A Sustainable Solution for SPS Rewards
What's the problem?
The SPS DAO is nearing the next phase of its lifecycle: a post-whitepaper distribution phase. This is a good thing as it means that the SPS DAO and Splinterlands have been able to outlast many projects in the Web3 gaming space, and as cool as that is, we're not done yet!
With that understanding, it's time for the SPS DAO to start preparing for that transition and the sooner we do so the better. Some of you may not be aware, but we have some very important rewards pools that are ending in less than a year. That's okay though, we still have the time and resources to make meaningful changes to help prepare ourselves for the future!
What's the solution?
While I can't personally answer that as it will ultimately be up to the DAO to decide, what I can do is provide the DAO with valuable information to help it make an informed decision and share what myself and several others think would be a viable solution to ensure that we have rewards for as long as the DAO exists. Before I get into the overly technical stuff later on, let's briefly discuss what I feel is the best solution that I've been able to find after countless hours of research, debate and conversations with top holders and other crypto enthusiasts: Exponential Decay.
What's Exponential Decay?
The simplest way to understand exponential decay is that some portion of a thing is lost over a period of time. The term is used to describe a way of mathematically calculating that declining value over time. If you've ever read a whitepaper, many of them have complicated looking mathematical formulas that are likely expressing some form of decay or declining rewards emissions over time. In fact, we currently use an exponential decay formula for SPS rewards.
The issue that we're soon to encounter with our existing exponential decay formula is that it was designed to distribute all tokens over a period of 5 years and this is further complicated by the fact that we didn't start all of our pools at the same time. This means that some of our pools will be fully depleted over the coming months and if we don't make adjustments, the others will also be emptied in the years to come.
With this high level understanding, let's look at where we're at and how we could rework our exponential decay function and utilize unused tokens to help the DAO prepare for a long life with an endless supply of rewards!
Where are we at right now?
I've put together a chart below to give a fairly accurate idea of where each reward pool is at currently along with how many tokens are leaving the pool per month right now and when we expect the pool to run out of tokens:
Endless Exponential Decay Rework
If we want to look at adopting an endless exponential decay model, the first thing we need to do is decide on a rate of decay. It's important to understand how the rate of decay impacts rewards in both the near and distant future. I'll show a specific example for illustrative purposes, but you can visit this spreadsheet if you want to really dive in deep!
Here we can get a visual representation of the differences between a steep or shallow rate of exponential decay on the total supply of the staking rewards pool over a 10 year period:
Here we can get a different perspective of how the rate of decay impacts the actual amount of rewards given out per month over the same 10 year period:
If this is all a bit confusing, that's okay I'll explain it quite simply: - Steeper rate of decay (higher percent) leads to more rewards right now, but we reduce them quicker. - Shallower rate of decay (lower percent) leads to less rewards now, but they are reduced more slowly over time. - A more balanced rate of decay, like 2% or 3% would mean we give up a little bit now to continue having higher rewards for a longer duration.
Pool Adjustments
We must consider that we are very late to make changes on some of our reward pools. We do however still have the tools at our disposal to make these changes with minimal immediate sacrifice and if we choose to do so, we'll gain sustainable, long-term rewards which we can supplement over time as needed.
I explored how we could potentially utilize the nearly 200m unallocated tokens that remain after ending the LP incentives in the chart below. Keep in mind this is all theoretical and any of these changes would require DAO approval. Some pools would actually get a slight boost because we're acting earlier on them. The very late pools, namely staking, ranked rewards and tournaments, will need the most help:
What do you think?
I know there's a lot to digest with this post and plenty of things for all of us to think about. While I'm presenting what I feel like could be a viable solution, I understand that others may have different ideas. This is a DAO and I encourage anyone that believes they can create a better solution to share it. I'll be having a DAOn Hall with @yabapmatt to discuss this idea and I'll link the recording afterwards. Thanks for your time and consideration!
https://www.youtube.com/watch?v=loUibBJHDrc