Airdrop

The airdrop distribution was pretty straightforward to audit. There were 400,000,000 tokens allocated for a one year airdrop period and a subsequent SPS DAO proposal to transfer unclaimed airdrop tokens to the SPS DAO after an additional one year claim period. 33,283,891 SPS were sent to the DAO.

DAO

One of the most interesting findings in this audit was the current state of the tokens allocated for the SPS DAO. The inflation for the SPS DAO was stopped on April 14th 2023 and will need to be addressed once validators are released. Another important thing to note in regards to the DAO tokens is that 78,746,577 tokens that were minted were actually sent to the reserve wallet instead of the DAO wallet when tokens were being handed off to the SPS DAO Treasurers.

We will have to figure out how we want to address this issue as a DAO. There's a couple of important points to consider: the DAO isn't actually being directly apportioned the tokens that it should be and they should not be counted as part of the circulating supply and it's also worth noting that the DAO technically controls the noncirculating supply and could still vote to do whatever it wants with those tokens through subsequent DAO proposals.

In my opinion, this is the first major indicator that we need to get Validators online asap.

Private Sale

This is one of the allocations that I needed serious help to audit. Thankfully the team provided the information that I needed to verify the distribution. 200,000,000 tokens were sold during the private sale and all of them were distributed. I'm also confident in saying that almost all of these buyers have already sold their tokens at this point.

Unallocated

This is the allocation that was originally earmarked for Team Funds. It became clear very early on that was a bad idea and the team made the decision to abandon its claim to these tokens which essentially returned control of this source of inflation to the DAO. 12,872,998 of these tokens were minted and distributed before the distribution was stopped. 65,000,000 of these tokens were also split off into a new allocation for SoulKeep rewards.

Partners/Advisors

For full transparency: This allocation and the Unallocated funds were distributed through the same wallets. A total of 42,872,998 tokens were distributed between Partners/Advisors and Unallocated. The size of this clearly marked allocation was 30,000,000 and I made the decision to mark this allocation fully distributed and to have the remainder notated in the Unallocated funds section for accounting purposes.

Play to Earn

The Play to Earn allocation is subdivided into 4 different allocations: Ranked, Tournaments, Brawls and Land. It's worth noting that it took a year to bring 3 of those subdivisions online, which makes the overall Play to Earn distribution appear to be much further off target than it actually is.

Important things to note:

• We are slightly over on Ranked rewards which means we'll run out of that allocation a few months early if nothing changes.
• We are significantly under target for tournaments, which is one of the reasons I spent so much time working on tournaments a few months back. I have corrected the schedule, but there are still roughly 7% of those tokens that will not be minted without a proposal on what to do with them.
• Brawls are significantly under target, in part due to the fact that Tier 5 brawls were not rewarding tokens for a substantial amount of time. This was addressed with a proposal a few months back to encourage guilds to advance to higher Tiers of Brawls.
• Land is slightly over, similar to Ranked rewards. We'll likely run out of this allocation a few months earlier than intended if nothing changes.

Staking, LP and Oracles (Validators)

This allocation makes me even more aware of how critical it is to get validators online as soon as possible. While performing this audit it became clear that Staking rewards are seriously over target. This resulted in a lot of investigation and it appears that what happened is that while Staking rewards were supposed to reduce over time to hit the 65 month target, that was not implemented properly, so we're roughly 12% over target meaning that if we don't change anything, that allocation will run out approximately 8 months earlier than expected.

The LP rewards are under target due to several proposals that have been passed by the DAO since the distribution began. This means that we can either never print those tokens, reallocate them elsewhere, extend the runway of that allocation or find a new use for them. This was expected and is working as intended.

Update: Validators are slightly over target right now. I updated the graphic to correct this issue.

SoulKeep

The allocation for SoulKeep is slightly under target. I didn't find any explanation as to why, but it's yet again another example of why getting Validators online is critical and I'll dive into that more below in my suggestions.

Where do we go from here?

I've been spending a lot of time pondering this question and I have some suggestions on how to move forward. It's worth noting that I am but one opinion and I'm sure others will have their own suggestions. Hopefully this audit will inspire some great conversations and help us to choose a good path forward.

My Suggestions

My primary suggestion that comes out of this whole process is that we need to get Validators online immediately. I know that is not exactly possible, but I don't think the importance of this can be understated. We should have all of this information readily available and easily auditable by anyone at any time via clearly readable on-chain data. It shouldn't take months of work to figure out what tokens went where and how much are left to be distributed.

I would suggest that when we transition to the SPS Chain that all tokens are minted and each allocation has its own "bucket" of rewards that can be verified by API. This would allow for third party tools to be developed that can track the amount of rewards remaining in real time and we'll know down to the day when they are schedule to run out.

Having that level of information would allow us to start planning and working to address how we want to proceed before an allocation is depleted. For example, knowing exactly when Staking inflation or Play to Earn rewards are going to run out will add a sense of urgency and a clear deadline of when the DAO needs to be self sustaining and have itself positioned to provide rewards for actions it wants to incentivize moving forward.

There's a lot of information to digest in this post and I have plenty of my own thoughts, but I think it's more important to open it up to discussion at this point. It's not for me to tell us how we have to proceed. This is a DAO and it's up to all of us to chart the course forward. I've shared my findings and immediate thoughts, but it's worth noting that my opinion is just one in the collective. Thanks for your time and consideration.