RE: DAO Proposal: Swap DAO BUSD and USDC/T For DEC
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This is a very dangerous road we are going down.
I am all for using DAO funds for economic reasons but all we do here is put gasoline on ember.
I copied this from my comment in the #tokenomics section. Might be easier to read there:
Reasons for the "DEC to PEG flywheel" to fail and create a new Dilemma
1) guranteed offramp
In short, everyone that ever bought DEC will eventually know that 0.001025 is the absolute end of it.
the heavy lifting act of pushing DEC back to peg has to be made by player demand, speculators demand will be near zero.
I like to remind people that DEC has been below peg (roughly where it is now) prior to the SPS airdrop. The only real documented time where DEC stayed at peg or way above it was due to good market conditions and extreme speculators demand - not playerdemand.
The playerbase will not be able to lift and hold DEC at peg partly because DEC demand fluctuates with everyday operations and secondly because the speculators turn into scalpers from now on, buying DEC below 0.0009 and selling at 0.00099 going forward forever.
We eliminated a major demand source (speculation) and expect the playerbase to do something they haven´t been able to do in way better market conditions before. That is economical madness
2) overall inflation
my rough estimation is that there are currently 31.85M SPS handed out into the open market on a monthly basis according to the whitepaper. That translates to the following DEC equivalent at SPS prices
0.01 $ = 310M DEC
0.05 $ = 1.5B DEC
0.10 $ = 3.1B DEC
we bruned 410M DEC in the last 30 days with the big event we had. The 30 days before that we burned 70M DEC.
now there is no doubt that burning an entire month worth of SPS supply will increase the price of SPS, but we´re going to see a downward spiral afterwards.
DEC reaches peg eventually
People start burning SPS since it is profitable
DEC supply increases, which reduces DEC price
scalpers get in to buy DEC below 0.001
SPS burning stops, DEC slowly burns until demand outplays supply and we hit peg for a moment again
the system we have is not going to stabilize anything. It will be an exploit feast for bots. Not to mention that even if SPS goes back to 0.05 $, the DEC inflation is multiplied by 5.
What we do is change the status quo for a very unstable and fast changing enviroment where we make ourselfs even more dependend on good external factors. A market shock at the wrong time might lead to a thumbeling downfall of DEC just shortly after a massive new DEC supply has been created which will put us into the same situation we are trying to get out of right now
while on the other hand we limit positive external events by increasing the DEC supply exponentially with the SPS price. The exact same hyperinflation issue we had in 2021 where "markets gonna market" made us get into deep shit due to missing economic common sense
I think you are using "BOTS!! SPECULATORS!!" to create a knee-jerk emotional response from a community that mostly has Bot-related PTSD. But calling it economic madness doesn't make it so.
RE: GUARANTEED OFFRAMP
Economically, DEC Speculation is not a demand source on a net basis - the only reason speculators are holding IS TO SELL AGAIN. Bulldog's proposal doesn't change that demand source at all. DEC is already held by speculators, many of which are only holding DEC because of the efforts to re-PEG.
There are also already PLENTY of market bots and they are already active in DEC. It's not like they can sell more DEC than they buy, in the long run. So who cares if those bots start buying more, when it's farther below peg - even if they sell near peg? ...All that does is create a stabilizing effect under the Peg and dampen volatility - which is something what you would want from any "so-called stable coin".
In my opinion, if there is some natural resistance at 99.99% of PEG, before we get to the SPS burning stage, that is beneficial: I expect the first time we exceed PEG, this community will be really excited and probably burn way too much SPS too quickly... so a bit of resistance at 99.99% is healthy to make sure demand for DEC is really there before we light the torches.
As long as the community keeps burning DEC, or storing for long term (for gameplay, guilds, etc), there will continue to be net buying pressure over time - and will most likely correlate with promos and events.
RE: OVERALL INFLATION
You are arguing against yourself here?
These can't both be true - SPS won't be meaningfully burned for DEC if it's below Peg, so SPS inflation will mostly just stay as SPS inflation until the fundamental DEC demand creates a situation where the SPS is worth burning.
While I agree with your point about the high rate of SPS distribution; hopefully the team continues to add utility to SPS and other uses for DEC. The SPS league requirements and DEC on Land are a start, but we will need more. Whether there is enough to deal with overall SPS inflation remains to be seen.
I'm not sure what you are talking about, but the objective of the SPS:DEC mechanism is not to pump any token. DEC is meant to be the transactional token and should be worth some % of peg, the game will honor the value of this through the distribution of their products (like packs for 4000 DEC for instance).
Any overflow of demand that requires more DEC will then require SPS to be burned to get more DEC. So there should be no "inflation" of DEC like the past (assuming the market is rational). In other words, players will only burn SPS when they NEED DEC. If they don't need DEC then they won't burn SPS.
When DEC gets to peg that doesn't mean it will stay there either. The point of this whole economic shift was not to pump anything. The point was to steer excessive demand into the SPS token, and trying to keep the DEC token more stable and backed by the company's products at $0.001.
I'm happy to discuss further if you like, you can DM me on discord anytime.