[PROPOSAL #88] [ACCEPTED] Increasing Hub Community Tax


I’m only a “user” but just do give a perception feedback. Indeed, 10% looks a lot, especially as it will gives the same yearly value that has been rejected (4M/y, Cf Adriana post). 5 to 7% looks more OK, perception wise

Also I think it can be nice to put in comparaison the staking APR of ATOM compared to a lot of projects (ETH etc) where they usually get around 5 to 7% APR. So saying we go from 20% APR for ATOM to 18% APR for ATOM looks very OK and even maybe still a bit too high compared to others


thanks for starting this discussion. I think this is a reasonable first step forward.

@Jazz I tried to explain this to you on twitter: It is a false narrative that a tax is worse for stakers.
Blending out other market factors with the current frame of inflation the marketcap would stay the same while the supply increases. This means the value of a staked position would stay the same while a “hodl”-position would lose value over time (depending on the amount of inflation). If the sole aim is to raise a specific sum for the community pool and you mint it, this dilutes the value for stakers and non-stakers alike. If you have a tax, it’s true that it’s paid just by stakers, but they lose still less value in their atom due to inflation than non-stakers. In case of an inflation of 15%, non-stakers would lose the full amount while stakers would still have (100 - 15 * 0.02/0.07/0.1)% left per year.
In an inflationary model stakers are definitely way better of than non-stakers even with taxes compared to a pure mint!
That said, I wouldn’t mind one mint at the beginning. If it’s true what @zaki_iqlusion said and we need funds asap we shouldn’t be too picky in my opinion. As a humble community member I fully agree with the need of a more potent community pool. As an opponent of atom 2.0 I don’t have a strong opinion regarding a tax-model or a mint as long as we don’t establish an unnecessary treasury.
@IcyCRO I think a cap in USD ist a great idea. Most likely this won’t be a problem in the near future, but as volatile as the markets are, it could be a great idea to establish a dynamic tax-rate creating a more constant (in usd) income for the community pool.

Greetings Niels

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Hi, this is Fredy, from Dragon

Thanks Damien for rising the discussion topic.
We are in favor of a 10% Tax and we find no issue with this model.
We also would agree on a single minting event to bootstrap the process.

What we still do not understand is this sudden rush that some members have been showing up during prop #82. There was no such rush for years.
Possible causes most likely are external causes that affect other chains or personal projects. We think that the hub should not be influenced that way. The sovereignty of the hub should make us to act proactively, and not reactively or depending on external reasons.



I think most of us here are in favor of raising community tax. But how much? How can we agree to a number? Should we have an early poll?


I agree with 10% tax.

However, what’s more important than deciding on the tax rate is asking the leaders of ATOM2.0 for the plan to use the budget. At this point, we don’t know how much Cosmos needs in order to execute ATOM2.0 vision.

First thing has to be a budget spending plan from the ATOM2.0 leaders! Tell us in details how much we need to spend to make ATOM great again.


I believe agreeing on a number might take some more time and deliberation from what I gather.

I point you to a Poll that @Adriana put out a few days back with this exact question - https://twitter.com/adriana_kalpa/status/1593988531348799492

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I might argue that only Twiiter users were included so I bet that skews the results in some way. And only 716 people voted out of the many thousands who use Cosmos. I’d be interested to see the results from the same poll posted on Reddit, Telegram, etc. I’m not against 10%, especially since front loading the tax to fill the pool makes sense. Just curious to see if the results are any different on other social channels.

I posted the survey on Reddit: https://www.reddit.com/r/cosmosnetwork/comments/z11s39/in_order_to_build_a_more_sustainable_community/

Witval would fully support the idea of strengthening CommunityPool. But we are worried about flat-tax rate for all the valdiators. Lowerend validators already not making break-even, this flat increase of the tax to 10 or 20% would only make the things worst for them. We propose to make necessary updates to tax logic and introduce voting-power based tax. Like if validator has 10% voting power, they are entitled to pay 10% tax, if the validator has 0.5% Vp, they will only pay 0.5% tax on rewards


That’s an interesting idea.

