More About Replacing DEC Rewards with SPS
Since my post from yesterday, which was written almost immediately after I read Splinterlands announcement on the follow-up changes to the ranked rewards system, I had time to listen to their town hall, where Matt was present to explain things further.
As I anticipated in my post, there are more things planned than the sheer removal of DEC rewards from ranked rewards and replacement with SPS rewards.
That's why I wasn't very quick to judge.
So, discarding the other planned changes and their influences or interdependencies, I want to focus today on replacing DEC rewards with SPS rewards, because that's a big move and radically changes the future relationship between the two tokens (3 if we count vouchers, but they are an extension of SPS rewards).
The first two questions that popped into many people's minds when they read about this change were:
- how do you prevent the selling pressure to move from DEC to SPS, once SPS replaces DEC for rewards?
- where do you get enough DEC for the upgrades in guilds, to use in the rental market, and so on?
And Matt answered both of them with one change they plan for the future.
Firstly, switching from DEC to SPS rewards will happen in August or September. Until then, DEC will remain the token being rewarded.
After the change happens, DEC can still be earned by:
- renting out cards
- burning cards
- burning $1 worth of SPS for 1000 DEC
Actually, the mechanism to burn SPS for DEC won't be added until DEC is back around 1$ per 1000 DEC.
Matt has talked about this burning mechanism of SPS for DEC before, in the town halls where he attended, so this is something thought over time.
In theory, that should prevent DEC price from pumping, because at soon as it does it becomes profitable to burn SPS for DEC, arbitraging DEC.
On the downside, with a drastically reduced inflation for DEC and a product-backed value of 1$ per 1000 DEC, DEC should be relatively stable.
The plan is that DEC becomes a transactional-token-only that retains its value of about $1, much like a stablecoin, but not as rigid.
It won't be earned by playing the game anymore. There will possibly be DEC rewards for liquidity providers, but they won't compare to play-to-earn rewards.
The question is: will rental market rewards still be in DEC? and if yes (which I believe they will), how much influence will they have?
That leaves SPS as a reward token.
What about the second question: will the sell pressure transfer to SPS?
Well, there are two elements that should prevent that from happening. But as we know, markets are markets...
The first one is the new burning mechanism of SPS for DEC, which will be implemented. Also here we need to mention the coming mini-set (Riftwatchers), which can be bought only with SPS.
The second element is the fixed amount of SPS printed for rewards every month, regardless of how many accounts are competing in the ranked battles and in different leagues. There will be a breakdown per league, same as for DEC, as far as I understood.
The rewards for ranked battles will start with 7.5m SPS per month, but you need to be aware they will drop by 1% every month, according to the whitepaper:
New SPS tokens will initially be added to the various reward pools at a rate of 37,500,000 tokens per month and will decrease uniformly across all reward pools at a rate of 1% per month, meaning that after one year the monthly contribution rate to the reward pools will drop to 33,239,400 and after 5 years it will have dropped to 20,518,400 SPS per month. These rewards will end after 65 months and at that point no more SPS tokens will be created.
In the fragment above it is the total amount for play-to-earn rewards, not ranked rewards specifically.
The 1% monthly reduction of rewards makes sense if the price of SPS will rise in time, as the initial prediction was.
A final question which I believe was asked before: what will happen after the 65 months pass regarding rewards?
If I remember correctly, Matt indicated the DAO funds as a potential source then, provided the SPS stakeholders agree.
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