Signs Splinterlands Is Not Dead Yet!
The Play2Earn Economy Paradox
So when it comes down to Play2Earn economies, a certain amount of real money (which can be sold/converted without directly hurting the game economy) comes in from sales and players get tokens and in-game assets that are created out of nowhere and are not really backed up by anything (can't be dumped without directly hurting the game economy unless more new players come in)
This while both the devs expect to keep earning their salaries and players expect to earn more than what they put in over time. In the end this is a zero-sum game which only really works early on while the assets are limited which makes it easy for even small demand to pump them to higher levels. Eventually, devs can't keep their fingers off the print button and the moment supply gets too big and players start to take money out everything collapses. Prices that are going down leads to more players leaving and less new ones coming in while devs want to continue earning their salaries which totally destroys the economy as the tokens and assets aren't backed up by anything real.
The Splinterlands Economy
I guess the idea behind having a Product backed stable coin in DEC which the entire game runs on and for SPS to be burned to create it could work if the game really was fun enough for everyone. However, declined earnings pretty much drag everything down as asset prices more or less are valued based on that. So players are expected to buy cards and SPS in order to earn some soulbound cards and some more SPS. This while SPS is only partially backed up by the DAO Holdings (it would make no sense if SPS market cap went below that). However, the DOA now funds the team directly paying the salaries.
The only real (temporary) solution would be a totally irrational bull market where dumb money pushed up SPS to a point where that lifts asset prices creating a positive spiral where new players are willing to come in.
The Soulkeep Economy
The Soulkeep Economy seems to be a total train wreck as the funds from sold packs fully seems to have gone to pay Dev Salaries and all there is left is SPS that is given from the DAO which nearly all go to a handful of players at the top each day while it doesn't give any benefit to the Splinterlands ecosystem whatsoever. The only reward Soulkeep is giving out is a small % chance to win a pack which helps to dump the asset prices. Packs went for 5$ in the pre-sale and now are going for 0.75$. So while Soulkeep barely even got started, everything already collapsed and rightfully so the DAO plans to take away the SPS Rewards.
I wrote this as a comment in the proposal post to remove the rewards instantly (Link) even though it goes against my own earnings
How to Make a Play2Earn Economy Sustainable !
After having seen pretty much all Play2Earn games collapse due to fundamentally broken economy design which always relies of exponentially more new players coming in to hold up the prices, these are 4 key solutions to possibly make it work!
1. Developers and Player Earnings come from the Same Source.
Basically, this setup where you have the company with devs and players running a DAO each with their own motives while ultimately the devs have all the control is broken. Devs and Players should tap from the earnings the game makes in the exact same way meaning Devs need to have skin in the game holding a lot of their own assets which they need to get the income.
One of the problems now is that the main incentive for the devs is to keep the Salaries coming which often goes against the success of the game as it so far resulted in crazy card printing including the last overpowered one. There also is a total disconnect between the game doing well and the salaries which I believe used to be different at the start when Matt and Aggy started to make the game. It used to be more of a passion project which got overtaken by greed (GLX, Arcde colony / Chaos Legion Overprinting / bot problem / Land Cash Grab / ... ) once things started to see some major adoption.
2. Investment Fund backing up assets and Yield providing Earnings.
In order to make Asset values hold up and to keep rewards sustainable. At least a big part of the money that comes in from sales should always be put into long-term investments which pay some kind of yield. This yield can be used to pay out rewards in the game.
Imagine that 50% of money that comes in from sales gets invested into assets that the DAO votes on and that 50% of the money that comes in gets distributed to SPS Holders where the team needs to hold most to pay their salaries. It would create a situation where everything actually is backed up by something of real value an no new players would need to come in to keep things going as the investments fund is expected to grow over time and give a yield.
Instead now the DAO fund are just used by the team as a milking cow while more cards that are printed dilute asset holders directly seeing that value flow to dev salaries.
If in-game assets were backed up by the value of the investment fund, it would prevent the card-price-gap and give the average player more confidence to actually keep investing and buy stuff in the game.
3. Outside Advertisement / Sponsorship Money Flows
Especially once there is a solid user base, it should not be too hard to implement advertisements direct during the loading or reward screens. Projects could also sponsor Splinterlands giving tokens to the investment funds with in return getting extra exposure. Part of the earnings from players could come from this also.
Too Late To Make Changes ?
I would say this concept of putting part of the sales into an investment fund that backs up the asset prices and helps to bring sustainable rewards is something that can only really be done right from the start or still by a project like Soulkeep who are small still. Once a game has too many assets and bag holder it kind of becomes impossible to make the switch.
In the end the game itself also is a Major Factor as it all can work if just enough players really love it and are willing to put money in without expecting an instant return. However with Play2Earn games, this dynamic just seems to be different.
Conclusion
The current way of going about things where few to none of the assets or tokens are backed up by something of real value while everything continues to get diluted just to pay for Dev Salaries is not a recipe for success. It needs an exponential number of new players to always come in to hold up which at best creates 1 more pump-and-dump cycle. A sustainable play2earn economy for me should always mean that devs rely on their assets holdings equal to players to get their salary earnings and assets should be backed up by some kind of investment fund is expected to grow over time and give a yield.
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Some great thoughts. I find it strange that the DAO with many assets doesn't have yield bearing or outside assets providing income that could flow into the game. The same as HBD should be backed by owning the asset or treasuries paying the yield instead of algorithmic.
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Yeah, I think it's the way to go for play2earn games to put at least part of what comes in aside as a real investment fund that has real revenue and growth to back things up instead of just using everything to pay devs while only having a mechanism where a coin has in-game purchasing value.
There needs to be something that doesn't have the potential to totally collapse as cards and sps did when there is a negative spiral. It would also lower the profit expectation of players, now the risk is simply so high that you need to crazy return to invest in these games which makes them bound to collapse sooner than later. If you know that there is something backing all of it, confidence to get in an hold even with lower earnings would be way higher.
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Interesting thoughts and constructive criticism to improve splinterlands