A few months ago the DAO did something historic. It paid the Splinterlands company $250,000 to produce a card set in exchange for 50% of the profits. And something amazing happened. Not only did it get paid back in multiples within weeks but it locked up tons of DEC in the DAO and started the flywheel.
The only problem is, there's no way to use that DEC value without dumping it back into circulation pushing the price way below peg again. Since the purpose of the SPS DAO is to add value to SPS, killing the flywheel by crushing the price of DEC is not in the DAO's interest. So, it paid $250k too share in profits that it can't use. Meanwhile, 
On the surface, this seems pretty illogical at best and like Matt has taken advantage of the DAOs coffers for pure company gain at worst. But if we dig a little deeper, I don't think it's either of those things. I'd like to give my thoughts on what's going on, why this has actually been a good deal for the DAO, and give a few suggestions on how we can make it a better deal for the DAO and the game as a whole.
Before we step into anything else, I think it's important to realize that the DAO really has one function. It's to increase the value of the SPS token. That could be done through building the game, pushing economic changes, marketing, managing exchange listings, or any number of other ways. But it's important to remember that increasing the value of the token is its only real mandate.
Increasing demand and decreasing the supply. And because of the flywheel, this also means helping to manage the DEC circulating supply. The more DEC that gets removed from the market, the better SPS can do.
The DAO bought the rights to 50% of the DEC revenue from pack sales with the hope and expectation that that revenue would be well over $250k.
OK, with that out of the way, let's talk about what the DAO could do with the DEC now that the Rebellion deal can be considered a success.
This is by far the most controversial of the options. It seems illogical to pay $250k for a chance at some profits just to burn all the profit. But is it? Remember, the purpose of the DAO is to spend it's capital on things that increase the value of SPS. The DAO just spent $250k and in return its now sitting on around $1 million in DEC that it could burn. Basically it spent $250k to inject $1 million into SPS.
Many people have argued that the DAO should have been spending its funds to buy DEC off the market. If the DAO spend $250k on DEC right now, it could only buy $250k worth if it could find it. Instead it made a deal that allowed it to buy DEC for 25 cents on the dollar so far and there could be a lot more coming over the next year which would bring the per DEC cost WAY down. To put it another way, the DAO spent $250k to take $1 million and counting of DEC off the market and potentially retire it so SPS can shine. If the DAO didn't make this deal, all the DEC would have been company revenue and be recirculated.
As yourself if you would have voted yes to the DAO coming out and saying can we spend $250k in DAO funds if we can use it to burn $1+ million worth of DEC in the next year? I think it would have likely passed. It should have passed. If that didn't pass, we need to really think about why we're here.
We could spend it on any nuumber of things. We could add more emplyees to the DAO. We could pay contractors to build improvements or side games. Or we could use it to onboard new players. ALl of these would recirculate the DEC and delay the flywheel which would be antithetical to the mission of the DAO, unless what it was spent on was something that would absolrb the DEC spent back into circulation.
What's most attractive to me here is the idea of onboarding. I don't know much about the average size of account but it seems to me that with even a shitty marketing plan, we sould be ab;e to get 1 new player per $100 spent. I'm pretty sure when we did the NFTY arcade deal, we were told that it costs $38 to onboard a new player. But let's say that's not even close to true and it really costs $1000 per player. That means with $1 million we would get at least 1000 new human players.
Do we think 1000 players could soak up $1000 each worth of cards, DEC, and SPS on average? Would those 1000 players reinvigorate the game and economy? Would they transact and cause tons more DEC to be burned? Would there be a few whales? Would some of them tell their friends? Would they rent cards and buy some packs? Would the contribute to guilds? Would they buy and activate some dormant land plots? Would the new activity attracts some old players back in?
I'm thinking its possible they could do all that stuff and end up soaking up the DEC and sending the flywheel into overdrive. And that's if it cost $1000 per new player. What if it only costs $200? $100? $38?
When the recent proposal came up to burn the NFTY decks, the prevailing idea was that they weren't doing anyone any harm so why touch them? I disagree with the community there but I lost the vote so they stay. Still, the same argument could apply here. In fact, in some way you could say its another $1 million the DAO is backed by and in some way that should (I don't think it actually does) influence the value of SPS.
Several people have forwarded the idea that we use DEC to buy SPS. I don't think this is a bad idea on the surface. It puts the DEC back out there but it causes massive buying pressure on SPS so in some way it offsets the damage and it puts a bunch more SPS in the DAO for when we need it. It's hard to say how much SPS $1 million in DEC would buy. I'm guessing somewhere around 20 million. And if done right now, there are many whales who would take advantage of the cheap DEC and use it to activate more land. This might mean the DAO gets a bunch more SPS, a ton of cards come out circulation (my favorite), and the DEC gets soaked up in short order so we quickly end up back in a place where the flywheel is going again.
But that is in the land where unintended consequences aren't a problem. In the real world, we'd have to vote on it so we'd all know it was coming. We'd all front run the DAO and then dump when the DAO bought at hyper inflated prices. Could we do a standing order for something like the DAO would buy any SPS under 3.5 cents? Sure but then there's a good chance it never gets to buy any SPS and any time the price of SPS dropped, we'd get hit by a flood of DEC. Not ideal. Markets tend to find the point where liquidity is the highest. In this case that would be at 3.5 cents.
This is just an idea I was playing with. Getting land up and running as close to max utilization as possible is important for the economy. There are simply too many cards going unused and land is supposed to cure that. Many major land holder have the cards but they don't have the DEC to activate plots. Well, the DAO has 1.3 billion DEC and counting. That's 26k plots worth and it would take 130k maxed cards out of circulation. That's a real dent.
What if there was a way to lend DEC out at 15% interest to landholders who could pay interest only payments back to the DAO. On $1.3 million, the monthly interest payment would be over $16k per month and it could be paid in SPS to the DAO or by burning DEC. Loans could be paid back at any time and it could be backed by putting a lock on the players staked SPS.
I like using DEC to buy some other tokens, except instead of buying SPS, I'd buy back the USDC we paid the Splinterlands company. The DAO made an incredible deal that paid huge dividends for SPS and the community. But the only way the DAO can keep paying for these types of deals is if it has non-Splinterlands assets to pay with. It would be bad if every time the DAO wanted to spend, it needed to dump Splinterlands assets on the market first.
So, I think it is really important that we replenish the $250k in USDC we gave the team. Even more so, I think it's important that we show an actual profit. Because of this, I think selling $300k worth of DEC to buy $300k in USDC is a solid move to show that beyond a shadow of a doubt, the DAO ended up in a stronger position for future deals. All things equal, that's a 20% return on our USDC for entering the deal.
And even if we put the $300k in DEC back in circulation, if we burn the rest of it, that means the deal still took at least 700 million dec out of circulation that would have otherwise stayed out there. So this way the DAO would have strengthened its USDC position, and added a ton of value to SPS and the economy by burning DEC.
Now, how it sells the DEC could be debated but I think selling $1000 in DEC per day for 300 days should be easily absorbed by the market.
If someone had a really good marketing plan, I could see using a few hundred thousand for that but I'd need to be sure it was going to work in order to vote for it.
I have more thoughts but this is already long. What would you do with the DEC? Any of these or do you have another idea?
