SPS Governance Proposal - Amend SMC Contract and Define Strategy
Table of Contents
- Introduction
- Change Order
- Quarterly Payment Rules
- Treasury Management
- Change SPS Conversions
- Conclusion
Introduction
The purpose of this proposal is to make adjustments to our ongoing contract with the Splinterlands team (Steem Monsters Inc) to ensure that the SPS DAO can continue its pursuit of ownership of the Splinterlands IP as well as realign incentives for both the SPS DAO and the Splinterlands team to promote a healthier game economy. There will be a major cut to the price that the DAO is paying and some necessary concessions that will need to be made to make this offer both realistic and functional. The validity of this proposal will ultimately be contingent on the Steem Monsters Inc Board of Directors accepting the proposed terms. My understanding is that is unlikely to be an issue, but if it becomes an issue we'll have to reconsider our approach.
While I prefer to not make multi-layered proposals like this, I do believe this is an instance where it's necessary. We're asking the team to take a major reduction in revenue to ensure the long-term stability of the project and our DAO, so we will have to make some compromises to ensure that our ask is viable from their standpoint as well.
This is going to be a very long one. I encourage you to use the Table of Contents above to help navigate to specific sections. Without further ado...
Change Order
CONTRACT AMENDMENT / CHANGE ORDER
Date: July 15, 2026
Client: SPS DAO (the 'Client')
Company: Steemmonsters Corp (SMC) (the 'Company')
Reference: Scope of Work (SOW) – Contract Administration and Operational Services
Pursuant to Section 'Client Change Request Procedure' of the Agreement, this document serves as a formal written Change Order to amend the active Scope of Work between the Client and the Company. Upon mutual authorization, the terms below will modify and supersede any conflicting terms in the original SOW.
1. REVISED TERMS & COMPENSATION
The parties agree to modify the financial terms and performance thresholds as follows:
* Daily Operational Payments: The daily operational funding rate is hereby reduced from $5,500 per day to $2,000 per day.
* Incentive Split Threshold: The 50/50 incentive split threshold is lowered from $4.8M over two (2) years to $1.65M over the total two-year contract term. These amounts shall be payable based on the Quarterly Payment Calculation (QPC).
* Future Pack Sales: 2% of the main core edition will be paid to SMC so they can incentivize employee/contractor retention.
2. AMENDED DEVELOPMENT SCOPE
The broad development scope previously outlined in the original proposal is hereby replaced with a focused delivery model. The Company's deliverables under this amended SOW shall be strictly limited to:
* Core-set delivery
* Reward-set delivery
* Day-to-day operations management
3. EFFECTIVE DATE AND PERFORMANCE
Except as explicitly modified herein, all other terms, conditions, and provisions of the original Agreement and related Scopes of Work remain in full force and effect. Pursuant to subsection (e) of the Client Change Request Procedure, the Company will commence performance under these revised terms immediately upon receipt of the mutually executed Change Order.
Quarterly Payment Rules
1. Overview & Total Contract Value
The total financial cap over the 2-year contract duration is set at $1,650,000, split 50/50 between the parties. To smooth out cash flow and reward outperformance during the contract term, payouts will be determined using the Quarterly Payment Calculation (QPC).
Reconciliation.
Note: The QPC is an interim mechanism to manage quarterly distributions based on projected trends. A final reconciliation will be conducted at the end of the 2-year contract term against full, actual sales results to ensure total payments match the final agreed-upon contract obligations.
2. Sales Categorization & Baselines
To account for massive spikes during major product launches, the contract breaks monthly sales data into two categories to establish a rolling baseline:
- Core Set Sale Months: Defined as the first two (2) months that a new core set is on sale, including its presale period. These two months carry a combined cumulative baseline of $1,000,000.
- All Other Months: Any month not defined as a Core Set Sale Month. These months carry a fixed baseline of $30,000 per month.
The total baseline target across the entire 24-month contract is $1,660,000 (consisting of one two-month $1.0M Core Set block and twenty-two $30K standard months).
3. The Quarterly Payment Calculation (QPC) Rules
At the end of each quarter, a QPC review will be conducted to determine if actual cumulative sales have exceeded the calculated baseline for that period.
