Splinterlands DEC $1 Peg is Fascinating

in LeoFinance5 months ago

splinterlandslogo.png

It's easy to get trapped into a box of present times.

Almost all the people that talk trash about crypto and the blockchain movement focus on the technology as it exists today in the moment and the current implementations of it. It's not very hard to talk trash about play-to-earn when the metric one is basing all those opinions on revolves around Axie Infinity. The way that these things work is full of flaws because it's new and fledgling technology. Lacking the foresight to realize that things will change is foolish.

On the other side of the coin, it is just as foolish to go full utopia with all this and just assume that every single problem that exists today is going to be fixed with magical thinking. Even worse are the people that don't consider that new problems are going to pop up that didn't even exist in response to the evolution of this entire movement.

balancestable.jpg

Imagine believing and espousing that the current stable coin iterations that exist today will never change or evolve. Either they are dollars in a bank, or overcollateralized by a governance token. Isn't that... foolish? Isn't that absurd? To think that no one is going to figure out another way of doing things? Splinterlands has already figured out another way, and I guarantee 99% of the cryptosphere doesn't even know about it, let alone 99% of the world, who knows very little if anything about crypto in general.

So how is Splinterlands doing it?

Everyone freaked out about LUNA when it it crashed to zero due to unsustainable debt ratios and UST >> LUNA conversions at the current market price. Now the regulators are frothing at the mouth looking to crack down. Will be nice to find out what is antifragile and what will get slapped down by the SEC. Bear markets aren't all bad. Time to take out the trash.

So the problem is destroying the stable coin for the governance token.

Clearly no one cares about the opposite scenario. Destroying governance tokens to create stable coins pumps the price of the governance token and easily stops the stable coin from breaking out to the upside. It's the opposite conversion that needs to be mitigated.

Hive mitigates this threat with a debt ratio haircut.

Currently sitting at 10% (and it's been talked about making it 20% or 30%), if the debt that Hive owes on HBD is higher than 10% of Hive's total market cap (determined by witness oracle price feeds and the assumption that 1 HBD = $1) then Hive... just simply refuses to pay back the debt.

Conversions will stop giving the full $1 conversion, and haircut it lower and lower as the debt ratio goes up. Whether bag holders know it or not, they accept these risks when they hold HBD inside their wallet. If the debt ratio was 20%, the haircut would lower the peg down to 50 cents, making conversions extremely unappealing in that moment.

(which has happened before)

I don't think it will happen again because we now have HIVE >> HBD conversions with help stop this from happening (no pump no dump; on top of raising the glass ceiling of the debt ratio), but that's another story.

Getting to the point...

Splinterlands doesn't even allow for DEC to be turned into SPS. Well then how do they stop DEC from crashing below $1? The peg is maintained using physical (or in this case digital) product.

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All in-game purchases can be bought with either credits or DEC. 1000 DEC is SUPPOSED to be pegged to $1. Credits ARE dollars. When you send $1 to Splinterlands they credit the account for 1000 tokens, thus they are guaranteed to be worth one dollar no matter what.

The trick comes in by allowing anyone to use either asset to buy things. If DEC drops below the peg, then it becomes cheaper to buy things with DEC over credits (and vice versa). Thus we see that this helps a lot with pegging DEC from dropping below the peg, and actually also helps a little bit from keeping it from going above the peg as well. No reason to spend DEC in-game when it is over valued. No reason to spend credits when DEC is undervalued. It's a shockingly simple but also interesting system. As long as there is at least some demand to buy product from the shop, it's a strategy that works. Thus the peg is enforced by the actual utility of product that can be bought within the shop.

This is how an actual economy works.

There is no magical asset that the Federal Reserve pegs USD to. The value of USD is derived by the physical (and digital) products & services that can be purchased with USD. Isn't it obvious that crypto should at least attempt to work toward the same goal, rather than playing all these games with smoke and mirrors?

pandorasbox.jpg

By using "physical" product to maintain the peg, the governance token SPS can only benefit from the pumps while having zero counterparty risk to the downside. I don't have to explain how useful that is. LUNA pumped x100 in a year because of UST conversions. Imagine if they actually had a way to peg the downside without LUNA dumping. Would probably still be sitting at $100 right now instead of the dumpster price. Crazy thought.

