SPS Governance Proposal - Reduce SPS to DEC Conversion Fee
This draft has been approved by all members of the SPS Foundation board unanimously and the decision was made to expedite this proposal due to the amount of time remaining before the Conclave Arcana set release.
Purpose of Proposal
The purpose of this proposal is address the numerous requests that I've received to have a vote on whether or not the SPS DAO would like to reduce the conversion fee of SPS to DEC from 2.5% to some lower amount. This has been brought up quite a few times in the past, but there was never a clear indicator of how to proceed.
With Conclave Arcana set to release shortly, today's requests are much more organized and with a greater consensus of support around an actionable number to build a proposal for the DAO to vote on. If this vote is to pass, we'd likely be able to see the changes take place before the main Conclave Arcana sell opens.
Proposal
If this proposal passes, the SPS DAO will reduce the SPS to DEC conversion fee from 2.5% to 0.5%. The conversion fee will remain at 0.5% indefinitely unless another proposal is passed to override this one at some point in the future.
I might be standing on a hose here (german proverb), but I don't really understand what the pros and cons are for this. Reducing conversion fee is positive for those who hold a lot of SPS, not so much for those who are holding a lot of DEC for CA, relatively. My interpretation, that's not displayed.
That's great, but still vague. A greater consensus is not an argument in and of itself. Could you please add a source that explains why we should vote in favor? What's the benefit for the community, the DAO, ...?
If the "how to proceed" is lowering the fee by 2%, it's not really rocket science. Seriously, what am I missing? Please bash or enlighten me, because this seems very opaque to me.
If the fee is reduced, who benefits, who loses? Will be DAO have less funds available? Wouldn't it be catering to those who speculated on SPS in the last week (and the whales), shooting up the price so much, to now be able to get a lot more DEC for their SPS and hence get a big advantage on the CA Pre-Sale and with that for the following Modern? Is that fair, 10 days before starting?
Please proof me wrong! For now, I think it would be better to think it through and not react under recent SPS-Boom-Pressure. I really hope I'm wrong 😅
For me, and what I think of investing into CA, 2% might not be that much. Hence my thought that it caters to those who have a huge stake. Which I honestly don't even have a problem with, as most of them do a big lot for the community (stabilizing the market etc.) but it should be labeled as such - if it's the case.
As this was not my idea I am not going to convince anyone to vote for or against it. I'll let those that feel strongly about this do so if they wish to try to convince you or stake can just vote it out. Personally I don't feel strongly about it either way. Lower barrier to entry doesn't bother me, burning more SPS is good. I can see it either way.
Okay, that makes sense then, thank you for pointing that out. I'll try to find some extra information on the topic then, or just wait for a lot of comments to drop. Thank you for taking the time to answer!
But you well timed it so that whales who bought lots of SPS could get more DEC, is this not using the system to gain advantage and benefit the whales? I would rather have this implemented after the pre-sale.
I can explain. Lowering the fee is a good thing for everyone. It helps with SPS to DEC conversion as it will help the flywheel. You can study about the flywheel:)
I think there is no one loosing and no one gaining here rather I just see that now you would need lesser amount of dec for you to be incentivized to burn because with the current proposal DEC should be @1=1005dec instead of 1= 1025dec to activate the fly wheel because by then a dollar worth of sps would be equal to 1005 dec so your incentive to burn would be starting at 0.5% above peg. One can safely say players are loosing but on the other hand we want to burn sps so that it gains value more and and the quicker the better i think. I believe that is why Matt is saying even to remove the incentive it will still be ok
Why change and why not? That's pretty much rushed without any explanation
It was requested, not something I came up with, so I'll let anyone that wants to argue for against this do so. Personally I don't have strong feelings either way. I think the intent is to lower the barrier to burning more SPS.
I am trying to find the advantage for the ecosystem to do that, since effectively, less SPS would need to be burned to mint DEC.
If people spend the same amount of DEC (on CA, wild pass, whatever), less SPS is burned and that would not be a good thing for the ecosystem, because we want SPS price to go up, right?
If the same amount of SPS is burned there is more DEC around. Everything and anything needs to burn DEC for the benefit of the ecosystem. So, more DEC minted is the opposite of that and that would be bad, right?
Well, we could assume that with burning SPS being a more attractive value proposition more SPS is burned overall to get more DEC to spend. So effectively a discount is put on everything and anything, as long as you pay in SPS of course. But wait, credits are 1 USD : 1000 credits (lets for simplicity say 1000 DEC), 1 USD worth of SPS is 975 DEC and would go to 995.
And that is the quintessential thing this change would do:
It makes paying with credits less advantageous compared to paying with SPS, although credits are still better. Is this good? The short answer is, it depends. But this is what this vote is about:
Do you want SPS to have more buying power and make it more attractive to buy stuff with SPS instead of credits.
P.S: All of this only is a topic if DEC is at peg and 1000 credits == 1000 DEC.
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STOPOk so this seems pretty simple...
Why do this: to increase incentive to burn SPS for DEC vs Buy DEC/Buy Creds/Swap etc
Who benefits - short term: Holders of SPS (Whales), because they already have tons of SPS and they'll bag an extra 20 DEC per $1 of SPS burned or $.02... because that's what 2.5% -> .5% is... a 2% change
Ok, we took the long way to get there...
