Splinterlands is currently receiving an influx of new players, which proves the game is a success. As a result, the game servers are being subject to considerable stress (and are being upgraded by the devs to accommodate the growth), and card prices are skyrocketing. This is a very exciting setting, though this growth rate cannot last forever, and future turbulences are inevitable, as the crypto savvy will know.
Two weeks ago I made a post commenting on how the printing of ever more powerful cards, although very profitable to the printer in the short term, is certain to irreversibly ruin the game in the long run. This has happened to a number of collectible card games, and I would not like to see this happening to Splinterlands too (because I like the game!), hence my bringing up this topic.
Today I would like to bring to discussion a topic that has huge impact to the whole Splinterlands economy: the demand for and liquidity of DEC (Dark Energy Crystals). DEC is the Splinterlands in-game currency and reward, so it is crucial for the health of the ecosystem. I must remark, the devs have made a good work in integrating DEC with the various aspects of the Splinterlands economy: you can buy pretty much anything in the game with them. This is excellent. But there are a number of problems to the token that need addressing / clarification, some of which I will discuss below.
One glaring issue is the now seemingly obsolete DEC-USD soft peg. To make it short, the devs launched DEC in 2019 to be the in-game reward, and intended to make its value fluctuate around $ 0.001 with a soft peg. Analysis of price charts shows us that this peg is now obsolete, which apparently happened due to the accounting of DEC balances for SPS (Splintershards) airdrops, which started in July this year. This caused a significant rise in the DEC prices. This price increase tendency is likely to continue in the future, as the devs signalled that new use cases for DEC will be implemented when the land mechanics kick in. This is all very good for the game, in my opinion. However, it is easy to see that, if DEC were to return to its peg value, the consequences for the game would be drastic, perhaps catastrophic.
Thus, I would argue that this USD peg is obsolete and ultimately detrimental to DEC and the whole Splinterlands ecosystem, and, thinking of the strengthening of the game, I would advise for its discontinuation. After all, the strength of the crypto economy is free market and unregulated prices.
Which brings me to another factor causing issues to the health of DEC. Of course, I refer to the Splinterland Credits. These credits can be bought in-game via various payment methods, and are worth $ 0.001 each (nota bene: the exact same value as originally intended for DEC). Purchasing credits is undoubtedly the easiest method of putting money into the game, especially for non crypto savvy, new users. This is probably the reason why they were created in the first place.
The credits were not a problem to the health of DEC in a time when the latter had a market value inferior to its intended dollar peg (check the price charts!). However, the situation now is completely different, as explained above.
But why exactly are the Credits detrimental to DEC?
A good question indeed. My answer would be: by hampering demand for DEC and depriving DEC from adequate liquidity.
As we all know, DEC is the official currency of Splinterlands. But the health and strength of this currency are hampered due to the existence of a shortcut, an alternate route for transacting value, which inevitably competes with DEC for the very same "market". This alternate route are the credits. However, unlike DEC, credits cannot be earned in-game, and also cannot be converted to other currencies or moved out of one's account. Therefore, credits are completely inadequate for storage or transaction of value.
The use of credits for in-game purchase leads to a reduction in the demand for DEC. This naturally causes a reduction in the value of DEC, but this, I would argue, is not the most significant consequence. More drastic, in my opinion, is the resulting reduction of liquidity for DEC. I am sure most of you have noticed that even relatively small purchases of DEC on any DEX is enough to cause a considerable price change, often a two-digit one. Why is that? Low, insufficient liquidity. Now, if people were buying DEC directly for their in-game purchases, instead of buying credits, I have little doubt that the liquidity pools for DEC would be much more robust across the board.
Very importantly, it is paramount to remember that low liquidity is a serious danger for anyone trying to cash out from the game.
Now, does Splinterlands really need the credits? Would the discontinuation of the credits hamper the entry of new players into the game?
I am of the opinion that discontinuing the credits would not negatively affect the game. Quite the contrary. The Splinterlands website already offers a number of ways to buy DEC, and even provides links to some DEXes in which DEC is traded. This could easily be further improved with the addition of more payment methods, such as those currently offered to buy credits. Being realistic, no one would be disincentivised from joining the game if he or she had to buy DEC instead of credits in order to make the first in-game purchases.
So, summing up, I argue that the whole Splinterlands ecosystem loses a lot due to the usage of credits. The credits are unnecessary and detrimental to the game economy. It would be best for the economy of the game if 1) the DEC-USD peg were abolished, 2) new use cases were developed for DEC (and also for SPS!), 3) the credits were discontinued completely, and 4) players were offered some way to convert existing credit balances to DEC or other assets.
What do you think about the consequences of the Splinterlands Credits? And about the future of DEC? Let us know in the comments!
All very good points. It's hard for me to decipher outcomes because I'm so new to gameplay. I will tell you that buying the potions for credits is what got me hooked and the change has dampened my spirit to spend $$ investing in the game.
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