Extrapolating out this idea into the future, what happens when crypto cities are actually a thing? What happens when we start enforcing the floor value with actual physical product that can be bought, sold, and traded on the market? The result is a much more healthy ecosystem than we see today, because the communities themselves control the currencies they are using to represent value within society.

city state.jpg

The more value society has, the more value our money has. It's difficult to even imagine how much changes when the entity that controls the money isn't some private bank looking to siphon as much value into their own pockets as they can. We can think of this as removing the imperialistic tendencies from money itself. Or perhaps we can't think of it. It's never existed in the modern world and we have no idea how many network effects and new business models will pop up as a result. This kind of network-effect adds even more value to society in general, creating an insane loop of exponential wealth building that feeds into itself rather than being bled by vampires.

Conclusion

Splinterlands is ahead of it's time. Crazy to think that it's built right here on Hive. I keep meaning to acquire more SPS. Perhaps this is the kick in the ass that I need to pull the trigger. Not not financial advice.

Posted Using LeoFinance Beta

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Another thing to consider is that DEC's par value is not defended. It has dropped as low as 40% of par and has risen to 1500% of par.

On both sides, they let the market dynamics play out, and tweaked things along the way.

Right now we are sitting at about 70% of par and that just allows people to get discounts to the degree that they want. Or not.

Systems get into (more) trouble when they try to overrule the market. The Splinterlands team is smart enough to just keep on building and let the value speak for itself. Or not.

Posted Using LeoFinance Beta

I'm obsessed with Yaba's tokenomics.
There are two ways to turn SPS into packs, via DEC.
You could sell the SPS for DEC, putting downward pressure on the SPS price, and upward pressure on the DEC price OR you could burn SPS to generate new DEC, decreasing SPS supply and increasing DEC supply.
When DEC is below peg, you want to sell/buy to get a discount on packs.
When DEC is over peg, you want to burn/generate to make overpriced DEC.
This turns SPS into a shock absorber for the DEC price. It's exquisite.

This turns SPS into a shock absorber for the DEC price. It's exquisite

This part excites me too….especially as Pump absorber on an already scarce asset.

Takes DEC pump energy and pushes it all into SPS.

I stopped trying to figure it out a long time ago.
Buy assets, watch numbers go up and compound.
Simple but effective.

Posted Using LeoFinance Beta

Also...

image.png

You can convert $1 worth of SPS for 975 DEC without any fees... so if 1000 DEC ends up being more than $1.25 then you'll be wanting to burn SPS to get DEC to sell on the market. The SPS gets burned which reduces the supply.

FYI it's not $1.25 - the price where conversions become profitable is $1.025.

Ah, thanks Matt for clearing that up.

How do you convert DEC to SPS?

Posted Using LeoFinance Beta

You can use Hive Engine or TribalDex to convert DEC to SPS (https://tribaldex.com/dieselpools/).

Yes, I would like to accumulate SPS. But I am interested in other profitable plays too.

Posted Using LeoFinance Beta

I said as much in the OP (perhaps vaguely).
But I didn't actually know the spread was 25%.
Thanks for the screenshot.

It's not 25% - it's 2.5%, just FYI.

lol... that... makes more sense.

Yes, there a 2,5% spread against hyper trading abuse. It was explained in one of their Townhalls.

Hello @aussieninja, I believe you are wrong. 1 SPS is not equal to 1000 dec, up there there is a formula that calculates the value, for example now it is 1 SPS for 72 dec.

Hope this helps.

Have a great week and good earnings.

Thanks @kaibagt. That's not what I said though...

You can convert $1 worth of SPS for 975 DEC without any fees

I could have added "$1 USD worth of SPS" to make it more clear though.

Thisssss!!!!!

DEC is still below par.

The challenge now is the peg is backed by Chaos Legion pack, which is also selling below $4 in the secondary market (lack of demand?)

And the new Riftwatchers is not purchasable by DEC

When do you think will be the next opportunity for DEC to be close to par again?

it will hit par when it's worth buying from the store again.


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I feel the same, this is nothing less than revolutionary.

 5 months ago  Reveal Comment
 5 months ago  Reveal Comment

And the best is yet to come.

