Mining the SPS trenches and tranches

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(Edited)

I am trying to decide whether to buy a Splinterlands Validator license or not - but it is a hard decision, since I am not sure I would run a validation node at all, making it just speculation on the value to sell - I guess.

But, what is the risk of getting cut?

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These are the prices of the node licenses:

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I bought some extra vouchers just before the price jumped again and with the coming drop, should have the 500 I need for the Presale on the 25th - but as life would have it, I would have to set it all up on my work PC to buy, if it sells fast, since I will be travelling for work that week.

However, assuming all goes well and I will use current prices for this.

SPS = $0.086
Vouchers = $1.60

The Presale will cost ~11,600 SPS + 800 in vouchers = so $1800.
Now, this "cost" depends on how the person has got the SPS and at what price, as well as if they are getting the vouchers "free" (airdropped on stake) or buying on the open market etc - but 1800 is the current cost or opportunity cost.

I assume this is going to sell quite fast and at current values, it is going to equate to 1 million vouchers being burned and 23.2 million SPS being taken out of circulation, the majority of which is burned I believe - which is about 1.5% of the current circulation.

there are 3,750,000 SPS tokens per month allocated to a reward pool for SPS Validator Node operators. 10%, or 375,000, of the monthly total will be allocated as block validation rewards for the accounts that receive staked SPS votes and are assigned specific blocks to validate, and the remaining 3,375,000 SPS / month will be split equally between all of the license holders that are actively running the node software.

Okay, so to get immediate value value, I would need to run a node and of course, because this is a set amount, the earlier in, the greater the share of the rewards pool, until more nodes come online. Let's say that the presale and Tranche 1 sells, so as @revisesociology put it in a worst case scenario, all 5000 are fired up and running the node software and since I will only have a lowly 1 license, I would get a share of the 3,375,000 a month. Assuming this is where all 5000 are, that is 675 SPS a month from the node, which also carries a cost with it in rent or electricity etc.

However, there are also another 20,000 Vouchers that will be added to the supply per day and dropped to running nodes. If all 5000 from presale and tranche 1 are up and running, that is 4 per license. That is a lot more vouchers, so the price of them will likely come down somewhat, so let's assume 50 cents a voucher, but remember that they offer a discount for subsequent tranche buys.

This means that every month, there will be
675 SPS = $58
120 Vouchers = $60

That gives it a breakeven of 15 months.

However, if only the presale goes, having only that 2000 would over double the pull of the node and it would be 1687 SPS a month, which is more interesting. But, the less there are, the more incentive to get another node.

1687 SPS = $145
300 Vouchers = $150

A breakeven of 6 months on the 1800 initial.

Note: This is assuming stable SPS price at 0.086 and dropping the price of voucher to 50 cents.

The cost of Tranche 1 (3000 licenses available) is 3000 of SPS, so that is the maximum price of it as that can be bought immediately and spent, no matter the price of SPS. If I miss the presale however, I already have the 500 vouchers to bring the price down to 1500 + the 800 for vouchers. So, the total is 2300 in cost/op cost - which is only 500 more for that tranche, if holding the maximum vouchers. Therefore, assuming that the Presale is gone and I manage to have one of those which cost me 1800 and there is demand for Tranche 1 which would have a break even of the max price of about 10 months, I should always be able to sell for more than I bought unless the price of vouchers go to zero and everyone can get the full 50% discount for free.

However, in order to get those vouchers, they have to earn them through staking SPS or, buying on the open market, so going to zero is very unlikely. For the full 50% discount to be accomplished on Tranche 1, it would take 1.5 million vouchers plus the $4,500,000 worth of SPS. For Tranche 2, it would take 2.5 million vouchers to get full discount and $12,500,000 worth of SPS.

That SPS value for Tranche 2 is about 20% of the current market cap of SPS and the vouchers required is 60 days of the total voucher drop and vouchers will have other purposes too, probably.

If I want to sell my single license and someone is willing to pay for Tranche 2, that means that my license is worth at least the 2500 minimum, plus whatever the vouchers are going to cost. If someone is willing to pay 4000 dollars all up, I can sell for 3900 no worries.

Now, remember that I am doing this calculation on SPS being the current $0.086, but that can change and while it can go down, let's pretend a year from now, it is at 50 cents and all 5000 of the Presale and Tranche 1 are operating.

That means that my node is earning

675 SPS = $337.50
120 Vouchers = $unknown

Without the vouchers, that is a 6 month return still to break even again, but if there is demand for the vouchers, then it comes down significantly, especially since the price of SPS is increasing and there is a "stable" income of SPS arriving at each node. And, if SPS goes to a dollar, this makes it even more lucrative, which puts pressure to buy and fire up more nodes, as well as pay the lowest possible price for them, which is the 50% discount with vouchers. To buy one from Tranche 2, that would take 500 vouchers to save 2500 dollars, so what is the price of a voucher? Well, it has to be under $5 dollars, right? But - is it going to be under a dollar?

