CONTEXT:
In response to the recent proposals regarding setting the maximum inflation rate at 10%, there is a crucial concern about the proposed minimum inflation rate of 7%. While establishing a maximum inflation rate is important for staking incentives and network security, the suggested minimum rate poses an issue. The concern is that, theoretically, even with 100% of the token supply staked, the network would continue to produce an additional 7% of tokens annually, a situation uncommon in other functioning blockchain models.
ANALYSIS:
The rationale behind setting the maximum inflation rate at 20% to reward contributors and incentivize staking is valid. However, the introduction of consumer chains adds complexity to the equation. The proposal suggests adjusting the minimum inflation rate to 0% for flexibility. This would allow stakeholders to fine-tune the percentage of bonded tokens based on emission rate incentives, especially in the absence of significant revenue from consumer chains.
CONCLUSION:
While the proposal acknowledges the adaptability of Cosmos, it is crucial to consider a more comprehensive approach to the inflation debate. The current focus on minimum and maximum inflation rates might oversimplify the issue. There’s a need for a global inflation reform centered on a formula for adjusting inflation, backed by competent economic knowledge, data analysis, and mathematics. This approach would ensure a more nuanced and informed decision-making process aligned with the reference quality expected in Cosmos governance.
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We invite the governance to start a dedicated topic on the formula’s reform instead of adjusting the parameters independently without a comprehensive framework. We think this reform should be data driven.
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