People are more afraid of loss , high inflation causes prices to fall. When prices fall, people will choose to sell rather than stake, leading to further price drops
Inflation is not the only way to generate staking reward. You have mechanisms like taxation, MEV harvesting, transaction fees, etc. Inflation is one of the most damaging mechanisms to generate staking rewards, because it extracts value from atom holders and gives said value to atom stakers(similar to a ponzi scheme/pyramid scheme). Inflation generally should be used for the short term and phased out for the long term.
From my point of view, inflation only benefits financial service providers who sell APY to their clients and do not care about a healthy hub.
I think if we ask everyone their opinion on the ATOM tokenomics, every retails and private investors will tell you that inflation is not beneficial for them and that they are all ready to pay much higher tx fees if its to create value for holders and a more desirable token and healthy network. I mean, by what I hear.
I really hope that the cosmos hub will manage to get out of this crazy inflation asap!
This can be proven only ex-post, so it can have problems if you pay ex-ante. You can only expect some quality in the work, and assume the contributor incentives only if you have history of that account.
Good point! I guess it also serves other purposes, but the APY one is very big, brings speculation and bad reputation to the ecosystem, especially in the eyes of the developers we are trying to attrack.
I believe this proposal makes sense. It is already happening on Ethereum, Binance, Fantom, etc. protocols and is a missing feature of Cosmos.
I don’t think this proposal reduces the security of the network, or if it does, only temporarily, because the price should adjust upwards given a smaller supply and an equal demand.
Also, the tokens being burnt should not be the staked tokens but the free ones that have just been used to pay for (any?) transaction.
Basically in the medium-long term you are doing a favor to validators even if you reduce their incoming tokens quantity: they will just have to sell less of them cause of the increased price and the decreased total supply. They could even increase their wanted gas for tx fees, and that would increase the monetary value of the demand, hence better test (price) the utility of the protocol to the user.
Up for building the
burn feature in the x/bank module, that again, many other protocols have and Cosmos is missing (the base actually exists but is used only for validator slashes and vetoed gov. proposals, right?).
At a later point, we should evaluate (still through governance) how to integrate it with the other existing functions. The easiest integration may not the best one, for example if you tap into the gas meter you should have the general behaviour I hypotetized above, but you could decide to impact only some functions (for example x/bank’s SendKeeper and some MsdSend functions) to subsidize others, like governing.