Splinterlands - Building in the await of the flywheel effect

By Behiver | behiver | 18 May 2023

Splinterlands continues to develop new dimensions of the game and Land is a big portion of it. As I see it, is expected to be a sink for NFT cards and DEC in order to put the Land at work and be able to harvest different rewards from it. And from that is expected to result NFT cards appreciation, DEC pegging and a flywheel effect on the Splintershards SPS token as well. This is what should ensure the rejuvenation of the entire ecosystem if everything plays out right.

DEC stablecoin

The DEC cryptocurrency was designed to act as a stablecoin in the Splinterlands ecosystem and hold a value stable of 1,000 DEC:$1 in order to provide stability and liquidity, while enabling users to mitigate volatility and facilitate seamless transactions IN and OUT of the game. The Splinterlands team made super human efforts in order to peg it by also adding discounted value DEC known as DEC batteries which will have the same scope but at a 20% discount. These act as promissory notes by incentivizing people to buy them now and use them later.

SPS governance token

In addition to DEC the Splintershards $SPS governance tokens grant holders the power to participate in the decision-making processes of the use of DAO Treasury and other gameplay mechanics. These tokens allow users to propose and vote on changes, shape the direction of the game in some portion of it, and earn rewards for staking and holding them.

Flywheel effect

So when is the flywheel effect get on rolling? The flywheel effect between the DEC stablecoin and the SPS governance token occurs when the stability and widespread usage of the stablecoin gets pegged and attracts more users and liquidity to the blockchain. As the stablecoin demand and use is increasing, that could incentivize SPS holders to exchange/burn them for DEC by taking profits due to positive unpeg of the stablecoin. Basically the formula of the flywheel effect will follow these expected steps.

High DEC demand and use will end up with less DEC in circulation
DEC will get closer to the peg ratio of 1,000 DEC for $1
The DEC demand will continue and will even surpass the peg ratio of 1,000 DEC for $1
The phase of the flywheel effect will get into motion
Players will use this opportunity to burn SPS for DEC (ultimate goal) using fixed conversion rate
This will push the SPS value higher and higher

This is a sound plan but as it looks it is slowly moving to fruition as it is still a big supply on the DEC size. Land will add the requirement of staking DEC in order to put it at work, so that should help to freeze some portion of the supply and make it not reach the market. Thus it could the price closer to its peg and maybe start a flywheel effect afterwards.

In the same time we should not bet everything on this flywheel effect formula, but rather bring new use cases that will appreciate both assets: the DEC stablecoin and the SPS governance token. And one that I am excited about and which was announced in the last AMA is adding SPS requirements for earning rewards in specific Leagues. This should make players hold and increase their SPS staking instead of putting the SPS rewards right away on the market.

Overall I think things are starting to stabilize and reach an equilibrium in order to create (or better say recreate) a healthy tokenomics. Because in the end, without assets that hold and even appreciate their value, this entire ecosystem will not be appealing anymore in the crypto space. But by the looks of it, there is a plan in motion and we just need to wait for it to get to completion.