I agree that this is probably the main reason against this, but the status quo doesn’t seem to be working.
If we have validators running at a loss, then their hypothesis must be that their holdings or earnings should increase to offset this in the long term, which these tokenomics reforms aim to address.
If validators are running at a break-even point, then there are alternatives to just continuing to inflate to pay them. One easy one would be raising the floor level of commission. We have somehow settled at 5%, but if this were 20% at a protocol level, validators would have the same income at zero inflation with no bias towards validators higher in the set and no inflation for holders.
The other question is whether we need to pay for 120 validators, and so the total revenue can be split between fewer participants - something that came up in the last set reduction discussion.
Decentralization is important, but it is also somewhat of a luxury beyond a certain point. With 36 validators owning the top 67% of stake right now, we should incrementally cut the set if validators begin dropping out due to unprofitability.
That does have benefits too - Dev mentioned on the tokenomics space on Monday that we dropped far more in block time than expected from the 150 → 120 cut, plus it has a few more benefits when it comes to integrating Osmosis more fully with Polaris.
You already mention that on the Hub the staking ratio went down. We also see that the price action on $ATOM is quite sh*t and lagging compared to other assets. That can also be expected for Osmosis in the end, because people might be more tempted to sell when the rewards for locking their assets goes down.
Unpopular opinion here too, but personally, I think that ATOM’s price lags because they issue $500,000 in staking rewards per day (10% of 1.9b cap over the year) while only have a revenue of ~$2k/day. Some of that will sustain from compounding + revenue offset from trading a high cap asset, but Osmosis changes stem from the common tokenomic concerns around emitting ~$18,000 in inflation before these changes while having a revenue stream of approximately half that. As emissions decrease, we become sustainable even at low volume levels, creating a much better environment for any Polaris collaborations or associated volume increases to build upon. Keeping a high headline APR past the point of distribution usefulness, solely to convince people to hold onto/stake a token and not sell is the very definition of a Ponzi scheme.