After the security issues, abandoned projects, and chains that gradually distanced themselves from the Cosmos Hub, one question remains difficult to avoid: what is ATOM still really for?
The token continues to secure the network, allows holders to participate in governance, and provides a yield to delegators. Yet that is no longer enough to convince a significant part of the market.
The obvious culprit appears to be inflation.
Rewards are distributed, part of them is sold, supply increases, and the price suffers. The explanation is simple. However, the first results of Gauntlet’s research point to a more complex situation.
They do not absolve inflation. But they suggest that it may not be ATOM’s real core problem.
Rewards are sold, but not all of them
ATOM is still mainly used for staking. The protocol issues new tokens to reward holders who participate in securing the network.
This issuance creates dilution. Even when rewards are not sold immediately, every newly issued ATOM reduces the relative share of holders who do not stake.
Gauntlet’s study confirms that some rewards do reach addresses associated with selling. But another portion is restaked or kept liquid.
More importantly, the flows identified as potential selling pressure appear to be highly concentrated.
A few dozen wallets reportedly generated most of the pressure observed. Large holders and centralized exchanges therefore play a much greater role than the commonly repeated image of thousands of small delegators selling their rewards every week.
The methodology still needs to be interpreted carefully. A transfer to a centralized exchange does not necessarily mean that a sale has taken place. It primarily indicates a likely destination.
The research does not close the debate. It simply shows that ATOM’s weakness cannot be blamed solely on small stakers or independent validators.
Governance can matter more than daily inflation
One of the most interesting findings concerns Proposal 848, which reduced ATOM’s maximum inflation rate from 20% to 10%.
After its approval, Gauntlet observed significant movements from large wallets. The reaction was reportedly greater than those recorded after some major market shocks.
This does not necessarily mean that reducing inflation was the wrong decision.
It mainly shows that a significant part of the demand for ATOM was directly linked to its yield. Reducing that yield without immediately creating a new utility changed the token’s economic proposition.
Inflation is therefore a cost, but in the current model it is also one of the main reasons to hold and stake ATOM.
Reducing it too aggressively could remove one of the token’s last demand drivers without addressing the underlying problem.
A yield financed by newly issued ATOM
That does not make the current system sustainable.
The Cosmos Hub mainly pays for its security by creating new tokens. The model works as long as the yield attracts enough capital and the market absorbs the issuance.
But it becomes fragile when the main reason to buy ATOM is to receive more ATOM.
Yield is not an economic activity. It is a redistribution mechanism financed by the protocol.
Gauntlet is therefore proposing to examine how rewards are distributed, rather than focusing only on reducing the headline inflation rate.
The ideas being considered include more progressive issuance, rewards distributed over time, and a clearer assessment of the level of economic security the network actually requires.
The next phase must also examine how staked ATOM could become more productive through liquidity provision, attestations, or participation in different services.
The objective would no longer be to reward users simply for locking tokens, but for providing an identifiable economic contribution.
The real problem: where are the revenues?
ATOM does not necessarily lack security. The network operates, and a significant share of the supply remains staked.
What it mainly lacks is revenue capable of gradually replacing token issuance.
To reduce inflation sustainably, the Hub must generate fees or provide services useful enough to finance part of its security without constantly creating new ATOM.
This is where the new roadmap becomes important.
Cosmos Labs now appears to be focusing its strategy around three major sectors:
- tokenized real-world assets;
- payments;
- interoperability.
However, this roadmap is not yet final. The teams are still working on several scenarios and must still select which solutions will be tested.
A strategic direction should therefore not be confused with an operational and profitable product.
Cosmos is now looking toward institutions
At the same time, Cosmos Labs is developing a strategy clearly aimed at banks and financial infrastructure.
The company is working on tools for creating tokenized deposits, payment networks, and settlement systems built with Cosmos technology.
The CBWeb3 project is one of the most concrete examples. The program brings together central banks and financial institutions from Latin America and the Caribbean around cross-border payments and digital currencies connected through IBC.
From a technical perspective, this approach fits Cosmos’s historical strengths: allowing sovereign networks to communicate without giving up their independence.
Commercially, it also appears more credible than launching yet another general-purpose blockchain.
But for ATOM, the problem remains exactly the same as before.
Using Cosmos does not mean using ATOM
A bank can build its infrastructure with the Cosmos SDK, use CometBFT, Cosmos EVM, and IBC, and then pay Cosmos Labs or an integrator for development.
That does not mean it will use the Cosmos Hub.
It also does not mean it will buy ATOM, stake it, or pay fees in ATOM.
This distinction between the Cosmos Stack, IBC, and the Cosmos Hub has long been misunderstood, and sometimes deliberately blurred.
Many chains have used Cosmos technology without generating meaningful revenue for ATOM. The new institutional strategy must not repeat the same model.
A bank using Cosmos infrastructure represents a technical and commercial success. But if all transactions remain on private networks and no service is provided by the Hub, ATOM can remain completely outside that activity.
The technology can win while the token watches the match from the stands.
The missing link
For the new strategy to benefit ATOM, a clear economic relationship must be created between institutional activity and the Hub.
That relationship could take several forms:
- fees redirected to the Hub;
- ATOM used as collateral or liquidity;
- interoperability services secured by stakers;
- settlement of certain flows directly on the Hub.
The mechanism planned around the USDC integration could provide an initial example of value flowing back to ATOM. But its actual operation and the revenues it generates will need to be assessed in practice.
The number of banks approached or memoranda of understanding signed will not be enough.
The important question remains:
When payments and assets move across infrastructure built with Cosmos, how much of that activity will actually pass through the Hub?
Without a precise answer, the institutional strategy will mainly remain good news for Cosmos Labs and the Cosmos Stack.
Not necessarily for ATOM.
Inflation mainly reveals the problem
ATOM probably distributes too many immediately liquid rewards. This issuance dilutes holders and needs to be reformed.
But reducing inflation again without creating new revenue could remove one of the last reasons to hold ATOM without solving its lack of utility.
The real challenge is therefore not simply to reduce rewards. It is to build an economy capable of financing them.
Payments, tokenized assets, and institutional adoption may represent Cosmos’s best current opportunity.
But using Cosmos still does not mean using the Hub.
The success of this new strategy will therefore be measured by its ability to turn institutional activity into utility, fees, and demand for ATOM.
The Hub may not be dead.
But to escape its dependence on inflation, it will finally need to prove that it can generate something other than new ATOM.