- Distribution Trigger: If actual sales exceed the baseline for the quarter, and no prior payment arrears (ie. unmet baseline objectives) exist, the SPS DAO will distribute 50% of the sales volume that exceeds the baseline (the "Distributable Amount").
- No Double-Counting: Once sales above the baseline are utilized to calculate and trigger a quarterly payment, those specific outperforming sales volumes are locked and cannot be counted toward meeting baselines or triggering distributions in future quarters.
- Mid-Quarter Core Set Crossings: If a Core Set Sale begins during a quarter but its initial 2-month window is not yet complete by the end of that quarter, the QPC for that period will include the full $1,000,000 Core Set baseline, plus the $30,000 baselines for any other individual months in that quarter. Consequently, the following quarter's baseline will only account for its standard "All Other Months" ($30,000/month) - less one month, as the Core Set baseline was already absorbed.
4. Baseline Distribution Schedules (Examples)
The following tables demonstrate how the quarterly baselines shift depending on when a Core Set Sale goes live.
Scenario 1: Core Set Sale Launches in December 2026 (Q4 2026)
In this scenario, Q4 2026 absorbs the $1.0M Core Set baseline plus two standard months ($60K), creating a large baseline hurdle that must be cleared before distributions occur.
| Example 1 - set sale goes live on Dec 2026 | |||
|---|---|---|---|
| Quarter | Months | Q Baseline | Total Baseline |
| Q2 2026 | May, June | $60k | $60k |
| Q3 2026 | All | $90k | $150k |
| Q4 2026 | All | $1.06m | $1.21m |
| Q1 2027 | All | $60k | $1.27m |
| Q2 2027 | All | $90k | $1.36m |
| Q3 2027 | All | $90k | $1.45m |
| Q4 2027 | All | $90k | $1.54m |
| Q1 2028 | All | $90k | $1.63m |
| Q2 2028 | April | $30k | $1.66m |
| Total | $1.66m | $1.66m |
Scenario 2: Core Set Sale Launches in January 2027 (Q1 2027)
In this scenario, the large $1.0M baseline hurdle shifts smoothly into Q1 2027 because the launch falls perfectly into the new quarter.
| Example 2 - set sale goes live on Jan 2027 | |||
|---|---|---|---|
| Quarter | Months | Q Baseline | Total Baseline |
| Q2 2026 | May, June | $60k | $60k |
| Q3 2026 | All | $90k | $150k |
| Q4 2026 | All | $90k | $240k |
| Q1 2027 | All | $1.03m | $1.27m |
| Q2 2027 | All | $90k | $1.36m |
| Q3 2027 | All | $90k | $1.45m |
| Q4 2027 | All | $90k | $1.54m |
| Q1 2028 | All | $90k | $1.63m |
| Q2 2028 | April | $30k | $1.66m |
| Total | $1.66m | $1.66m |
Treasury Management
A vote FOR the proposal will authorize the DAO Manager to follow the stated objectives.
SPS DAO Treasury Management Objectives
1. Impact of Funding Reductions to Steemmonsters Corp (SMC)
Following a reduction in daily funding from $5,500 to $2,000, the DAO anticipates a significant shift in its funding requirements. Currently, funding is distributed through two primary mechanisms:
- DEC-to-CREDIT Matching: Distributing Dark Energy Crystals (DEC) to the team to match liquid CREDITs purchased in-game.
- Alternative Token Disbursements: Paying out external, non-Splinterlands tokens.
While the "DEC for CREDITs" conversion was initially projected to average roughly $2,000 per day, the actual daily rate consistently exceeded this estimate during the first two months.
Due to the reduced funding cap established by this SMC contract amendment, the DAO must adopt a more proactive approach to treasury management to ensure DEC distributions align efficiently with actual needs.
SMC will initially handle trade executions for the DAO Manager. However, the DAO may replace SMC with its own Designated Treasury Manager (DTM) at any time.
2. Treasury Management Objectives
Primary Objective (Asset-Liability Matching): The fundamental goal of treasury management is to balance the DAO's liabilities with its available assets. When a mismatch is anticipated, the DAO Manager is responsible to notify the DTM to start actively swapping assets to mitigate the shortfall.
