Cosmos refocuses after chronic decline
Cosmos refocuses after chronic decline
When Cosmos (ATOM) network launched it brought in a new era of blockchain technology that promised to solve a lot of the scalability issues currently experienced on popular chains such as Ethereum. Cosmos enabled developers to build entire networks as Layer 2 rather than just tokens.
Each layer had it’s own chain that fed into the main Cosmos chain and ATOM was utilised as the governance token. For a while the chain saw a huge uptake of investors and developers with significant success. However, the collapse of Terra (Luna) Network significantly impacted Cosmos as it did use Terra’s native stable coin USDT which since becoming depegged caused Cosmos to also collapse.
The chain has continued to suffer throughout the past few years with further action taken from the U.S Securities and Exchange Commission (SEC) causing doubt amongst many digital assets and Crypto Currencies about what is a security and what isn’t. This has caused Cosmos to lose a significant amount of investors and many to leave the chain.
Recent developments by Cosmos is leading to the chain refocusing and looking at ways to bring investment back and prevent further leeching of funds to enable the chain to be successful well into the future and make a comeback.
Cosmos Lowers Inflation
In a recent development the Cosmos Hub community has voted to cap the maximum annual inflation rate of its native token Atom to 10% down from around the 20% rate it was previously offering. This decision comes amidst a broader assessment of the Cosmos network which has experienced a decline in network activity and open interest in recent weeks.
The governance body of Cosmos Hub which oversees the ATOM token has approved a proposal to reduce the maximum inflation rate from approximately 14% which it has been recently down to 10%. This move is aimed at adjusting Atom's annualized staking yield from around 19% to approximately 13.4%. The proposal narrowly passed with 41.1% of votes in Favor marking the highest ever turnout vote in the Cosmos ecosystem and setting a record for the network.
The proposal argued that the high inflation rate was an overpayment for security and that validators could still break even or turn a profit under the proposed 10% inflation. Notably Zero Knowledge Validator casting the largest vote in favor, emphasized that double-digit inflation is not necessary for security and could weaken Atom's price in the long term.
Opposition
However, there was significant opposition with AllNodes, a validator expressing concerns about the impact on small validators calling the proposal "an abrupt, short-sighted, and ill-researched idea." Despite the divide, the proposal passed signalling a shift in the Cosmos community's approach to inflation and security.
Assessing Cosmos Network Activity:
Simultaneously an analysis of Cosmos' network activity reveals a decline in demand. Data from Artemis indicates a drop in the number of unique wallet addresses completing transactions on the chain decreasing by 60% from 43,000 to 17,000 daily active addresses in the last week.
The decline in user activity has translated into a 39% drop in on-chain transactions with Cosmos experiencing a total of 52,140 daily transactions as of November 23rd. Despite this, the decentralized finance (De-Fi) ecosystem within Cosmos has seen a surge in total value locked (TVL), reaching an all-time high of USD 1.96 million marking a 73% increase since the beginning of November.
In the futures market ATOM's open interest has experienced a 10% decline in the last seven days, reaching USD 106.31 million. This decline coincided with price consolidation leading to more long positions being liquidated than short positions further indicating strong selling pressure and a potential market trend reversal.
However, in the spot market accumulation persists among daily traders with key momentum indicators on a 24 hour chart showing a preference for accumulation despite sideways price movements. This could be more around speculation as Cosmos did once sit as a top 10 token with a relatively good value point. Punters could be speculating on the tokens return value and it’s potential.
Outlook
The decision to cap the Atom inflation rate at 10% reflects the Cosmos community's commitment to balancing security and economic sustainability and maintaining the projects relevance in the current market.
As Cosmos navigates a decline in network activity the growth in its De-Fi ecosystem provides a contrasting narrative that showcases people are still willing to invest in the network.
The coming weeks will be crucial in assessing how these developments shape the future trajectory of the Cosmos network and its native token, Atom. Which was once a top 10 token and as it tries its best to return to that position.
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Posted Using InLeo Alpha