With Chaos Legion upon us, I thought it would be a good time to take a look at how Splinterlands is doing.
The short version is not great. I know. It's weird. Chaos Legion was such a success and there's so much growth on the horizon and so many newly minted millionaires in the game. So then, where's the growth?
To start, let's go ahead and say that Splinterlands is night and day to what it was 5 months ago. The fact that Chaos Legion is releasing 15 million packs compared to 1.5 million of their last set and some people have an expectation of an immediate sell out is pretty amazing. It's also great to see they are taking that money and putting it back into development and hiring new staff all the way around. The latest AMA said every department was being give 3-4x the resources to get things done with and that's great since they have big ambitions and have had to deal with major growing pains.
But we all know Splinterlands has exploded this year. What I want to focus on are the more recent trends. And what we're going to see is that all that growth happened in about 2.5 months and has since slowed to a crawl and even reversed in many cases.
Let's start in my favorite place to talk about: the rental market.
If you've been around since August you may remember these articles as the market grew to amazing heights seemingly overnight.
You can see that on August 12th we'd hit an amazing $20,000 in daily transactional value being rented out.
In this one you can see that the day before we were celebrating that there were 50k daily active users, which at the time was huge!
Then within a few days of this happening we hit $30k. I don't have a tweet from them about this but you can see from this post I wrote on Sept 7th that we were at $30k and the point of that post was that we had been there for quite a few weeks and even though user growth was still spiking, rental market value wasn't moving. This is where I was warning that if the rental market got stuck, the whole economy would shrink and everything would lose value.
..And that did turn out to be the story of the month of September.
So here we are in December with Chaos Legion out, 8x the active daily users and as you can see, we now below where we were in August in daily transactional value. Almost twice the rentals (still tiny when you consider there are 8x the players) but the actual value has shrunk.
[current active rentals]
I feel like I've been talking about this forever but this is the result of too much inventory being owned by too few people who compete the prices down to nothing because there are way more cards on the market than potential renters. Each time prices drop and the amount of renters stay the same, it shrinks the whole economy which devalues DEC (and SPS and all the card assets in the game) and lowers the payout to players and therefore the value of playing the game.
(Oh wait, I found a tweet from August 14 showing a larger USD value rental market than we have today with 8x more players. Probably nothing.)
The rental market is the lifeblood of this game and the whole game will go the way of the rental market.
I know people are convinced that cheaper prices are better but what they aren't taking into account is:
cheaper rentals -> smaller economy -> smaller payouts -> less profit for players and renters -> fewer players -> asset prices drop
In other words, cheaper rental prices lead to lower overall payouts and a less profitable experience for everyone.
Remember the bulk of the growth that happened in July and August was due to the payouts increasing and bronze players were making $10 per day off a few rental cards. At the time Krons were going for $1.50 per day and Mylors were renting for .30 cents because you could make that back in a few games and still walk away with a nice profit if you played a bit more.
What about today, bronze players? Or even most silver players?
Kron is now .30 cents and Mylor is .03 cents and bronze players can barely break a buck a day playing. On top of that, the few cards they picked up like Wavesmith which were going for $5 and renting out for .07 cents are now renting out for .006 cents and selling for .93 cents. I bet those players are all thrilled with their progress and happy to be paying less per rental as this economy shrinks down more every day.
Speaking of happy players, let's look at that Daily Active Accounts growth to see what's been going on there.
[active accounts 30 days]
I was talking to someone about this a few days ago who said you can't expect Splinterlands to have 100% new player retention when I mentioned their lack of growth. But as you can see, 100% retention isn't part of the conversation. Over the last 30 days they can't seem to get over a 0% retention rate and it might even be negative.
Let's zoom out a little bit and see a 6 month chart.
Wow. Remember when we were supposed to have 1 million active daily users by the end of 2021? In September I was telling you based on the rental market not moving in the face of all that growth that it was all bots. In October, they made the rules against new players instead of just saying bots are a problem.
While the new rules did discourage bots, had they just admitted bots were the issue, they could have done it in a way that kept new players feeling welcome and there's a great chance that many of them would have ended up investing heavily in this game that was making them a solid profit.