Secondary Objective (Fund Replenishment): The treasury aims to replenish depleted reserves and restore baseline asset levels for each token. For example, if stable coins or DEC are utilized for payments, the DAO Manager will instruct the DTM to prioritize restocking these specific assets when allocating excess funding.
Tertiary Objective (Excess Capital Allocation): If the DAO has fully secured its historical and projected funding requirements, any remaining excess funds will be allocated toward building future reserves and executing buybacks of stable coins, DEC, and/or SPS.
Authority & Execution
The DAO Manager holds full administrative authority to instruct the DTM with direction in order to fulfill the primary and secondary objectives (Asset-Liability Matching and Fund Replenishment).
The DAO Manager and the DTM will operate on a 'best efforts' basis, striving at all times to secure the most favorable pricing for the DAO. The DTM shall report all transactions to the DAO Manager on a timely basis which will be used to create reports that will be posted on the @sps.dao account. In the event the DAO is dissatisfied with either the DAO Manager or the DTM’s performance, the DAO's sole and exclusive remedy shall be the termination and replacement of the DAO Manager or the DTM.
Excess Capital Allocation Table
The tertiary objective (Excess Capital Allocation) will be managed by the DAO Manager according to the baseline formula outlined in the initial table below. However, this formula remains subject to change via future DAO amendments. These will be reviewed periodically and voted on by the DAO. The DAO Manager will notify the DTM of general objectives and modify instructions as needed. The DTM will use its best efforts to fill all orders of any tokens at the best possible price on any given day.
| Formula For Managing Excess Capital Allocation | ||||
|---|---|---|---|---|
| Condition 1 | Condition 2 | Stables | DEC | SPS |
| Dec below 35% of peg | SPS below $0.005 | 0% | 90% | 10% |
| Dec between 35-49% of peg | SPS below $0.005 | 0% | 60% | 40% |
| Dec between 35-49% of peg | SPS between $0.005-$0.01 | 0% | 80% | 20% |
| Dec between 50-69% of peg | SPS between $0.005-$0.01 | 0% | 50% | 50% |
| Dec between 50-69% of peg | SPS between $0.01-$0.015 | 20% | 50% | 30% |
| Dec between 70-89% of peg | SPS between $0.01-$0.015 | 50% | 0% | 50% |
| Dec between 70-89% of peg | SPS above $0.015 | 75% | 0% | 25% |
| Dec above 90% of peg | SPS above $0.015 | 90% | 0% | 10% |
Note: peg refers to a DEC to USD rate of 1000:1
Examples for illustration:
Case A
DAO receives $50k in Credits, no excess available, thus no instructions given to the DTM. DAO will send an additional $10k in additional payments to the team.
Case B
DAO Manager anticipates receiving $100k in Credits, thereby creating $40k in excess. DAO Manager instructs the DTM to buy $40k in DEC during the month to replenish DEC paid out in prior months.
Case C
DAO Manager anticipates receiving $100k in Credits, thereby creating $40k in excess. DAO Manager instructs the DTM to buy $20k in DEC during the month to replenish DEC paid out in prior months and to keep $20k in USD to replenish the USDC paid out in prior months.
Cases D thru F:
DAO Manager has recovered all the funds paid out during the contract period (DEC, USDC, or SPS) and then anticipates $100k in Credits, thereby creating $40k in excess. DAO Manager instructs the DTM to buy respective assets based on the price conditions of both DEC and SPS..
Case D
DEC is trading at $0.00027
SPS is trading at $0.004
DAO Manager instructs the DTM to buy $36k in DEC and $4k in SPS
Case E
DEC is trading at $0.00063
SPS is trading at $0.014
DAO Manager instructs the DTM to buy $20k in DEC, $12k in SPS, and keep $8k in USDC.
Case F
DEC is trading at $0.00095
SPS is trading at $0.02
DAO Manager instructs the DTM to buy $4k in SPS and keep $36k in USDC.
