Jae has not proved that 20% is the required inflation to reach 2/3rd staking percentage. This is his own guesstimate. The Cosmos Hub is not the only proof-of-stake chain out there. There are other POS chains with larger market caps that have been researched by advanced academic teams like Cardano (ADA) and Avalanche (AVAX) whose white papers have been written by Prof. Aggelos Kiayias of University of Edinburg and Prof. Emin Gun Sirer of Cornell. I have not seen academic research anywhere that states that 20% inflation rate is needed for 2/3rds bonding ratio. Cardano in particular has made a number of different design choices than ATOM. The ADA token is not bonded for any period of time and is not slashable. These are 2 design decisions that run opposite Jae’s decision to lock up the ATOM token for 21 days and make it slashable. Yet ADA has had more than 2/3rds staked at less than 5% inflation rate since it went into production in 2020. ADA routinely had 70% staked for as long as I have tracked it (which is since 2018). What appear to be disincentives to stake theoretically don’t actually work that way in practice. Cardano to this day has 3 or 4 times the market cap of the Cosmos Hub which means that investors are more comfortable with its security than ATOM’s.
I have taken The Top 20 staking coins from Staking Rewards, all of whom have at least $500 million staked and put their current staking ratios and inflation rates on a chart and ran a polynomial regression line through them. This regression yields the formula you see on the chart. That formula tells me that to achieve 66.67% bonding ratio, the inflation should be 8.76%. In other words, if ATOM has inflation higher than 8.76%, it will achieve its objectives of having at least 2/3rds bonded. If we lower Max Inflation to 10%, we definitely have that ability as such I don’t think the security as Jae defines it (2/3rds bonded) will be impacted in any way.
The entirety of Jae’s argument is that 2/3rds bonding ratio can’t be achieved with 10% inflation and that is an outright false statement because there are 5 chains (ADA, ICP, SEI, EGLD, XTZ) that achieve that level of security with less than 10% inflation. ATOM’s range after this proposal will be from 7% to 10% and that would be higher than 4 out of these 5 coins. XTZ has 4% inflation, EGLD 5.6%, SEI 3.5%, and ADA 2.63%.
Jae’s concerns that the security of the Hub will be affected due to this specific change are entirely speculative.
In addition, I think that “No With Veto” vote is entirely inappropriate here. The proposer has provided his analysis which I find adequate. Prop 848 is a “parameter change” proposal. This is not a wide ranging proposal. This is very specific and well targeted proposal. As such it is not spam. This proposal is very similar to other “parameter change” proposals that were passed with wide majorities recently.
Prop 845 to “increase MaxBlockSize”
Prop 844 to “Update Global Fee Parameters”
Prop 843 to “Increase Global Fee minimum gas prices”.
The Bitcoin Blocksize Wars happened over increasing the block size. Here similar proposal passed with 95% YES vote without much of a discussion or analysis. Nobody was asked to submit detailed analysis. I find Jae’s demands for much deeper analysis on Prop 848 while sleeping through Prop 843-845 a bit arbitrary. Prop 848 does feature far deeper analysis than any of these other parameter change props.
Finally, lowering the Max Inflation rate to 10% does not make ATOM into a monetary token. The new range of 7 to 10% inflation rate is still quite a large penalty for ATOM holders. Currently, Fed rates are at 5% and as such the opportunity cost of holding unstaked ATOM is 5% + 7-10% range or from 12% to 15% per year. No professional investor wants to be holding an asset that is depreciating at the rate of 12% to 15% because they will be fired before 6 months are out. As such there are significant incentinves to stake ATOMs and the concerns for its conversion into a monetary token which will be accumulated for non-staking purposes is very overblown. Even if Fed rates go back down to 0%, ATOM is still losing -7% to -10% per year which is also prohibitive for any professional investors. Investors are there to make money (in fiat), not lose money. If they lose money, they go out of business 