The report discusses the proposed hard fork of the Cosmos Network following a governance disagreement. The disagreement arose after the Cosmos Hub approved a proposal to adjust the maximum inflation rate of ATOM to 10%. This decision was opposed by Cosmos co-founder Jae Kwon, who proposed a hard fork and a new token, AtomOne (ATOM1). The report explores the potential impact of this hard fork on the Cosmos Network and the ATOM token.
Disagreement Over Inflation Rate Adjustment
- Proposal 848: The Cosmos Hub approved Proposal 848, which proposed to adjust the maximum inflation rate of ATOM from 14% to 10%. This would also lower the APR for ATOM staking from 19% to approximately 13%. The proposal sparked a heated debate within the Cosmos community.
- Impact on ATOM: Advocates for the proposal argued that the reduced inflation would boost ATOM’s value as a security asset, particularly as Cosmos plans to expand its DeFi ecosystem and Atom Economic Zone (AEZ). However, the proposal was opposed by Cosmos co-founder Jae Kwon, who argued that the inflation cap would alter the Cosmos network security framework.
Proposed Hard Fork and New Token
- ATOM1: In response to the approval of Proposal 848, Jae Kwon proposed a hard fork of the Cosmos Network and a new token, AtomOne (ATOM1). Kwon argued that ATOM was never meant to be money, but to ensure the security of the IBC hub, and that altering the inflation schedule compromises ATOM’s core purpose.
- ATOM1’s Purpose: The main purpose of ATOM1 will be to fix governance issues and develop an explicit constitution before launching the full IBC and ICS functionality of the chain. The distribution plan for ATOM1 remains speculative, with suggestions that all ATOM holders will receive the new tokens and those who voted “NO” to Proposal 848 might receive a “loyalty” bonus.
Impact on Cosmos Network
- Uncertain Outcomes: The report notes that the success of ATOM1 and its impact on the broader Cosmos network remains uncertain. Hard forks have had mixed outcomes in the past, with some struggling to establish the same network effect as the forked network.
- Community Division: The proposed hard fork has raised concerns about fracturing the Cosmos community. The report argues that hard forks should ideally be avoided due to the risk of dividing the key community of the network.
- Understanding the Implications: Stakeholders should understand the implications of the proposed hard fork and the new ATOM1 token on the Cosmos Network and the ATOM token. This includes the potential impact on the network’s security framework and the value proposition of ATOM.
- Monitoring Developments: Stakeholders should closely monitor developments regarding the proposed hard fork and the distribution plan for ATOM1. This includes keeping an eye on discussions about the design of ATOM1 on platforms like GitHub.
- Evaluating Governance Models: The disagreement over Proposal 848 highlights the importance of effective governance models in crypto networks. Stakeholders should evaluate the governance models of crypto projects they are involved in or considering for involvement.