You can burn SPS for DEC if you like but that's not the only mechanism. Also worth pointing out that while DEC price is pegged to the dollar when purchasing things from Splinterlands, transactions between players still use the prevalent market rate at the time.

The DEC peg has been described as being a "psychological peg". It will take some time before it actually gets to the desired rate

Posted Using LeoFinance Beta

In many instances the demand to buy things from the shop will dwindle as players trade with themselves. That hurts the peg quite a bit. Also small network is small. The required network effect is yet to be seen.

Hi
The game has been doing very well even in these bearish times and look forward to see the valuations getting even better over time.

My head hurts now, but in a good way.
This place is amazing, there are so many ways to make money, exercise your brain, learn useful stuff, and just have fun, and thats just on Splinterlands.
Amzing, simply amazing.

Posted Using LeoFinance Beta

Now I need to learn about DEC PAR value and Dec SPS conversions.
This place is a seemingly endless rabbit hole.

Posted Using LeoFinance Beta

You are very correct to an extent.

No reason to spend DEC in-game when it is overvalued. No reason to spend credits when DEC is undervalued.

Splinterlands is ahead of its time. Crazy to think that it's built right here on Hive. I keep meaning to acquire more SPS.

Just taking down notes for my reference. Thanks!

Posted Using LeoFinance Beta

Interconnections on splinterlands are pretty smart between every asset.

There's so much going on with Splinterlands it's wild to think that it's just a bunch of smart regular dudes that started this all. I like that they let things just even out on their own and weeks or months later look at the situation and make changes so that DEC isn't getting harvested as badly as it is. It makes good improvements and then brings balance. Imagine, as you say, bigger institutions doing stuff like that? I think the only reason they go crazy is because of paper hands investors bitching and moaning at them. Have a set of balls will ya!

Posted Using LeoFinance Beta

 5 months ago  Reveal Comment

Well that’s good! There’s certainly a lot of people who are making a living off Splinterlands which I find awesome.

!PGM
!PIZZA

Sent 0.1 PGM - 0.1 LVL- 1 STARBITS - 0.05 DEC - 15 SBT - 0.1 THG - tokens to @torran

remaining commands 5

BUY AND STAKE THE PGM TO SEND A LOT OF TOKENS!

The tokens that the command sends are: 0.1 PGM-0.1 LVL-0.1 THGAMING-0.05 DEC-15 SBT-1 STARBITS-[0.00000001 BTC (SWAP.BTC) only if you have 2500 PGM in stake or more ]

5000 PGM IN STAKE = 2x rewards!

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Support the curation account @ pgm-curator with a delegation 10 HP - 50 HP - 100 HP - 500 HP - 1000 HP

Get potential votes from @ pgm-curator by paying in PGM, here is a guide

I'm a bot, if you want a hand ask @ zottone444


PIZZA! PIZZA!

PIZZA Holders sent $PIZZA tips in this post's comments:
@torran(6/10) tipped @edicted (x2)

Please vote for pizza.witness!

!PGM
!PIZZA

Sent 0.1 PGM - 0.1 LVL- 1 STARBITS - 0.05 DEC - 15 SBT - 0.1 THG - tokens to @torran

remaining commands 4

BUY AND STAKE THE PGM TO SEND A LOT OF TOKENS!

The tokens that the command sends are: 0.1 PGM-0.1 LVL-0.1 THGAMING-0.05 DEC-15 SBT-1 STARBITS-[0.00000001 BTC (SWAP.BTC) only if you have 2500 PGM in stake or more ]

5000 PGM IN STAKE = 2x rewards!

image.png
Discord image.png

Support the curation account @ pgm-curator with a delegation 10 HP - 50 HP - 100 HP - 500 HP - 1000 HP

Get potential votes from @ pgm-curator by paying in PGM, here is a guide

I'm a bot, if you want a hand ask @ zottone444


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I told people Splinterlands will be bigger than FIFA they didn’t believe me.

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Splinterlands is ahead of it's time. Crazy to think that it's built right here on Hive — Yeah sure it is . It is called an engage in-to-receive, investing card video game operating on the Hive blockchain for a golden reason .

Excellent explanation for how the Splinterlands (and traditional banking) economy works. I've always liked the ability to use either Credits or DEC to buy cards as I slowly build up my Collection Power. Your post is the reminder that I too need to pick up some SPS to add to my portfolio.