The Babylon community proposed to reduce the inflation rate of BABY tokens by approximately 30% and introduce a BTC-BABY co-staking function.

The community of the Bitcoin staking protocol Babylon recently released a new proposal, "Reduce Inflation and Introduce Joint Staking," aimed at adjusting the BABY token economics, including reducing inflation and introducing BTC-BABY joint staking. The proposal proposes reducing inflation by approximately 30%, from 8% to 5.5% per year, with the following distribution: 1. 1% goes to Bitcoin (BTC) stakers, who receive commissions from finality providers; 2. 2% goes to BABY stakers, who receive commissions from CometBFT validators; and 3. An additional 2.35% goes to BTC stakers who stake both BTC and BABY as joint staking rewards. For every 20,000 BABY staked, one staked BTC is eligible for joint staking rewards. 4. Due to limitations in the Cosmos SDK, finality providers and CometBFT validators cannot collect commissions from joint staking rewards. To compensate for this limitation, 0.075% is allocated to active finality providers based on delegation size, and 0.075% is allocated to active CometBFT validators based on delegation size. Once the trustless Bitcoin custody protocol is ready, the token economics should be revisited and adjusted to drive adoption. Furthermore, the proposal proposes the introduction of a BTC-BABY co-staking feature to encourage BTC stakers to also stake BABY and actively contribute to validation and finality security. The more BABY staked, the greater the co-staking rewards earned.