The hidden gem...
Who benefits - long term: Holders of SPS... all of us. This change appears to incentivize the burning of SPS and the burning of SPS reduces the supply and reducing the supply of something does what folks???
Bingo.
I see no downside to this and if the board agrees... seems ok to me.
Open to hear why we shouldn't do this... I'm not getting the fees paid into my account lol...
Everyone benefits.
I have a lot of SPS but I won't burn.
When I buy credits from team, the team must burn SPS to get me DEC when they run out and they will. That helps the flywheel.
I see - so both burning SPS AND buying Credits helps the Flywheel... interesting!
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?
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.
If, I am buying credits and team is burning SPS, then it does not mean that team is losing .5 % ?
Cedit can be used for market purchase too then it means team will get 4 -.5 =3.5% in market transaction.
Not always. If team already have the DEC, which currently team have a boatload of, then they are not burning SPS, they are just giving you DEC from their stash when you make the purchase.
I say let's keep the fee. No need to reduce it. When dec rises enough, we will burn Sps anyway. VOTING NO
I'm still trying to understand the benefits/challenges of this proposal, but one thing I keep thinking about is skipping the pre-proposal step, this seems very rushed as mentioned in the comments on this post, I think there could be more details in the proposal to really evaluate the impact of this whether it is positive or not.
I agree with this sentiment. Why is this considered to be so urgent that we need to skip the pre proposal phase? It's unnerving to watch the process be bypassed like this if there isn't a good and urgent reason to do so.
Try to understand the mechanics of the fly wheel. I think you can understand it better. For me i think it is beneficial to that camp who are trying to burn sps quickly as you will now need the ratio of $-dec to be at 1:1005 as oposed to 1:1025
I've been asked about my thoughts on this by a number of people so I figured it was best to post them here publicly.
First, as many people have stated in the comments, I agree that it would be very helpful to have the reasoning behind the proposed change included in the proposal. I know that you posted this on behalf of others, @clayboyn, so this comment is for those who requested that you put up this proposal and generally for anyone who wants to make a proposal in the future.
Second, while I'm not advocating for or against this proposal, I don't see it causing any issues for the ecosystem if it passes. Since we only have one way conversions (SPS -> DEC), as compared to other systems like Hive that have two way conversions (HIVE <-> HBD), I don't foresee any exploits being possible if the fee is reduced or even removed.
Thanks Matt. Ultimately I'm fine with whatever the DAO wants to do on this one and I can see benefits either way. I suppose stake will sort this one out.
Appreciated Matt! I think your comment helps clearing any doubt in the conversation. I am always a fan of low trading fee. I think fee was there as a security measure, and at 0.5% that security measure is still in place.
I just think we need to be careful about bypassing a stage of the voting process without a good reason and urgent need to do so.
I randomly had a discussion with deepseek about this topic couple of weeks back and it felt that 975 dec for 1 dollar worth of sps was quite optimal for the ecosystem and warned that changing it from 975 to either direction should not be taken lightly and only after careful consideration. I'm not saying that this is good or bad or that deepseek understands everything, but I do agree with it, that this kind of massive changes to the sps burn system should be very carefully considered, argued and not simply rushed into.
This would mean that arbitrage starting point would move from previous $0,001025 DEC to $0,001005. This would make sure that DEC hovering value would be lover on average during peak demand stages potentially triggering arbitrage bots to turn on the engines more often.
This should encourage more sps burns at least short term as the dec price doesn't need to reach as high, but it would also make DEC more inflationary as it is cheaper to mint.
Is the fee burned or does it go to DAO?
Deepseek did also warn that big players and arbitrage bots could potentially exploit this by burning large amounts of sps at improved rate -> quickly sell newly minted DEC to the open market for quick profit -> DEC price crashes. Not sure how realistic this scenario is, but worth discussing.
Yes that is the incentive which is the mechanism of the flywheel I supose I dont see it as an exploit because if the price of DEC falls below 1: 1005 dec then there will be no incetive to burn. Further more there is no quick swap from dec back to sps potentially without a cost. If you are planning to swap it back , you would need to cover the transaction costs of swaping it back to sps I supose which is not easy @.5%
I agree the percentage of this conversion fee should be set by the DAO... not sure it was set by the DAO originally so it seems way better we're doing it now.
I'm not sure if .5% is the right amount and sadly DAO votes are a yes no instead of a vote on a certain amount. My heart leans a bit more toward 1% so that we can see some burned while being low enough to not be a barrier to do the conversion that i feel like 2.5% is. (I assume the fee is burned??... it should be indicated on the UI if so)
I think we should all be willing to change this fee up or down as we see the results of this next change.
Agreed on all points.
I agree, i think .5 is not enticing enough but am also thinking like we need to start burning lol
I'm not convince this equals more burning in the long term. In the short term it might because there is a new pack sale on the horizon. With the rate reduced to 0.5% we would have to convert five times as much to get the same burns. I can see reducing it by 0.5%, from 2.5% to 2.0%; letting that settle and then further if plausible. Going straight to 0.5 from 2.5 might not be the move. Such decisions should always consider the slow period each set experiences (goes arm to arm with a DEC dip, less DEC burning/ extra being created will put further pressure on DEC during those periods).