Thoughts on Sparklet
Here is a no frills, no formatting brain dump on the spark/sparklet announcement.
I want to start this post by saying I am FOR the end goal of making Spark more accessible and liquid. I am also FOR the end goal of making Spark and thus Upland more visible to the broader crypto market. I think those are both good and healthy things.
From a governance standpoint I will admit I am bummed that Upland framed this as a yes or no for this particular plan. The planning might have gone too far before getting input. As such many in the community have a split opinion because they like the targets, they just have issues with the trajectory. Hopefully the reddit feedback is taken to heart and potentially the voting can be parsed out to be a little more granular.
I will say I have taken the time to read the whitepaper, watch the video that was posted with it, and listen to the UPX podcast. While listening to the podcast is really where my concerns rose. I have been on several crypto teams, I have helped deploy multiple projects, I have helped in developing tokenomics, and I have become painfully aware of how trading on an open market impacts the token prices.
I feel the team may have some overconfidence in how things will all work out. I say this because many of the reasons this will work out are the same reasons other projects have given why things will work out. I want to address those points to not say the team is wrong, but to instead provide some counterpoint to solidify the plan.
I again want to reiterate that I am for the general concept, but I think there are better ways to execute the vision than what is planned.
First I want to address pricing. I know that Upland is setting the price based on what they have successfully sold spark for in the past. I think this is quickly going to become an unreasonable price. That price was supported in part by the scarcity of the sales. They were only available during spark week, and in limited quantities. Also the buyer never knew for sure if they could get what they wanted, in the windows of the sale. With spark more liquid that fear of missing out won’t drive price. Users will know they can get more spark any time they want. In addition we need to acknowledge that a tremendous amount of spark has been give out for free. The true value of spark is the total amount collected in sales divided by the total amount of spark on the market. As we have seen with the spark renting market the price will drive down. The current fiat out method for spark is renting it out through the exchange, using the UPX earned to buy props, then selling those props at a theoretical loss for USD. When those that have an abundance of free spark are looking to sell they may not feel they need the retail premium to get a profit. Even spark sold at $200 per spark will be pure profit for them. So there needs to be significant buy pressure to make up for that. This is all to say that sparklet markets will likely have far more volatility than anticipated.
During the interview the team indicated that they felt the lockups for exporting spark would help to stabilize the price. I have participated in crypto projects that had lockups as long as 3, 6, and even 12 months. These did not give the price stability that was anticipated. It at times would serve to delay some selling off, but in crypto markets where the down markets typically last 1-2 years these lockups don’t provide the stability they were designed to provide.
The team made the point that so many other projects came to market without a product. This is true of many projects. That being said, there are also projects that did not launch tokens until they had a fully functioning product behind them. Many of these projects also faced all the same hardships that some many other projects have faced. There seems to be a bit of an attitude that since they are coming to market with a functioning product shields them from volatility and some other pitfalls, this makes me afraid they are not going into this decision with eyes open.
Many times the team referred to things that “usually happen” in the industry. Unfortunately I fear their data set is incomplete. The example that’s most relevant was that “usually” there is a presale to investors. I can say with experience that just as often as that happens, also other distribution models happen as well. Maybe it was said this way for marketing purposes, but if that is the team’s honest belief I think it’s a dangerous one to have.
There was a comment about Upland trying to build the largest digital open economy. This has to be quantified heavily. In the crypto space Ethereum is the largest digital open economy and Upland can not hope to compete with that. When looking at the ETH space the base gas token has it’s own economy in the hundreds of billions of dollars. When you extend that to all products that run on ETH you are talking trillions of dollars. That can further extend to the layer two chains and roll-ups that are also dependent on ETH and it becomes an unattainable goal. It’s the size of that economy that Upland hopes to tie in to.
There was a point made about externally traded tokens providing visibility. There is some truth to this, and this gets to the crux of the discussion and the bulk of Uplands motivations. There was an example given about early speculators for property flipping getting into Upland and staying. There were many contributing factors to that, but the largest by far was that you had to get in the app to participate. Then once in the app you had to get into the community to understand it. Those two key components don’t exist for the majority of the target audience for token trading. If this was a true lead into the app to be able to trade or access spark this model would have relevance, unfortunately with the given plan I don’t see that happening. Traders will trade the charts and not care about the underlying product the vast majority of the time. It’s not the lead in that it could be.
There is also an issue in that Upland built an economy around letting people access the app with a nice graphic presentation. They didn’t need crypto knowledge it was all taken care of for them. So you attracted those people and built an amazing experience. This process will now ask those some people to deal with token bridges, gas fees, transferring to exchanges and trading on open markets to access the liquidity that is being put into place. It’s not a good fit.
The team said that most tokens that had bad market volatility was because there was no actual utility for the tokens. The team also compared spark to ETH, while saying that ETH had huge utility. The fact remains that ETH has seen huge market volatility over the years. Even with a current market cap of $200B it’s still volatile. In the past two years, well after being an established platform for more than half a decade, ETH had monthly swings of over 50%. There are other tokens out there with significant utility that had even more volatility than that. It’s not reasonable to enter this with this level of confidence, it seems somewhat uninformed.
So, after all this criticism I want to come to the table with ideas.
I would like Upland to pull the yes no vote and parse out the ideas to get better feedback on parts of the plan and not the whole thing. Let the community steer through voting as well as the community feedback.
I would like to see Upland provide more flexibility in app to see how a spark economy will develop. Like with metaventures, totems, and so many other things there were test beds that gave real information that helped to shape the final product. Rather than pushing liquidity to ETH right away there should be more work to provide a better level of in app liquidity. Things like staking to factories, transferring spark, and in app spark usage should all be implemented prior to a large roll out to ETH. Much like the closed beta for fiat out, maybe a few select community members can test a bridge function on an ETH testnet. You cannot modify smart contracts on ETH like you can on Antelope, there is no second chances.
I would like to see a larger amount of spark get into the communities hands before providing liquidity. The sudden liquidity on the market may not be healthy, and likely will irk the players who worked for, or bought their spark. I believe an open spark buying option, much like UPX can be bought at any time, should be implemented first. This coupled with the ability to transfer spark between KYC accounts really should be explored before pushing spark liquidity out to another chain.
When eventually it goes to ETH it should be done in a way that
requires the exchange to interact with Upland to get the listing. There needs
to be an obvious connection between the chains. Possibly requiring dev shops to
have an exchange provided with liquidity.
As summary, get spark more room to grow in app prior to pushing out to another chain. During this time get community feedback and make adjustments.
As a final point, this part is for the real crypto nerds. Only those really into the tech with appreciate this next part…..
This problem is further clarified when you understand that Upland is a DAPP that runs on top of EOS. Upland is itself functionally a layer 2 product that is fully dependent on the continued operation of the EOS chain. Without EOS chain, Upland goes away. This is too fragile, EOS is nowhere near as established as Ethereum. Since Uplands time on EOS there have been monumental changes to block.one, and overthrow of the chain, the launch of the Antelope protocol and so much more. I would like to see Upland address this potential weak link in their plan.
I would like to see Upland potentially working on getting a fork of Antelope that will also run a EVM (Ethereum Virtual Machine) and then use that as a roll up to ETH. This would get way more eyes from ETH users than any listing. It would get broad attention from both Antelope and Ethereum communities. From there, you’re bridging and listing on ETH exchanges could grow organically. This is a stretch and well outside the context of this discussion, but I felt it should be put out there. Hopefully this spurs a side conversation. Dev shops could be block producers, so many opportunities for real growth. But…I am a crypto nerd and this is me nerding out.