@wabkebab raises excellent points. Even if the inflation is halved to 5% with the staking rate we have today, the system will still be very competitive next to Ethereum, Solana and Cardano, Tron and Avalanche. Those are all the platforms that are currently above DOT in marketcap, all of which yielding lower or around the same staking returns, with Solana and Avalanche being the highest. This is not including derivative products of course, but the competitive landscape as it is now remains in DOT’s favour even after this change.
Also note that Bitcoin does not have any staking, relying on its scarcity & halvings that dictate its tokenomics. If we imagine a graph of scarcity versus rewards (inflation), BTC and DOT would be on opposite ends of the spectrum. This proposal should bring DOT more to a balanced center of that spectrum.
It seems some opinions here also do not consider that the staking system has scaled over the last 3 years & is a very different system than what it was when the 10% inflation was first introduced. Back when staking first launched nominators were capped to 64 (!), and 20 validators. The system steadily expanded, and jumped from ~8k to ~19k supported nominators when I began taking notice of Polkadot. We then saw the introduction of bags list, nomination pools, and better UX with staking dashboard & wallet UIs, and more. During this growth phase inflation remained at 10% - the same 10% that launched with 20 validators.
Where incentives were definitely needed in the early days, they are not needed as much now, and are actually contributing to the detriment of DOTs reputation and long term value as inflation continues to compound total issuance. Barrier to entry has lifted significantly, the network has sufficiently decentralised, and daily transactions are growing network-wide.