The thing about Splinterlands is its not just a game. It's a DeFi project with many ways to earn. Some of the pools, like the swap.hive:voucher pool pays out almost 55% in SPS. And this APR is only going up as SPS treks higher. At 7 cent SPS, the APR jumps to over 100%.
And if you're paying attention, you know that land is basically one massive DeFi project where the biggest parts of it really are the 50+ liquidity pools, all paired with DEC. There are some very interesting possibilities coming out of that since there's a 10% swap fee that gets paid out to liquidity providers, plus there are resources you can only get by providing liquidity. I'll probably have to write a post on this soon but today we're going to talk about a different aspect of Splinterlands DeFi that could send SPS soaring.
I'm not the first to talk about this but I'm not sure how many people are really aware of it as a possibility. I certainly don't see it being discussed regularly in the community or being advertised outside of it.
Splinterlands has a variety of liquidity pools that are all incentivized by giving out a fixed amount of SPS. The two pools we're interested in now are the DEC:DAI pool and the DEC:USDC pool. Both of these pair two stable coins against each other and pay out over 20% in SPS. The USDC pool pays out over 30% in SPS.
Since it's paid out in a different token (SPS), as that token goes up, so does the APR. In most pools like this, the high APR would attract more participation and that would even out the APR. However, in a DEC pool, the only way to keep getting more DEC to participate is to burn more SPS. That puts pressure on SPS which increases the APR again.
What we could quickly see is a spiral of people buying and burning SPS for DEC in order to pair it with USDC and DAI which could keep the APR high no matter how much is added into the pool.
Or at the very least, the people getting SPS, would be burning what they get instead of selling it. Of course, this should spill out into people finding more ways to get SPS like playing the game.
Now, it's debatable how well the APR would hold up. There are a lot of factors. We don't know how quickly SPS would rise vs the APR lowering result of greater participation. Also, the higher SPS goes, the less of it needs to be burned to get the same amount of DEC. At some point there would be a leveling off point. But if this happened, the attention on the game and ecosystem would be incredible.
If you're looking for a pop in price to sell into, this would be the concept to push on Twitter and other outside platforms. I can tell you that if this did happen, I would certainly be a seller. Although it would be a lot of fun for a few weeks or months, ultimately it would lead to a crash so big it could put the game in danger.
Let's talk about why
If the price of SPS got up to $10, it would take $6 million per day coming into the token to eat up the daily emissions. Most likely the daily burn would drop way below the emissions rate and people would start unstaking to sell some en mass. This would drop the price quickly.
The combination of a sudden price drop and more people coming in would cause a panic in the pools. As they started coming out of the pool, all that new DEC would start to flood the market. Peg would break and there would be a run for the exits. DEC would collapse to a fraction of its peg and there would be potentially hundreds of billions of DEC on the market. The flywheel would be dead, assets would be in decline, and people would sell whatever they could for whatever they could get. SPL would be a wasteland and a well known cautionary tale in the crypto space. It would happen very quickly. Everything would go up much higher than we could ever imagine and then it would fall much lower than we've ever seen.
That's why if this happens, I would sell everything. I mean, I'd probably get rich AF on the way out but I would definitely DCA myself right out of this project.
Do you think this is possible? Would you buy in or sell out if the degens came in?