Hypothetically if the price reacts to the supply of the newly minted tokens linearly there shouldn’t be any problem, BBB bought 100 Atom at 10 USD for 1K USD and with 20%APY over the two years BOB has now 144 ATOM, and even if the price of Atom is 7 USD I have more number of tokens but that is equal to my BOB’s original 1000 USD. Now we have established in the example mathematically that if price reacts to inflation linearly nobody gets hurt. But, this doesn’t happen, It also depends on the market’s external forces, liquidity, and utility. Only the utility adds to the value of the token intrinsically not artificially, reducing the inflation by 50% at this point in time will not only hurt the existing investors who have already lost a lot in the bear market Considering ATOM ATH was 44 USD on Jan 2022. But also it is a haphazard step that has not been proven right in the past either.
Another argument to not support this idea is the examples of JUNO, OSMO, Stargaze, and many more who have reduced the inflation greatly but that affected the price of said tokens negatively. Yes, there might be external factors contributing to the price drop of these tokens but no one can prove it mathematically. What we have seen in the past is the price was dropping and they decided to reduce the inflation but it didn’t work not a single example.
Additionally, Why do we want to support the LSM in the current stage, where we are making a king (Stride) and they only add to centralization by delegating to 32 validators only? And we see most of these 32 validators again and again as beneficiaries of the system. Maybe this is just a coincidence that these validators get all the major delegations from ICF and Stride. Whether it is a coincidence or not but we should all agree that Stride being a LSD leader should not have the technical capability to decentralize the stake as we have imagined other LSD providers pStake and Quicksilver although they have better decentralization policy where pStake stakes with 75+ validtaors and quicksilver Stakes with the entire set, are not ready for mass adoption. We need to let it cool down for a bit and improvise on the basis of the reasonable data set. So LSM is not at all a motivation for me.
Lastly, the validators, reduce the inflation by 50% meaning the income of the validator will reduce by 50% now it does not matter for 50% of the top validators but for the bottom 50% it matters, given the ICS and all the consumers chains giving no revenue at all. A validator needs 300K in delegations at 5% commission to make 800USD (A monthly cost some believe is the average cost of running a node).
The relationship between inflation, token value, and the practical implications for validators and investors is far from straightforward, and reducing inflation might not be the panacea it initially seems.