Many discussions about Splinterlands governance happen in Discord and end up getting lost amidst a myriad of messages. One such example about a month ago, Vugtis put his ideas on tournaments and ranked play in Discord and I summarized them into a Hive post.
Over the past weekend, Vugtis again shared his thoughts on SPS distribution and rewards in Discord (message link). Here I am going to share what he wrote so we have a record of it on the blockchain for everyone.
Image created with ChatGPT 4.0.
The Proposals
Two draft SPS Governance proposals have recently been presented to the stakeholders on the topic of SPS Distribution and Rewards.
The first was proposal #237 Extend SPS Staking Rewards. This draft proposal failed. Above is a screenshot of the results.
The second was proposal #239, Adjust Token Distribution Strategy. The screenshot above shows that the draft proposal passed. It is now in the proposal stage as proposal #242.
Words from Vugtis
There was some speculation about why certain large SPS stakeholders voted the way they did, including some messages from 
Note: I've made minor edits to the writing below for ease of readability and to correct punctuation and grammar. This is not a word-for-word copy.
Hey, I am sorry for not replying right away. I was, and still am, quite occupied with other stuff. So, I might not be able to have an interactive talk with you guys, but I'll tell you what I think. I was indeed the main guy who is against the what-to-be proposal.
I was presented with this graph, and from here we can see that in 15 months (probably around the time for the next main set), we will have 20M reward, which is a 30% cut, and if we look ahead 18 months from that point, we will have up to ~62% cut from the current rewards.
Now the question is, who will buy the next set with that kind of reward cut all across the board? Not to mention the sell pressure caused by that reduction, which lowers the value of SPS.
Now, I can understand the dream to have infinite reward without topping up the reward pool, and that was the aim of the original proposal, but to me, that is indeed a dream at this point, and to me, that is a DEATH SENTENCE to our project. That is basically saying, we are not giving out any more rewards, it's up to any potential buyer if they want to buy or not. Guess what? People will simply not participate. I might be wrong, but I am not taking that gamble. Once we lost that bet, we probably won't make it back.
So, we are going to have rewards for a long time in order to survive and grow, until we are ready and in a position to cut more.
What can we do in the meantime?
Continuing the words from Vugtis, just breaking up the headings to help readability.
What can we do in the meantime?
Slowly reducing the reward we give out vs the revenue we receive, slowly reducing that ratio.
Create value to our product outside the immediate $ value to justify the reduction of SPS rewards, for example: entertainment value.
By giving value to the entertainment aspect, it enables us to give in game rewards that might also offset the reduction of $ reward.
In order to do that, we need time. And while we are building more value in our product, we can't do a drastic reduction of rewards. Let's hope that we'll get there sooner than later.
I hope you guys can understand my reasoning. Thanks for reading.
Follow-up Responses
Tjbonitz posted another response, it's quite lengthy and I'm not going to repost it here. You can read the full message here if you have access to the Shard Holders channel.
Vugtis posted an additional response here. Below is the full text. Again with minor edits from me, so not a word-for-word copy.
Cutting rewards drastically is basically going to put stop to our economic wheel, causing a death spiral.
Our 1B staking will not be 1B anymore. Where will SPS go? Sold on the market.
A combination of modern, wild, tournaments, brawl cut will reduce the incentive to own cards. People will sell their cards. Less people participating in the game also means lower pack sales. Less pack sale = less dec absorbed and less sps burned. DEC & SPS crash.
Less participation means less demand in SPS rental, causing lower APR, and more sell pressure.
Less participation means less demand for whatever land produces. And don't forget, the additional SPS reward cut from land also accelerates this.
And like I said earlier, less demand in land means more cards getting sold on the market, especially older editions.
More cards sold = price down = sentiment turns sour. People will be wary of buying new cards due to the crashing of older edition cards.
Less participation + bad sentiment means less packs sold. Less packs sold means the team won't get enough $ to sustain their development cost. Remember team needs about $3M per year to operate. We barely have enough to cover that yearly. Next? Worst case, total shutdown.
You are saying rewards don't move the needle because people can't recoup their investment to begin with?
That is very optimistic of you to say that. You are saying people don't care about rewards? They just buy because they love the game? I don't know how to respond to this without being sarcastic. I think this comment alone is enough for you to lose this debate.
Maybe you are right, they can recoup 50% of their investment, not 100%, and that's fine because they love the game. I am probably 1 of those people, but mind you, I hope that eventually the value will rebound. But if you cut that 50% to 20%, do you think people still love the game? You can't possibly be that optimistic if you see how people in this game behave and comment. Even I am not okay with that.
To answer your question, why do I think SPS won't go up? I actually think it will be the opposite, if the what-to-be proposal passes, we will have lower SPS price due to the reason above. At the moment, we basically have little reason to own/hold SPS. We have way more SPS staked than is needed to play the game.
SPS will only go up when there is pressure towards the flywheel, and the only way it happens is participation through core set sales. Reduced demand in core set due to reasons above which is supposed to be the biggest driver towards the SPS price, will make matters worse.
What we should do is not cutting rewards drastically, but try to get more users, try to deliver a better product so we can be less dependent on $ reward. The more value we create, the less dependent we are on $ reward. Right now, we don't have that much leverage.
At the end of the day, let's say both of our view has 50% 50% chance to happen. FYI, I don't. I think my scenario is more likely to happen.
But let's say what if it is 50 50, or let's say it is 70% in your favor. I will still not gonna risk it. You have to consider the risk/reward. When the 30% (death spiral happens), there is no going back; we are simply done.
Doing it this way is less risky, we can always cut more to a reasonable amount if it is necessary. So, unless I am convinced that it is 90%++ will not cost us this project, I won't be for it. I am not gambling this project away.
That's all from Vugtis so far. You can see that Vugtis put a lot of thought into this and I hope more eyes see this.