Cosmos Hub, one of the influential blockchains within the substantial Cosmos Network, recently underwent an upgrade introducing a liquid staking module with significant implications for ATOM stakeholders simply looking to maximize yields from staking.
Prior to the upgrade, account holders of ATOM, the native token of the Cosmos Network, endured a 21-day lock-in period whenever they opted to move their funds post-unstaking. This new module eliminates this inconvenience, allowing staked ATOM to be used in the Cosmos DeFi ecosystem, striking a balance between creating DeFi and Staking yields. It brings about potential benefits for stakeholders, much akin to earning interest with a savings account.
Moreover, this module would loosen over $400 million worth of ATOM for liquidity purposes, as per insights from Cosmos validator Cryptocitos. This unlocking could thus perpetuate the presence of staked ATOM within protocols that run on Cosmos. Cryptocitos further notes that this change eradicates the necessity for a 21-day unbonding prerequisite, promising a more seamless and flexible staking experience.
However, as liberating as it may seem, the new version is not devoid of its own restrictions. Stakeholders would only be allowed to cancel previously active unbondings allowing their ATOM tokens to re-enter regular staking and be used in the liquidity staking module. Furthermore, it limits ATOM holders to a maximum of 25% of their total ATOM amount for liquid-staking.
The upgraded version also predicts implications for ATOM’s inflation rate. The validator argues that the current bonded ratio for ATOM is 67.8%. History suggests that as long as the token’s ratio remains above the 66.67% threshold, inflation rates experience a gradual decline toward a 7% floor. As the bonded ratio ascends, the pace of the inflation rate’s decline accelerates.
Addressing the risks of liquid staking, Cosmos Hub has taken an active stance to mitigate associated threats. The liquid staking module introduces governance-controlled parameters wherein validators receiving delegations from liquid staking providers must self-bond a specific amount of ATOM, adding an extra layer of security.
This upgrade marks another significant stride in the blockchain sector, particularly for the Cosmos Network. While flaunting the potential benefits of increased accessibility and improved yields, it also raises questions around complex dynamics such as inflation rate manipulation and governance-associated security measures. Overall, it brings about an intricate blend of opportunities and challenges, further emphasizing the need for active stakeholder engagement and informed decision-making in the emerging world of blockchain.
Source: Cointelegraph
