TL;DR - with today's numbers (Oct 24 2021) you actually earn more SPS by holding DEC and receiving airdrops than spending the equivalent amount to stake SPS! Sounds weird? Too good to be true?
It might be...
Read on to understand why!
There are two main ways of receiving SPS daily:
- Staking SPS and earning the stated APR. As of 24 Oct 2021, this was 58.67% APR.
- Receiving SPS via Airdrop Points. Airdrop Points basically count up your in-game assets to provide SPS rewards. 1 DEC counts for 1 Airdrop Point.
For players like myself, we log on every day to this familiar screen and click our 2 "Claim" buttons for the sweet SPS:
But have you stopped to wonder - if I want to get the most APR, should I be focusing on maximising my Airdrop Points, or staking more SPS?
Read on to find out :)
The math
The game tells us the APR for SPS - currently, it's 58.67%. This means if you held 1 SPS for 1 year, you would receive 0.5867 SPS.
We need to calculate what the equivalent APR is for holding DEC at this point in time. However, this number isn't given to us directly.
- We can calculate how much 1 SPS is in DEC. Taking the numbers at time of this post, SPS is $0.60 while DEC is $0.01. This means 1 SPS is equivalent to 60 DEC.
- 60 DEC provides 60 Airdrop Points.
- From Splinterlands docs, we know that 1,095,890 SPS is distributed per day. This means the amount of SPS you get daily is your airdrop points divded by the total system airdrop points, mulitplied by 1,095,890.
- Taking today's total system airdrop points of 8,306,402,048, we can calculate that 60 Airdrop Points would give you: 60 / 8,306,402,048 * 1,095,890 = 0.007916 SPS per day
- To convert to an APR (annual return percentage), we multiply this figure by 365 - 0.007916 * 365 = 2.889 SPS, or 288.9% APR
Therefore, staking 1 SPS will give you 58.67% APR - but staking 1 SPS worth of DEC (which is 60 DEC at today's rates) will give you 288.9% APR. Wow! That's over 4x better return on investment.
So, why not just hold DEC?
Sure, right now buying DEC provides over 4x the APR of staking SPS. Holding DEC is also more liquid, as staked SPS takes time to unstake (4 weeks).
BUT - there are risks involved with buying and holding DEC. Splinterlands devs have repeatedly mentioned that DEC is not meant to be the store of value in this game, but rather, SPS is.
In fact, the intended value of DEC has always been 1000 DEC per USD ($0.001). When DEC rises above this value, the ranked battle reward pool distributing DEC increases accordingly. This mechanic attempts to rapidly increase the supply of DEC and regulate the price back down to $0.001.
There is a risk that developers may implement mechanics that limit DEC's ability to generate airdrop points. In particular, if 1 DEC no longer correlates to 1 airdrop point, DEC would likely drop in value significantly.
The sky high APR of holding DEC right now is why DEC is staying consistently above $0.01 (over 10x its intended value) for the past month. As Splinterlands explodes in popularity and other methods of obtaining Airdrop Points have become more expensive: collection power, packs, land... DEC has risen in price.
As always in life, the higher risk play provides the higher reward :) Hope this helps!
This is my 2nd post on PeakD/Splintertalk. Follow me for more Splinterlands math / tokenomics related content that can help infrom your strategy!