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.
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.
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?
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.
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.