Let's go with 50c on SPS and a dollar on vouchers.

675 SPS = $337.50
120 Vouchers = $120

This cuts the ROI (now multiple times over) down to less than 4 months, but the node can be sold for at least $2999, as the vouchers are valued at $1 each.

Hmmm... it seems like a no-brainer to roll the dice on a license - but this is also under the assumption that there will be future demand on both SPS and the licenses. Of course, as more licenses get activated, the 3,375,000 SPS a month gets spread further, but, there should also be more demand on SPS by then too, so while less token will be coming in, the token value will be higher.

This puts a tension on my license - do I keep earning my initial investment every 4 months (300% a year) or do I sell now and double my initial investment?

Lot's of assumptions and too many numbers for my head, but I think I am going to try and buy the presale and if not, I will likely spend my 500 vouchers and get in on Tranche 1 anyway. There is always risk in everything we do - but I think I want a cut of this.

Doing all of this helped me get a better understanding of why I am intending to buy and hopefully, this helps someone else too.

Taraz
[ Gen1: Hive ]

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24 comments
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I have never bought any Splinterlands related that I have not regretted not buying more. Excited to see how it goes

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I have been getting in very late, but hopefully it will come with no regrets down the track. I am still in that "iffy" stage :D

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Given that you are emotionally invested if nothing else as you seem to like playing the actual game as well as the investing side of things, I would have been more surprised if you'd decided not to buy XP

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Yep - sunk cost fallacy in play!

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Whole lot of numbers, many of them too big for my small hands lol. It sounds like a worthwhile proposition if you’re interested in giving it a whirl. If anything you could sell the license in a period where things go up. Granted things could always go down further but will Splinterlands go down to values of where it started? I don’t think it’s likely but certainly possible.

Tough decisions for sure! I’m debating whether to sell some of my vouchers when it gets closer to this happening or wait until Riftwatchers. I’m itching to make a few hive off something to power up!

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It definitely could all backfire, but I do think that there are legs in Splinterlands for the next few years, especially if play2earn keeps picking up.

I didn't mention Riftwatchers here directly (other than "other usecases") but this is one of the reasons I think there is going to be a lot of volatility and umming and ahhing over what to do. Complexity makes it hard for any single person to do it all.

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Small players like us can't afford to buy a node. It's good that @hivebuilder has given us an option by buying SCV (Splinterlands Community Validator).

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Yeah, I think there are several out there that will do the same kind of thing. I will likely lend my support to a node or two and perhaps due to the earning potential, get a kickback for doing so, since it isn't a governance thing in the same way as Hive.

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It requires an uptime of 95% to be able to meet your desired return on the invested SPS/Vouchers.
In other case if it does not run no rewards.
Solution Sell it in the secondary market and get your profits a win win.

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A Privex hosted server should be enough. An extra cost though.

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The math certainly work out - I like the way you don't consider a downside on the price of SPS - it's not worth it given that none of us are selling!

Another crucial factor is what are the costs of running a node going to be?!?! And how easy?

I still think renting a server is going to be the option there!

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I like the way you don't consider a downside on the price of SPS

It is of course there, but that is not where we are looking for it to go ;)

Another crucial factor is what are the costs of running a node going to be?!?! And how easy?

As you said - rent and there will likely be a million "how-to" guides on setting it up.

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The entire validator stuff just seems way too expensive and it's a lot more work to make sure it's running. However, I do think your math does work out and it can pay itself off in a year. However, I feel that the utility of SPS is lacking so I don't know if the price will really rise until that does come out.

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Would be good to get a better idea of what SPS is going to be up to longterm in way of utility. But, I assume that with all the time and effort in, they will think of something.

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is the boost to your returns worth the effort of managing the node is a question I would be asking myself.

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Don't know. I have never run a node before.

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Will they give you time to power down your staked SPS or is it go on the 25 for the pre sale, and where do you buy? In the game shop. Hasn’t been promoted very well.

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On the 25th. I think it was in a post the other day, as well as in the AMAs and stuff.

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Small investors like me can’t node if I have the money i would have considered this math but is too much. @hivebuilder Is trying give many people opportunities to have a part in this.

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Still undecided. Considering this is two grand+.., I should have an opinion by now.

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5 years this has been happening to me, it started here, around people that are still here. Homeland security has done nothing at all, they are not here to protect us. Dont we pay them to stop shit like this? The NSA, CIA, FBI, Police and our Government has done nothing. Just like they did with the Havana Syndrome, nothing. Patriot Act my ass. The American government is completely incompetent. The NSA should be taken over by the military and contained Immediately for investigation. I bet we can get to the sources of V2K and RNM then. https://peakd.com/gangstalking/@acousticpulses/electronic-terrorism-and-gaslighting--if-you-downvote-this-post-you-are-part-of-the-problem

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