Splinterlands - DEC Batteries...

My Opinion On DEC Batteries

On paper the proposal does illustrate clearly what the functions are for a potential future Splinterlands token. However I personally believe the ability to use the DEC-B for any form of currency undermines those who already paid in the for of DEC. What I mean by this is past purchases made using DEC such as guild upgrades would be short handed now as DEC-B at 20% discount of DEC but use at the same rate as 1:1.

Time duration with interest is what will bring future demand into the present. An automatic 20% discount without duration will likely lead to value destruction more than appreciation. I know the goal is to pull DEC to par value but by introducing a discounted token in exchange it will only undermine the actual value of DEC.

If all 2 billion. DEC-B are exchanged with DEC and market cap of DEC remains the same of course value of remaining DEC would increase in value. However what if DEC market cap does not remain the same? This is not a prediction either as we all know in free markets token prices fluctuate.

The benefits with introducing DEC-B will likely be temporary because the continuing demand for DEC continues to fall. There is only so much demand in the game even for DEC-B that introducing another form of discount in the new asset is really undermining the overall value of the game. Wonder if splinterlands developers knows this?

If goal is to pull future demand of DEC my take is create DEC-B with interest paid in DEC after a time duration. Since splinterlands knows how much DEC is in circulation they can easily compute a interest rate with the time duration to hit a quantity supply cap of DEC in the future. This will shrink the DEC supply at present time while holding a specific expectation of future DEC demand. Let’s run an example.

As of now there are 6.3B DEC in circulation. By end of 2023 let’s just say Splinterlands wants to have to DEC supply at 5B. Then they would run a bond sale of 1.3B DEC for a fix interest paid in DEC at the end of 2023. The current rate is 1:1 for DEC to DEC-B. How much interest paid by end of 2023 will depend on Splinterlands decision. (I am not too savvy with blockchain but what I understand is the blockchain has the info to make a ledger. If Splinterlands can go through 2022 and see how much DEC was actually burned and take that amount into consideration for 2023 rate burn rate it would indicate how much can potentially be brought from the future to present day for purchase.)

Let’s say 0.5B DEC was burned in annual 2022. Then if we assume 2023 remains the same splinterlands can say for buyers of 1.3B DEC-B tokens that at the end of 2023 the holders of DEC-B will get back 1.8B DEC. Assuming worse case no DEC got burned in 2023 then total circulation of DEC at end of 2023 is 6.8B. This excludes the burning of cards for DEC to make calculations simpler.

So what did we actually do based on the example above? We pulled current DEC demand from the future to the present. Because of the 1.3B DEC went locked up for DEC-B the entire year of 2023 we would see 5B DEC in circulation. This would allow DEC price to hold up while pushing total supply of DEC out into the future. Time duration can be longer than one year and interest payment can be less, I just did 0.5B as example to simplify the math.

Time Has Value

Reading Splinterlands proposal of DEC-B and why they believe it is necessary has me feeling we are in good hands. They see that there is a problem and have been thinking of solutions. However the main mechanics of how bonds actually work is a big oversight. Instead of introducing a new token why not simply lock up existing tokens for a time duration? I think this approach avoids undermining the value of DEC while pulling in future demand.

To end it here I hope enough Splinterlands players can voice their concerns on the proposal regarding the discounted value of DEC-B having no time duration is a big issue. Even if proposal gets through and gets implemented I fear the DEC price will continue to fall. Without time duration we are simply pulling down the value of DEC.

Until next time thanks for reading!!!

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