Mining the SPS trenches and tranches

I am trying to decide whether to buy a Splinterlands Validator license or not - but it is a hard decision, since I am not sure I would run a validation node at all, making it just speculation on the value to sell - I guess.

But, what is the risk of getting cut?

These are the prices of the node licenses:

I bought some extra vouchers just before the price jumped again and with the coming drop, should have the 500 I need for the Presale on the 25th - but as life would have it, I would have to set it all up on my work PC to buy, if it sells fast, since I will be travelling for work that week.

However, assuming all goes well and I will use current prices for this.

SPS = $0.086 Vouchers = $1.60

The Presale will cost ~11,600 SPS + 800 in vouchers = so $1800. Now, this "cost" depends on how the person has got the SPS and at what price, as well as if they are getting the vouchers "free" (airdropped on stake) or buying on the open market etc - but 1800 is the current cost or opportunity cost.

I assume this is going to sell quite fast and at current values, it is going to equate to 1 million vouchers being burned and 23.2 million SPS being taken out of circulation, the majority of which is burned I believe - which is about 1.5% of the current circulation.

there are 3,750,000 SPS tokens per month allocated to a reward pool for SPS Validator Node operators. 10%, or 375,000, of the monthly total will be allocated as block validation rewards for the accounts that receive staked SPS votes and are assigned specific blocks to validate, and the remaining 3,375,000 SPS / month will be split equally between all of the license holders that are actively running the node software.

Okay, so to get immediate value value, I would need to run a node and of course, because this is a set amount, the earlier in, the greater the share of the rewards pool, until more nodes come online. Let's say that the presale and Tranche 1 sells, so as @revisesociology put it in a worst case scenario, all 5000 are fired up and running the node software and since I will only have a lowly 1 license, I would get a share of the 3,375,000 a month. Assuming this is where all 5000 are, that is 675 SPS a month from the node, which also carries a cost with it in rent or electricity etc.

However, there are also another 20,000 Vouchers that will be added to the supply per day and dropped to running nodes. If all 5000 from presale and tranche 1 are up and running, that is 4 per license. That is a lot more vouchers, so the price of them will likely come down somewhat, so let's assume 50 cents a voucher, but remember that they offer a discount for subsequent tranche buys.

This means that every month, there will be 675 SPS = $58 120 Vouchers = $60

That gives it a breakeven of 15 months.

However, if only the presale goes, having only that 2000 would over double the pull of the node and it would be 1687 SPS a month, which is more interesting. But, the less there are, the more incentive to get another node.

1687 SPS = $145 300 Vouchers = $150

A breakeven of 6 months on the 1800 initial.

Note: This is assuming stable SPS price at 0.086 and dropping the price of voucher to 50 cents.

The cost of Tranche 1 (3000 licenses available) is 3000 of SPS, so that is the maximum price of it as that can be bought immediately and spent, no matter the price of SPS. If I miss the presale however, I already have the 500 vouchers to bring the price down to 1500 + the 800 for vouchers. So, the total is 2300 in cost/op cost - which is only 500 more for that tranche, if holding the maximum vouchers. Therefore, assuming that the Presale is gone and I manage to have one of those which cost me 1800 and there is demand for Tranche 1 which would have a break even of the max price of about 10 months, I should always be able to sell for more than I bought unless the price of vouchers go to zero and everyone can get the full 50% discount for free.

However, in order to get those vouchers, they have to earn them through staking SPS or, buying on the open market, so going to zero is very unlikely. For the full 50% discount to be accomplished on Tranche 1, it would take 1.5 million vouchers plus the $4,500,000 worth of SPS. For Tranche 2, it would take 2.5 million vouchers to get full discount and $12,500,000 worth of SPS.

That SPS value for Tranche 2 is about 20% of the current market cap of SPS and the vouchers required is 60 days of the total voucher drop and vouchers will have other purposes too, probably.

If I want to sell my single license and someone is willing to pay for Tranche 2, that means that my license is worth at least the 2500 minimum, plus whatever the vouchers are going to cost. If someone is willing to pay 4000 dollars all up, I can sell for 3900 no worries.

Now, remember that I am doing this calculation on SPS being the current $0.086, but that can change and while it can go down, let's pretend a year from now, it is at 50 cents and all 5000 of the Presale and Tranche 1 are operating.

That means that my node is earning

675 SPS = $337.50 120 Vouchers = $unknown

Without the vouchers, that is a 6 month return still to break even again, but if there is demand for the vouchers, then it comes down significantly, especially since the price of SPS is increasing and there is a "stable" income of SPS arriving at each node. And, if SPS goes to a dollar, this makes it even more lucrative, which puts pressure to buy and fire up more nodes, as well as pay the lowest possible price for them, which is the 50% discount with vouchers. To buy one from Tranche 2, that would take 500 vouchers to save 2500 dollars, so what is the price of a voucher? Well, it has to be under $5 dollars, right? But - is it going to be under a dollar?

Let's go with 50c on SPS and a dollar on vouchers.

675 SPS = $337.50 120 Vouchers = $120

This cuts the ROI (now multiple times over) down to less than 4 months, but the node can be sold for at least $2999, as the vouchers are valued at $1 each.

Hmmm... it seems like a no-brainer to roll the dice on a license - but this is also under the assumption that there will be future demand on both SPS and the licenses. Of course, as more licenses get activated, the 3,375,000 SPS a month gets spread further, but, there should also be more demand on SPS by then too, so while less token will be coming in, the token value will be higher.

This puts a tension on my license - do I keep earning my initial investment every 4 months (300% a year) or do I sell now and double my initial investment?

Lot's of assumptions and too many numbers for my head, but I think I am going to try and buy the presale and if not, I will likely spend my 500 vouchers and get in on Tranche 1 anyway. There is always risk in everything we do - but I think I want a cut of this.

Doing all of this helped me get a better understanding of why I am intending to buy and hopefully, this helps someone else too.

Taraz [ Gen1: Hive ]