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Cosmos Blockchain Split Proposal Prompts ATOM Selloff


Cosmos blockchain split may happen soon

LUCKNOW (CoinChapter.com) — Cosmos blockchain split may happen anytime soon, according to a proposal made by its founder Jae Kwon over the weekend. Kwon urged the community to vote in favor of splitting the Cosmos Hub blockchain into two entities. 

Cosmos Blockchain Split, Cosmos Blockchain Split Proposal Prompts ATOM Selloff

ATOM Inflation Key Reason to Split Cosmos Blockchain

Kwon’s Cosmos blockchain split proposal comes as a solution to ATOM’s rising inflation rate. Typically, the market considers cryptocurrencies with excessive supply rates as bearish, one of the reasons why Ethereum introduced a token burn feature into its blockchain.

ATOM’s inflation from  14% to 10%, a move approved by 41.1% of the community, with 31.9% against it.

Proposal 848, greenlit by the Cosmos community, argued that ATOM’s current 19% inflation is excessive and must be brought down to around 13.5%. In turn, higher inflation risks Hub’s security by discouraging users from staking in Cosmos’s decentralized finance tools.

Nonetheless, critics argue that the scenario of the Cosmos blockchain split reducing inflation may impact smaller validators securing the network. They criticized the plan as “an abrupt, short-sighted, and ill-researched idea” with the potential to disrupt developers, traders, and validators engaged with ATOM.

These concerns arose shortly after Cosmos introduced a liquid staking module, eliminating the previous 21-day waiting period for unstaking ATOM. This upgrade provides holders greater flexibility to utilize staked tokens in Cosmos DeFi applications without losing staking income.

Jae Kwon: The Vocal Critic of Cosmos Blockchain Split

Kwon, despite disagreeing with the decision, proposes a 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.

He also emphasized integration with $ATMO/$ATOM1 alongside the existing ATOM token.

Kwon suggested naming the forked blockchain “AtomOne,” which would split off from the original Cosmos Hub yet still support the existing ATOM token. 

“I believe that the final plan should include 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. 

The imminent network will function independently, equipped with its governance framework and dedicated development team, emphasizing the goal of achieving heightened decentralization.

ATOM Holders May Receive Token Airdrop

A potential blockchain split could prove beneficial, according to an X user John Galt, a leading Cosmos strategist at crypto firm Stride Zone. 

“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. Without Jae’s conservatism, Cosmos Hub could be more innovative,” Galt said on X. 

Moreover, Galt anticipates that a hard fork and Cosmos blockchain split could trigger an unprecedented airdrop reward for ATOM holders.

When new chains emerge from forks, free crypto tokens are sometimes distributed to holders of the original coin. This massive token giveaway could also spur intense trading activity around both ATOM and the new ATOM1 asset, leading to surging volumes as investors flock to acquire and exchange parallel cryptocurrencies. 

“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.

How It All Started? 

In an earlier phase, the Cosmos ecosystem sought ways to overhaul its tokenomics, aiming to enhance the long-term sustainability of ATOM. A community-endorsed approach involved a significant reduction in ATOM production, a proposal that underwent a voting process.

Fortuitously for the protocol, the proposal garnered approval, signaling the dawn of a potential new era. Despite being a vocal critic, Jae Kwon expressed discontent with the Cosmos blockchain split vote’s outcome, highlighting his opposition due to concerns about Cosmos heading towards self-destruction.

While being instrumental in the chain’s development, Jae Kwon diverges from the principles of decentralization integral to Cosmos. He has now unveiled plans to establish a fresh network, coined AtomOne, achieved through forking Cosmoshub4.

Despite the optimism, ATOM is currently trading 3.5% lower at $9.35, a decline that coincides with Bitcoin struggling to surpass the $38,000 mark.

Cosmos blockchain split
Cosmos price performance in a day. Source: CoinMarketCap

The crypto briefly breached $10 over the weekend but failed to establish a sustained position above the three-week-long resistance.





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