I decided to test out the SPS burn feature and it was pretty straightforward. We're still watching the numbers to see how this affects the splinterlands token market but at least we can easily access DEC with our SPS.
In any case, the conversion process was pretty simple and straightforward. To convert SPS to DEC, you simply;
- Go to Splinterlands page and log in.
- Go to the SPS dashboard
- Click on the "Convert SPS" button
- Input the amount of SPS you want to convert and receive DEC in-game.
- Use the DEC for buying packs, potions or monsters.
Since DEC is no longer being printed from ranked battles, this is the only way to get DEC tokens without staking assets in liquidity pools. It might not seem like much right now but DEC still has an important role to play in the future of Splinterlands.
The psychological peg of 1000 DEC for $1 is still the dream. It will be a huge success when this peg is reached and somehow maintained through SPS burns and other schemes in the game.
The Burn
In situations like these, there will always be arbitrage opportunities to capitalise on. The question is if you're ready to play the game and take advantage of the difference in prices.
I expect arbitrage to play a role in the stability of DEC in the psychological peg. So how do you intend to take advantage of the situation?
I did a quick check to find out if there was truly an arbitrage opportunity and as expected, there was. The difference between burning SPS for DEC and simply swapping SPS for DEC on Tribal Dex shows an interesting discrepancy that could be capitalised on.
So, here's what I noticed from the two aforementioned processes. In this analogy, I chose a hypothetical situation where you decide to burn 1000 SPS tokens and this is what I found out;
So, on one hand, converting 1000 SPS to DEC gives you a bit over 53k DEC. This is in tune with the current market price of SPS and the fact that $1 of the market price of SPS will print 975 DEC.
On the other hand, we have a situation where we are simply swapping SPS at the current market price for DEC at the current market price. This transaction is completely dependent on the market's perception of both tokens and so a bit over 79K DEC comes out of this swap.
What we can say for sure is that swapping SPS for DEC offers more value than burning SPS for DEC.
Here's the thing though, this inference above is only based on the fact that DEC is still valued below the psychological peg. When DEC eventually reaches the psychological peg, burning DEC might make more sense since swapping will not offer more value.
If you're planning to buy assets like packs or potions that are priced in DEC, then it is best you use the swap feature on Tribal Dex, rather than burning SPS tokens.
From an investor's point of view, there's no logical reason to burn SPS. However, if you're feeling philanthropic and would like to reduce the amount of SPS in circulation, then you should absolutely go for it. Burn millions of SPS tokens and pump our bags while you're at it champ. I love you.
