Cosmos Founder Calls for Chain Split; ATOM Down 3%

Cosmos Hub is an intermediary among all independent blockchains created within the Cosmos network. ATOM powers the Cosmos ecosystem of blockchains programmed to scale and interoperate with each other.

AccessTimeIconNov 27, 2023 at 7:12 a.m. UTC
Updated Mar 8, 2024 at 5:36 p.m. UTC
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  • Cosmos' founder Jae Kwon favours splitting the blockchain into two following a decision by the community to reduce Cosmos' native token ATOM's inflation to 10%.
  • The hard fork, dubbed AtomOne, could be bullish for ATOM token, according to one observer.

ATOM, the native coin of Cosmos Hub, a blockchain acting as an intermediary among all independent blockchains created within the Cosmos network, is nursing moderate losses a day after Comos' founder Jae Kwon called community members to split the blockchain into two, with one observer hailing the potential hard fork as a bullish outcome for the investor community.

"Let's coordinate a split," Kwon said Sunday, following a decision by the Cosmos community to approve a proposal to reduce ATOM's inflation to 10% from 14%. Cosmos Hub is an intermediary among all independent blockchains created within the Cosmos network.

The so-called proposal 848, approved with 41.1% support for the reduction from the participating voting power and 31.9% against it, said that ATOM's double-digit inflation rate represented overpayment by the Hub for security and disincentivized ATOM's use in decentralized finance. The approved change is projected to bring down Atom's annualized staking yield from approximately 19% to about 13.4%. Staking refers to locking coins in a blockchain in return for rewards.

Kwon, however, wasn't impressed and called for the hard fork.

"Despite our voting [against the plan]… 848 has ended up passing, something that isn't too surprising (though it would be good to know whether the later votes came from newly purchased ATOMs)," Kwon said on X.

Kwon referred to the hard fork as AtomOne, which would fork the Cosmos Hub, calling for a final plan whereby the forked chain would support ATOM token along with the native ATOM1.

"I believe that the final plan should include an integration of $ATOM and $ATMO/$ATOM1 so that instead of mass selling $ATOM and collapsing it all, we allow participation from $ATOM, but what is in the README can be improved. Tokenomics people take a shot," Kwon said on X.

According to X user "John Galt," an expert on Cosmos and head of strategy at Stride Zone, a potential hard fork could resolve years of community infighting and bode well for ATOM token holders.

"A fork would be very bullish. For years, political tension has impeded the development of Cosmos Hub. Most notably when the ATOM 2.0 proposal was vetoed in the fall of 2022," Galt said on X. "Without Jae's conservatism, Cosmos Hub could be more innovative."

Besides, Galt expects the hard fork to lead to the biggest airdrop for ATOM and could result in a massive increase in trading volume for both ATOM and ATOM1 tokens.

Airdrops involve blockchain-based projects and developers sending free tokens to the communities as part of a broader marketing initiative. When a chain splits, the native coin of the new blockchain is usually airdropped to token holders from the original blockchain.

"Jae is calling the new chain AtomOne (ATOM1). Most of the ATOM1 allocation would go to ATOM stakers pro-rata their amount. Unclear if liquid ATOM is included," Galt said.

Still, as of writing, ATOM traded 3.5% lower on the day at $9.59, according to CoinDesk data. The cryptocurrency peeped above $10 over the weekend but failed to establish a foothold above the three-week-long resistance. The weakness perhaps stems from bitcoin, the industry leaders, struggling to get past the $38,000 mark.

15:37 UTC: Mentions Cosmos Hub's role in the Cosmos network in the first para.

Edited by Sam Reynolds.


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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.

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