RE: SPS Governance Proposal - Reduce SPS to DEC Conversion Fee
(Edited)
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How does it benefit everyone? From what I can tell it does nothing other than create (or rather enhance) a short-term pump because it puts a sort of discount on buying CA packs with SPS. We will burn less SPS in the future because more DEC is being minted and while it originally goes to the team and the DAO it will eventually find its way to players, we know that.
This is not about the flywheel, this is just moving future SPS burn to the present with a discount. It is basically DEC-B but not time-limited.
What am I missing?
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You are missing everything! :)
Since DEC is not very liquid, and we can't manufacture DEC. As soon a price of DEC gets at peg (or even near peg), people can burn SPS to get DEC. SPS is very liquid and easy to get. At 1.02 above peg even company will burn SPS to get DEC to sell for credit. Lower transaction fee gives everyone more incentive to burn SPS, thereby lowering its supply.
... and of course, it should go without saying... but a Lower Supply, even with a Constant Demand... will increase the Price of the [Object]... 😄
DEC is just as liquid as SPS, I would argue even easier considering a lot of SPS is staked. It is just as easy to buy as SPS and credits are even easier. If there is not enough DEC in circulation SPS will have to burn, whatever the fee is.
But that is not my point. My point is the change incentivizes creation of DEC by giving out more, which will take a long time to be burned off and will circulate in the ecosystem eventually.
If the fee is not reduced people will still need DEC, SPS will still be burned and the only difference is that less DEC is created or more SPS must be burned to create the same amount.
So what happens is you incentivize burning of SPS but at the same time it creates more DEC which will deincentivize burning of SPS later. In the end less DEC is burned with the fee reduction, so for each 1 USD worth SPS burned we have 20 more DEC in circulation.
Looking at what was burned in the last couple days we already would have a couple hundred thousand more DEC in circulation if the fee change was already active. That takes a lot of time to burn off. And yes it will likely be spent on packs and yes half of it is locked down in the DAO for a while until it eventually goes to the team or rewards or whatever. In the end there is more DEC in circulation.
So more supply of DEC, less SPS burn in the future? I mean until very recently next to no SPS was getting burned because there was too much DEC supply. It just moves the burn to now in the hope more packs are bought with SPS burn and the price for SPS spikes for a bit.
But ok, agree to disagree.