Change SPS Conversions
The SPS to DEC conversion mechanic will become an admin account function which can only be utilized by the elected SPS DAO Treasurers per these guidelines:
- If DEC is at least 10% over the targeted peg price of 1,000 DEC to $1, the SPS DAO Project Manager will notify the SPS DAO Treasurers that the DAO needs to issue more DEC.
- The DEC needed to weaken the DEC price and return it to peg will be obtained by burning SPS in the DAO's coffers to create additional DEC as needed.
- The SPS Treasurers will then sell the newly minted DEC into the SPS:DEC liquidity pool in game to purchase back SPS while weakening DEC and pushing it back towards the targeted peg price.
Conclusion
Ultimately it is up to the SPS DAO and the Steem Monsters Inc Board of Directors to decide if they'd like to approve their respective parts of this proposal. While I'm sure we can all find some point of contention when working towards a compromise, it's more important to consider if we believe the overall proposal is establishing a foundation from which we can build our future in a healthy and sustainable way. Details could be tweaked slightly via future proposals if needed. Now that the proposal is live, I'll be sharing it with the Splinterlands team to put before their Board of Directors for approval. Once I am assured that the terms are acceptable I'll be setting up DAOn Hall events to discuss further with the community.
Leo AI summarised this rather well...
This proposal represents a significant strategic pivot for the SPS DAO, shifting from a high-cost, open-ended operational funding model to a strictly capped, performance-based partnership with Steem Monsters Inc (SMC).
Here is a breakdown of the key implications:
The most immediate impact is the 63% reduction in daily operational funding, dropping from $5,500 to $2,000.
Why it matters: This effectively caps the DAO's financial exposure. Under the old model, the DAO was burning through treasury reserves regardless of game revenue. The new model ties the bulk of the payment to a $1.65M total cap over two years, contingent on hitting sales baselines.
The Trade-off: SMC is agreeing to a massive revenue cut. In exchange, the proposal offers them a "realistic" path to survival and a small retention fund (2% of core edition pack sales) to keep their team intact.
The proposal moves beyond simple funding and introduces a sophisticated treasury management framework.
Active Hedging: The DAO will no longer just hold assets; it will actively swap tokens (DEC, USDC, SPS) based on market conditions to match liabilities (payments to SMC).
Excess Capital Strategy: If the DAO generates surplus funds (e.g., from high credit sales), it won't just sit idle. The plan mandates buybacks of DEC and SPS when prices are low, which could be highly bullish for the token economy if executed well.
Example Logic: The proposal outlines specific scenarios (Cases D–F) where the DAO buys more SPS if its price is low relative to DEC, or holds USDC if both are high. This suggests a mature, data-driven approach to treasury growth.
The development scope has been strictly limited to Core-set delivery, Reward-set delivery, and Day-to-day operations.
Focus: This eliminates "scope creep." If SMC misses these specific deliverables, the incentive structure (the 50/50 split) likely won't trigger, protecting the DAO's capital.
Incentive Threshold: The threshold for the 50/50 revenue split was lowered from $4.8M to $1.65M. This makes it much easier for the DAO and SMC to start sharing upside revenue, aligning their interests toward hitting that lower, more realistic target.
While the financial prudence is clear, there are execution risks:
SMC's Viability: Cutting daily funding by nearly $120,000 a month is a massive shock. The proposal assumes SMC's Board will accept this to "ensure long-term stability." If they reject it, the game's operations could stall entirely.
Operational Friction: The new "Quarterly Payment Calculation (QPC)" and rolling baselines add administrative complexity. Disputes over whether a sales target was met could lead to friction between the DAO and SMC.
Market Dependence: The success of the "Excess Capital Allocation" (buybacks) relies heavily on the DAO generating enough excess revenue. If the game economy remains sluggish, the buyback mechanism may never trigger, leaving the treasury flat.
Conclusion
This is a hard-nosed, survival-focused proposal. It acknowledges that the previous burn rate was unsustainable and attempts to restructure the relationship into a partnership where both parties only win if the game generates revenue.
For the SPS DAO, it is a protective move to stop the bleeding of treasury funds. For SMC, it is a "hail mary" to keep the lights on with a slimmer budget. The success of this hinges entirely on SMC's ability to hit the $1.65M baseline with a reduced team and budget.