What is the marginal value of a single SPS? Or: When should I stop staking SPS and instead put it into an LP?

6 months ago

All of the 3 people that follow my posts know I'm pretty fixated on one issue: what is the best way of allocating my limited splinterlands resources?

In a previous series, I discussed this at the level of cards: does it make sense to buy a specific single card? In a lot of cases (but far from all), I found that just putting that money in a liquidity pool would return greater yields.

Today, I want to have a similar discussion, but around SPS. Since staked SPS became needed to get Reward Points from battles (determining SPS and chest earnings), whether to put the SPS into a liquidity pool or stake it has been an important question in my mind. I will attempt to answer this below.

NOTE: The calculations that follow are somewhat specific to my location in Champion league. The value of a champ chest is different from a bronze chest. If you're also in champion league, this post will be correct for you. If you're in another league, you'll need to adjust your numbers accordingly.

The calculation

The calculation, despite using some complicated formulae, is fairly simple: over the course of a year, how many additional RP does a single SPS yield, on average?

To do this, we find the RP gained at a given number of staked SPS at a given ranking, and subtract it from the RP gained at a given number of stakes SPS +1 at the same ranking. We then divide this by the cost of a single sps ($0.017). Over the ~4,368 ranked battle wins in a year, this will give us an expected ROI for that single SPS.

Of course, to arrive at this, there were a number of assumptions. The most subjective of which is the value of a champion chest, which includes valuing the soubound cards. As they are currently not tradable, their value is unknown. Based on the previous pool of cards, I valued the expected value of cards from chests (net the costs of potions) at $0.05. With this, a single champion chest has an expected value of $0.52.

The results

The figure above shows a decreasing ROI for SPS as you stake more. It starts at over 100% APY at the lowest numbers, going to ~5% once you've staked 300k SPS (reminder, this is for Champion league; this will be different in lower leagues). The crucial number is where the ROI drops below 25% (the ROI you would get by instead placing that SPS in the SPS-HIVE LP). That magical number is 110,000 SPS.

As an interesting side-note, it is useless to stake SPS until you break the 1x multiplier (at 3700 rating this is ~9500 SPS). So if you have less than 10k SPS, don't stake it!

The takeaway is therefore, if your account is like mine and you stay at the low end of Champion 3 over the season, you want to stake 110k SPS, and then place the rest in an LP (even if you're in champion I this only goes up to 150k). If you value reward cards more highly than I do, you may want to stake more. If you don't value them at all, then you may want to stake less.

Conclusions

I was particularly pleased with how the final graph looked - a nicely exponentially decreasing line showing a nice cutpoint where the best recommendation is to place SPS into an LP rather than staking it. I was also pleased that it's a relatively low number that should be achievable by most people with decks that can compete in Champion. I think the devs did a good job with the new RP system using staked SPS.

Of course, this is again very dependent on how I valued champion chests. Running the numbers for yourself may be important to see if the same holds true for you. Once we see the cost to unbind soulbound reward cards and their actual market value, I will likely revisit this calculation and see how accurate (or not) it was.

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12 comments

@splinterboost 61

6 months ago

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@kalkulus 67

6 months ago

Great post. I was somewhat surprised at how high the roi turned out to be. How sensitive is this to the chest value? For example, how low does it drop if you value chests to 0 (just to get the absolute minimum)

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@badrag 63

6 months ago

It's unfortunately pretty sensitive to that. Dropping chest value to 0 gives a max ROI of 11%. That said, other than soulbound cards, everything in the chest has a pretty well-defined value (SPS has a market, potions can be directly bought, even merits can be minimally exchanged for DEC if you burn the cards), but the soulbound cards don't really have this.

If I just drop the soulbound cards' value to 0, I get a max ROI of 100%. So fortunately it's not super sensitive to the value of the soulbound cards themselves, which were the most unknown part.

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@kalkulus 67

6 months ago

Ok, thanks!

Id be interested in seeing how this turns out for lower leagues too. I understand you only have your own champ data, but maybe the reward pool stats on splexx can be used to make an estimate for lower Leagues too?

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@badrag 63

6 months ago

Yeah, all this should apply equally to other leagues as well. Maybe I'll do a post about that as well!

Do you know where I would look to see the RP required for the first daily chest in each league?

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@kalkulus 67

6 months ago (Edited)

Yes, its the value under loot_chests->quests->[]->base here:
https://api.splinterlands.com/settings

I've previously used the following function to calculate how many chests you get for x RP in different leagues: (The function returns five arrays (one per league) with the thresholds for various amounts of chests).

def getQuestTotalRPTresholds():
    max_chests = 30
    quest_bases = [390, 6500, 22500, 53750, 112500]
    quest_step_multipliers = [1.2, 1.13, 1.09, 1.062, 1.038]
    quest_chest_limits = []
    season_chest_limits = []
    chests_increments = [a*b**np.arange(0,max_chests+1) for a,b in list(zip(quest_bases, quest_step_multipliers))]
    total_points_chest = np.cumsum(chests_increments, axis=1)
    return total_points_chest

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6 months ago

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6 months ago

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6 months ago

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6 months ago

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