later votes came from newly purchased ATOMs),” tweeted Kwon. “Now let’s coordinate a split.”
Cosmos infighting
Kwon’s efforts to fork the network follow long-term infighting within the Cosmos ecosystem. John Galt, a Cosmos-focussed crypto influencer, commented that a chain split could “resolve years of political tension” plaguing the Cosmos ecosystem.
Kwon said the new network, informally dubbed AtomOne, would fork the Cosmoshub4 code to ensure it runs the latest Cosmos software, also advocating support for the fork to support ATOM. “Instead of mass-selling ATOM and collapsing it all, we allow participation from ATOM, but [tokenomics] can be improved,” he said.
Galt said a fork could precipitate the largest airdrop ever received by ATOM holders. AtomOne would distribute the majority of a new ATOM1 token to Cosmos stakers, but wallets that voted in favor of proposal 848 would receive reduced allocation.
Galt also speculated that a chain split would likely benefit the original chain by removing dissidents from the network. He noted the failure of last year’s ATOM 2.0 proposal.
“Without Jae’s conservatism, Cosmos Hub could be more innovative,” he said.
Proposal 848
Proposal 848 estimates the majority of Cosmos Hub’s 180 validators will operate at a break-even or profit after the adjustment, encouraging unprofitable validators to increase their staking commission to bolster returns.
The proposal was informed by analysis from Blockworks Research that concluded Cosmos was overpaying for network security. Blockworks’ findings estimate most rival Proof of Stake networks issue staking rewards at a rate of less than 7% when more than 60% of supply is staked.
Cosmos uses delegated Proof of Stake consensus, meaning ATOM holders can delegate their tokens to a select pool of validators for staking.
