The Biggest Mistake of Splinterlands: Numbers!

Splinterlands shocked everyone yesterday when they announced a 45% lay off

This certainly came as a surprise to me as someone who watched every Town Hall and kept up to date with the game. The impressions they gave was that the company was steadily growing (we now know it was growing too fast) and that they had enough capital to withstand a bear market. They explicitly said this on at least one occasion several months ago. Well, turns out with the market turn down of last week, this statement was not quite right. It seems the company isn't facing any bankruptcy for now, but they realized that they would soon if they did not cut down on spending. Personally, I think it is the right move, but it certainly raises some questions: why did they not realize this sooner? What happened to the millions of $$$ they got from all of the sales? How could they spend it so quickly? Of course they did not spend it all, but it seems odd how this would not be enough to keep a company running for the foreseeable future. Then again, the expenses (especially server costs and employees) are definitely very high...

I think the problems can be boiled down to a single issue

The team simply got the numbers wrong. (A) Numbers in regard to the assets that they were selling. They were selling too much (CL, RW, TD etc.) at a too high of a price. Whereas the earlier packs of the game had a price tag of $2, CL was selling at $4 and RW as well as TD at $8... Clearly this was not sustainable as demand was simply not there. (B) Numbers in regard to the tokenomics. SPS, DEC and Vouchers have a way too large supply and inflation. Why would we need a supply of 3 billion for SPS?! Axie Infinity, the biggest competitor in the P2E space, has a supply of 270 million. With this the token price has much more potential, and more importantly the inflation for the game is much much lower. SPS's inflation is still at around 17% - about 400k tokens are being distributed daily. This is way too much. Vouchers are also clearly too inflated. There is no chance that they will reach their pegged value at current inflation. The sinks are way too low for all of the tokens; or rather they cannot be triggered with a low price of DEC and SPS.. Also, since the team does not want to change the outline of the whitepaper (which would severely undermine trust), it is extremely difficult to fix these fundamental problems.

This wouldn't of been a problem in a bull market. Players would have kept coming to Splinterlands and the assets would have sold out just fine. This would have kept the price of Vouchers at its peg and would have at least stabilized the value of SPS. Nevertheless, I think the silver lining is that the team is thinking in long terms. The distribution of SPS is still ongoing for about 4 years. That is a long time... It is easy to imagine how things could turn around if we should see a bull market in the next years. But so far we have to deal with the current situation.

Th biggest hope for the game currently is LAND which the team should get out as soon as possible. The GLX airdrop is also helping and of course Tower Defense could be a hit. The team has to set priorities now and fix the game before it becomes unfixable. I think the team has still enough resources and experience to pull it off. 🤞

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