Cosmos Divided? Founder Jae Kwon Calls for Hard Fork After ATOM Inflation Slash Sparks Community Rift

The Cosmos Hub, a prominent player in the blockchain universe, is currently navigating a significant crossroads. Just when the community thought they had charted a course for ATOM’s future by voting to reduce its inflation, a dramatic turn of events has unfolded. Following the approval of Proposal 848 to slash ATOM’s inflation to 10%, Cosmos founder Jae Kwon has ignited a firestorm by proposing a hard fork. Yes, you read that right – a potential split in the Cosmos ecosystem is on the horizon. Let’s dive into what this all means for ATOM holders and the broader crypto landscape.

What Triggered the Cosmos Community Split? The Inflation Vote Explained

To understand the current drama, we need to rewind a bit. The core of the issue lies in Proposal 848, a community vote focused on adjusting the inflation rate of ATOM, the native token of the Cosmos Hub. But why is inflation such a hot topic in the crypto world, and why did it lead to such a strong reaction?

In simple terms, inflation in cryptocurrencies refers to the rate at which new tokens are created. A higher inflation rate generally means more tokens are entering circulation, which can, in theory, dilute the value of existing tokens. However, inflation also plays a crucial role in securing Proof-of-Stake networks like Cosmos by incentivizing validators to participate in block production and network security through staking rewards.

Proposal 848 aimed to reduce ATOM’s inflation rate from approximately 14% down to a maximum of 10%. Here’s a breakdown of the vote and its implications:

• Proposal: Reduce ATOM inflation to a maximum of 10%.
• Vote Result: Passed with 41.1% in favor, 31.9% against, 6.6% veto, and 20.4% abstaining.
• Impact: Reduces ATOM’s APR (Annual Percentage Rate for staking) from around 19% to approximately 13.4%.

You can check out the proposal details on Mintscan for a deeper dive.

The proponents of the inflation reduction argued that the existing rate was unnecessarily high for network security. They believed validators could still operate profitably even with a lower inflation rate, especially considering they have the option to adjust their commission rates to cover operational costs. Essentially, the argument was for a more sustainable economic model for ATOM.

See Also: Cosmos Hub Approves Proposal To Reduce ATOM Inflation Rate From 14% To 10%

Jae Kwon’s Hard Fork Proposal: AtomOne – A New Path for Cosmos?

While Proposal 848 passed with a clear majority of votes cast, the level of dissent and abstention reveals a community that’s not entirely unified on this issue. Enter Jae Kwon, the founder of Cosmos, who has publicly voiced his disagreement with the inflation reduction and has called for a hard fork, proposing a new network named AtomOne.

In a tweet, Kwon urged the community to “coordinate a split,” suggesting AtomOne as a forked network from Cosmos. The idea is to create a new blockchain that would co-exist with the existing Cosmos Hub, supporting both the original ATOM token and a new token, ATOM1, for the forked chain.

Folks should coordinate a split, let's call it AtomOne. https://t.co/3j29nZqCzA

— Jae Kwon (@jaekwon) November 26, 2023

But what exactly is AtomOne proposing, and how does it differ from the current Cosmos Hub?

Key Features of the Proposed AtomOne Fork:

• Token: A new token, ATOM1, in addition to supporting the existing ATOM.
• Inflation Rate: A higher maximum inflation rate of 20% compared to Cosmos Hub’s reduced 10%.
• Governance: Altered governance mechanism requiring a two-thirds threshold for proposal quorum, suggesting a move towards stronger consensus requirements.
• Token Distribution: 10% of the ATOM1 genesis supply pre-mined for “various purposes.”
• Airdrop: 90% of ATOM1 genesis supply airdropped to those who opposed Proposal 848, based on “Alignment judged by voting activity.”
• Architecture: Utilizes much of the existing Gaia architecture, the foundational software of Cosmos Hub.

ATOM Price Reaction and Community Sentiment

The news of a potential hard fork has understandably introduced volatility and uncertainty into the ATOM market. As reported, the price of ATOM experienced a dip of around 4% following the community rift, settling at approximately $9.29. This price fluctuation, while not drastic, reflects the market’s sensitivity to such significant developments within a crypto ecosystem.

Beyond price movements, the real story lies in the community’s reaction. The hard fork proposal has ignited passionate discussions across social media, forums, and within the Cosmos community itself. Opinions are divided, with some supporting Kwon’s vision for AtomOne and others advocating for unity and moving forward with the reduced inflation rate on the Cosmos Hub.

Potential Implications of a Cosmos Hard Fork:

A hard fork of this magnitude is a complex undertaking with potential benefits and challenges. Let’s consider some of the key aspects:

Potential Benefits:

• Catering to Different Visions: A fork could allow different factions within the community to pursue their preferred paths for ATOM’s development and tokenomics. Those who believe in a higher inflation rate for security and staking rewards might find AtomOne more appealing.
• Experimentation and Innovation: AtomOne could become a testbed for different governance models and economic policies, potentially leading to innovations that could benefit the broader Cosmos ecosystem in the long run.
• Empowering Dissenting Voices: The airdrop mechanism targeting those who opposed Proposal 848 could be seen as a way to empower dissenting voices and ensure their continued participation in a network that aligns with their views.

Potential Challenges:

• Community Fragmentation: The most significant risk is a split community, potentially diluting the network effects and overall strength of the Cosmos ecosystem. A divided community can lead to confusion, reduced collaboration, and slower progress.
• Developer and Resource Split: Forking requires developers and resources to be diverted to the new chain. This could strain resources and potentially slow down development on both Cosmos Hub and AtomOne.
• Market Confusion and Volatility: Two separate tokens and chains could create confusion in the market, especially for new users. The value proposition and long-term viability of both ATOM and ATOM1 would need to be clearly communicated to avoid market uncertainty and potential volatility.
• Governance Complexity: Managing two separate but related ecosystems will add complexity to governance and decision-making processes within the broader Cosmos community.

What’s Next for Cosmos and ATOM?

The situation is still rapidly evolving. Jae Kwon’s proposal is just the beginning of a conversation, and whether AtomOne materializes depends on community consensus and support. Here are some key things to watch out for:

• Community Discussions and Signaling: Pay close attention to discussions within the Cosmos community forums, social media, and governance channels to gauge the level of support for AtomOne.
• Developer Response: The stance of core Cosmos developers will be crucial. Will they support or oppose the fork? Their involvement will be essential for the technical feasibility of AtomOne.
• Validator Alignment: Validators play a vital role in securing blockchain networks. Understanding which validators align with Cosmos Hub and which might support AtomOne will be important.
• Market Sentiment and Price Action: Monitor ATOM’s price movements and market sentiment as the hard fork discussion progresses. This can provide insights into the market’s expectations and concerns.

In Conclusion: A Fork in the Road for Cosmos

The Cosmos Hub is at a pivotal moment. The inflation vote, intended to refine ATOM’s tokenomics, has inadvertently opened up a deeper debate about the future direction of the network. Jae Kwon’s hard fork proposal, AtomOne, represents a significant divergence, highlighting differing visions within the community. Whether this leads to a constructive evolution with two distinct but related chains or a damaging community split remains to be seen.

For ATOM holders and those invested in the Cosmos ecosystem, staying informed and engaged is paramount. The coming weeks and months will be crucial in determining the path forward for Cosmos and the future of ATOM. One thing is certain: the conversation around ATOM’s inflation and governance has just become a lot more interesting, and the crypto world will be watching closely.