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Without question the Cosmos needs the funds to do proper BD. The 10% tax should be an initial investment and increased if success if found. In the next official prop, it would be great to see some sort of direct value accrual to the token, rather than the treasury itself from what are essentially venture-level bets (accepting fees for security in consumer chains’ tokens).

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An interesting model to look at to balance inflationary security rewards and transactions is Elrond. In their white paper, they create a model where inflation depends upon Txs and is adjusted downwards as Txs increase their share of the security budget. Cosmos should consider implementing something similar combined with an incentive tax for ecosystem development.


After putting quite a bit of thought into it, Blocks United would support a 10% tax that dynamically lowered itself as the community pool met target funding.

I really like the idea of using the tax mechanism to increase the hub community pool and I would even go as far as increasing that to 15%.

But… We could take into consideration of using the progressive tax system which could even help with decentralization.

Lets say for example: stakers with less than 5k atoms would be taxed 5%.

ATOM stakers with more than 5k and less than 20k ATOMs could be taxed with 10%.

And all stakers with more than 20k a tax of 15%.

Interesting thought, but that would only cause people to fragment their wallets… and not achieve the effect you want to achieve…

I do feel something where the community tax is proportional to %VP. Then you would also stimulate decentralisation at the same go as filling the community pool.


Oh yeah implementing that on the validator %VP could achieve the intended goal.

imo, validators/delegators that are part of the top 1/3 should be taxed higher than the rest of the set.
Increasing the nakamoto coefficient while solving the funding for ICS would be a nice outcome for ATOM :slight_smile:


Hey Guys,

Thanks for bringing up this discussion.

We do support a community pool tax increase, but before defining a % we should account:

  • How much do we want to save per year? Should we settle this goal in terms of $ATOM or Fiat? If so, should we update this tax every quarter based on price action? A bearish price action should lead to a higher tax rate.
  • Once ICS will be live, a funding schedule based on oncoming teams/projects might help us adjust the percentage to fit hub’s investments.

Considering that at the moment, the community pool has 1.25 million ATOM, we think a 10% target tax reviewed every quarter would be appropriate.

1mln every quarter, at the current price are approximately 9 million $, but it’s hard to determine where these market conditions will lead us, this is why we think it’s important to update this percentage constantly.


Hey @MadeinBlock, thanks for what you wrote.

I think in the long run, a sort of dynamic tax rate based on certain parameters and externalities per quarter or yearly is probably a good way to go or at least a good idea in theory.

I’m not sure if defining a goal in terms of Fiat is the best way to go to keep things relative. Having Fiat goals can lead to potentially unnecessarily high taxes especially, if for example, the price of ATOM were to dip significantly.

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Here’s a Poll from CosmostationVD account on Twitter

Seems like there’s a little discrepancy between the results from Adriana’s followers and Cosmostation’s followers.

Cosmostation’s followers dominantly voted for 5%.

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It is true, indeed, the purpose of relying on fiat-based goals should aim to a conservative and more realistic approach in terms of market conditions and we may also take in consideration to enforce a maximum tax variation per quarter.

Let’s say that this proposal passes with: a 5% tax rate, a goal of 15 million $ (approximately 1.500.000 ATOM right now, 25% less $ATOM then what we are actually going to accumulate with a consistent 5% tax) and a maximum rate change of 5%.

After every quarter the new rate should be based on the average price for those 90 days occurred. If the market lowered the average price, we may consider to increase the tax rate (still limited with a cap). If not, we can keep the same rate or even lower it.

After 4 quarters, worst case scenario our community tax would be at 20% rate, with a total of 5 million ATOM (500,000 from the first quarter, 1,000,000 from the second, 1,500,000 from the third and 2,000,000 from the last one, considering a 5% increase for each quarter). In order to consider our initial goal achieved the price should be at least 3$.

Full support from Citizen Cosmos on increasing tax to community pool. IMO, it should be in build into the inflation normally. i.e. everyone will be loosing a little staking reward. But thats life. I think token holders, by which im referring to each one of us that holds ATOM, should be prepared for many more pools like this to be created in the future. This is normal. We need to grow.