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It is important to take a step back and reexamine the economy as a whole, with the loss of so many players, the question of the total supply of SPS should be in question. With the shrinking player base, is 3 billion SPS still a logical amount, at this point in time, my argument is no. At the time of drafting this proposal the current value of SPS sits at $0.0071748, per Hive Engine market data. A significant drop in value from when it was first introduced. Therefore, to stabilize the value of the Splinterlands SPS (Splintershards) token, immediate deflationary steps need to be taken. We have real world examples, that show this is a viable solution to the inflation that we are experiencing, i.e. Bitcoin and corporate stock buybacks. Bitcoin, in particular, shows us that scarcity is king in the crypto world. This proposal aims to take the white paper total from 3 billion tokens to 2 billion. I would prefer an immediate reduction of supply, however, to not shock the system, a trial period of 3 months is proposed. Sending 2% per month of the remaining unreleased supply to be sent to the null account effectively burning it out of the economy.
Implementation
Since there is over an additional 1 billion in SPS that has yet to be added to the ecosystem over the next two years, this will only compound inflationary pressures in the Splinterlands economy. That is why this proposal takes aim at the remaining SPS that has yet to be released, specifically, the Foundation/DAO pool will have .2% burned monthly, the Unallocated pool will have .2% burned monthly, the Play to Earn pool will have .8% burned monthly, and the Staking/LP/Oracle Rewards pool will have .8% burned monthly. All totaling up to 2% each month during the three-month trial period.
Once the test period has concluded if this has succeeded in stabilizing SPS token and increasing the price by 5% at least, then this should continue till the total supply of SPS is limited to 2 billion through the remaining release schedule of 65 months, per the white paper.
Potential Pros
Scarcity Effect: Reducing the total supply of SPS tokens can create scarcity, which, if demand remains steady or increases, could drive up the value of each token. This is based on the basic economic principle that scarcity can lead to increased prices.
Reduced Inflation: By cutting the above mentioned SPS distributions, the rate of inflation will decrease. Lower supply growth can help stabilize the token’s price or even increase it if demand remains constant or grows.
Enhanced Investor Confidence: A clear commitment to controlling inflation and enhancing token value can improve investor confidence. Investors might view the token as a more credible and stable asset, attracting more long-term holders.
Perceived Stability: Reducing the supply can help stabilize the token’s price fluctuations over time, making it less volatile and more attractive as a digital asset.
Sustainable Economy: By adjusting the token supply to better match the game's current user base and economic activity, the overall economy of Splinterlands can become more sustainable. This can help prevent the kind of hyperinflation that diminishes a token's value and utility.
Long-Term Planning: A more stable and predictable token economy can help both players and developers plan for the long term, potentially leading to more strategic gameplay and investment.
Increased Engagement: If the value of rewards becomes more meaningful due to higher token value, it could lead to increased player engagement. Players might feel more rewarded and motivated to play regularly.
Community Trust and Loyalty: By demonstrating a proactive approach to managing economic challenges, the development team can build greater trust with the community. Stabilizing the economy can help retain players who might otherwise leave the game due to poor economic conditions or devalued rewards. It may also have the added benefit of attracting back players, who have since left.
Marketing and Public Relations: Splinterlands can showcase its commitment to innovation and responsiveness to community feedback, enhancing its image as a player-focused game. Successfully implementing and communicating such a strategy can generate positive publicity and enhance the game’s reputation in the market.
Potential Risks
Market Adaptation: The market might take time to adapt to the new token metrics, resulting in volatility or unintended economic behaviors within the game's ecosystem.
Demand Elasticity: While reducing supply theoretically increases value, this assumes demand remains constant or increases. If demand is elastic and sensitive to changes in supply and rewards, the actual effect could be counterintuitive, with value dropping as players leave or disengage.
Competitiveness: Lower rewards might make Splinterlands less attractive compared to other play-to-earn games and DeFi platforms offering higher returns, potentially reducing the user base. Seeing as how the player base has already shrunk significantly, i.e. bot farms leaving, this is a lower tier risk in my opinion.
Player and Investor Sentiment: Reducing rewards may negatively impact player and investor sentiment, leading to dissatisfaction or reduced engagement. This can counteract the intended positive price effects if a significant number of users leave the ecosystem. Seeing as how the team has already taken steps to combat those who would leech on the system, I believe this to also be a lower tier risk
I look forward to the feedback of the Splinterlands management team and the community.