But they attacked new players at the same time they were opening new ways for whales to earn which left a bad taste in everyones mouth and not only slowed the growth rate but turned it negative. Before we go into that though, here's a chart showing games played and transactions just to show the active accounts leveling off isn't some fluke chart.
Games Played ramped up until it just stopped dead and leveled off just like active accounts.
Transactions coming down to meet the uptrend line but if you look you'll see that for the past two months its not only leveled off but keeps making lower lows.
But the real proof is in the next chart. Daily signups and spellbook buys over the past 6 months. I recently saw an interview with Aggroed where he was asked about the new player experience and his answer was that he wasn't all that concerned with it because they were still signing up thousands of users per day.
I ask you what CEO shouldn't be concerned by a literal 90% drop off in daily signups that is still dropping? Could it be they are a little blinded by recent success and aren't seeing the most obvious signs that there is trouble brewing?
Notice that there was no bump in sign ups for Chaos Legion. None.
[daily signups]
You know where else there was no bump up for Chaos legion? Total card market cap. They just added 182 new cards. Each of those cards has its own market cap which should be added to this total card market cap. It's unfathomable that there wouldn't be some jump in a healthy system that is growing as they say it is.
The team was quick to point to this chart.
just showing market activity going up. But they didn't go out of their way to show the most important chart which was how much actual value was added to Splinterlands by releasing Chaos Legion.
Can you spot the Chaos Legion Value Bump?
Without seeing a value jump, it indicates that all that market action was people rushing to sell their new cards AND their old cards rather than some new demand coming in.
And I was no different. My goal when opening packs was to immediately sell all my common CL cards at the inflated prices I was expecting in the first couple days. The thing is though that in the 1 hour I couldn't get the site to work when packs were released, I missed the window. By a few hours in, most cards were actually already going for roughly what the new rewards cards are going for.
Meanwhile, almost any old card you look at has crashed.
Here's Kelp Initiate where I was buying it a few days before CL:
And here it is yesterday:
These 50-70% crashes are common and that's how you add 182 new cards to a line up and end up adding no value at all to the ecosystem. Note that "creating value" is a line that is being used over and over again now by the devs but they aren't actually creating value. Just taking money out of one pocket and putting it in the other and calling it profit.
OK but I'm being hard on them. I mean, they are giving out SPS every single day right? That's value being created for sure every single day!
Ask yourself this. You keep staking your SPS right? Has the value of your holdings gone up over the past month? Nope! It's gone down. Dilution is not creating value.
In the face of their biggest game changing events and a really hot market, they can't even stay flat. Value is falling out of the game every single day now. It is not being created by ANYTHING they are currently doing.
Yep I'm looking at you vouchers! You didn't create value by handing vouchers to one group and forcing another group to buy them from them so the first group could use the second groups money to buy packs they otherwise wouldn't have bought and immediately use the cards from those packs to drive prices down on all the other cards because there actually was no new demand to absorb any of the new supply. <--Feels like a pattern here.
Well, there was demand, but their ammo was spent buying vouchers that didn't need to exist but have now been touted by Aggroed as his best idea in the game ever.
Makes you wonder if they could have sold $4 million in packs without first handing out $20 million in "Value"? Like most people who bought packs, I put none of my own money into it. I just recycled what they gave me. And what they gave me was ultimately -$32k in card value because even though my Chaos Legion cards are worth $3000, their existence dropped the rest of my cards value by $35k and that's just the first 1 million packs. What's 14 million more packs going to do to "value"?
That's what happens when you believe creating supply = creating value. The real value runs out the door.
Sometimes crypto can't wait to outfiat the fiat.
I'm not saying it's over for Splinterlands. As of now I am still fully invested but I'd be lying if I said I didn't have my doubts and I wasn't thinking about lightening my load a bit.
They have made some brilliant moves and built something incredible but there are some common pitfalls that they seem to be oblivious to and if they don't get out of their own way, Splinterlands is going to just be one more chart that goes straight up and then straight back down.
Kind of like their new sign up numbers I guess.