Analysis

Why You Ought to Be Frightened About STEPN

Key Takeaways

  • STEPN has soared in recognition, with greater than 800,000 day by day energetic customers in line with the sport’s builders.
  • Nevertheless, skeptics are beginning to query whether or not STEPN’s token economic system is sustainable.
  • If STEPN’s participant development plateaus its economic system might be at risk of getting into a dying spiral, as has occurred with earlier play-to-earn video games.

Curiosity within the move-to-earn app is hovering. However earlier makes an attempt to create crypto recreation economies point out that the euphoria isn’t going to final.

The STEPN Story So Far

STEPN’s premise is straightforward: you receives a commission to maneuver.

The “move-to-earn” life-style app launched with a closed beta in December 2021 and maintained regular development by onboarding new customers by way of weekly Discord calls and Twitter areas. STEPN ambassadors would reward engaged neighborhood members with pairs of the sport’s NFT sneakers, granting them entry to begin incomes Inexperienced Satoshi tokens (GST) by operating, jogging, or strolling round their neighborhoods. On the time, gamers might make anyplace from $5 to $50 a day, relying on how lengthy they’d been enjoying and what number of pairs of sneakers they owned. 

Because the chilly winter months ended, STEPN’s development accelerated because the prospect of incomes useful tokens for operating round outdoors grew to become much more interesting. The sport switched to an open beta, and anybody with an activation code might begin enjoying. 

By March, STEPN had amassed greater than 100,000 downloads through the Google Play retailer. Now, the sport’s builders boast that it helps over 800,000 day by day energetic customers (Dune Analytics knowledge reveals the quantity nearer to 90,000), and day by day transactions of STEPN’s NFT sneakers are at an all-time excessive of 264,000. That is necessary to notice as a result of STEPN’s main income is generated by taking a 6% lower from trades of its sneaker NFTs on the secondary market. The extra NFTs are created and traded, the extra money STEPN makes. 

STEPN’s fungible tokens have additionally skyrocketed in current weeks. The sport’s governance token, GMT, reached an all-time excessive of $4.11 in April after buying and selling for cents a couple of weeks earlier. GST, earned by way of enjoying the sport, noticed the same rise, topping out at $8.51 as move-to-earn mania hit a peak in late April. 

GST/USD chart (Supply: CoinGecko)

Though the costs for each tokens have now cooled off, they seem like holding their worth. Since gamers want GST and GMT to restore and improve sneakers, demand ought to keep excessive so long as folks preserve enjoying. 

Is STEPN Sustainable?

As a brand new crypto mission offering profitable returns to its gamers, skeptics have questioned whether or not STEPN’s token economic system can proceed paying folks so handsomely to go on their day by day jogs. It’s important to know exactly how the sport’s mechanics work to know if STEPN financial mannequin is sustainable.

Whereas gamers solely want a single pair of STEPN’s NFT sneakers to begin enjoying, proudly owning a number of pairs means they’ll earn extra GST token. Sneakers generate vitality day by day, and each 5 minutes spent transferring converts one level of vitality into an quantity of GST tokens determined by the sneakers’ effectivity ranking. 

Gamers who maintain no less than two pairs of sneakers may also “mint” new pairs by burning GMT and GST tokens. “Virgin” sneakers that haven’t been used to mint new footwear want fewer tokens, with the fee growing each successive mint. After minting seven instances, sneakers will now not be capable of mint anymore. 

STEPN’s financial construction is just like that of Axie Infinity, the primary play-to-earn recreation to hit it large. In Axie Infinity, gamers burn AXS and SLP tokens to “breed” Axies, that are wanted to play the sport and earn tokens; in STEPN, sneaker minting is the secret.

Each Axie Infinity and STEPN depend on new gamers becoming a member of to maintain the sport worthwhile for present ones. If demand for brand new sneakers dries up, their value on the secondary market will fall. This implies fewer new sneakers will get minted, eradicating shopping for stress from GST and GMT. In the meantime, these already enjoying the sport will proceed incomes tokens to promote on the open market, driving the worth of GMT and GST down in a race to the underside. 

If such a situation sounds far-fetched, it shouldn’t. That is what occurred to Axie Infinity after it surged in recognition through the “NFT summer season” of 2021. Token costs and demand for Axies soared as new gamers entered the sport, sped up by gaming guilds renting their Axies out to gamers who couldn’t afford a set in return for a portion of their earnings. Nevertheless, with so many gamers incomes and promoting the sport’s SLP token, its value eroded, making it much less enticing for newer gamers to begin. 

Ultimately, Axie Infinity’s honeymoon interval wore off, and the sport struggled to retain gamers. As soon as the financial incentives disappeared, and fewer folks had been enjoying the sport for enjoyable, demand for Axies and the tokens wanted to breed them cratered. The value motion of the sport’s flagship AXS token encapsulates this story completely. AXS soared from $4 final Could to an all-time time of $164 in November. Six months later, it’s buying and selling at simply over $20. 


AXS/USD chart (Supply: CoinGecko)

Nevertheless, in contrast to Axie Infinity, STEPN has launched some new mechanics in an try and stability its token economic system. GST, the earnable token analogue to Axie Infinity’s SLP, has extra makes use of within the recreation past creating new sneakers. Gamers want GST to restore sneakers (essential to proceed incomes), unlock extra sneaker sockets, degree up sneakers, and improve sneaker gems. Whereas this added utility ought to assist preserve demand for GST excessive and thus improve gamers’ income from enjoying, it does nothing to cease the sport from getting into a dying spiral as soon as participant development plateaus. 

Moreover, as a result of STEPN can restrict the variety of new gamers getting into the sport by way of its invited-based sign-up system, it has extra management over how briskly it grows. That is integral to managing the STEPN economic system. As Twitter consumer PhABCD not too long ago identified, STEPN’s sneaker inflation is at present on monitor to extend by an unsustainable 31,000% over the subsequent yr. To decelerate sneaker manufacturing, the sport’s designers have two choices: improve the price of minting new footwear or lower demand by slowing consumer development.

By managing STEPN’s development, the designers can cease it from flying too near the solar for some time. Nevertheless, there’ll probably come a time when there received’t be sufficient new gamers or minting footwear received’t be worthwhile sufficient for present customers. At this level, STEPN’s economic system might be at risk of unraveling, which might crash its tokens and NFT sneakers. 

Seeking to the Future

Whereas it could not occur tomorrow and even subsequent month, earlier play-to-earn video games present that STEPN’s present mannequin is unsustainable. Until the sport makes drastic adjustments, a crash is nearly inevitable. 

With this in thoughts, it seems that the STEPN group’s main purpose is to maintain the sport alive for so long as attainable to revenue from sneaker NFT buying and selling charges. In line with a current TechCrunch article, STEPN at present brings in over $100 million in month-to-month buying and selling charges. If this retains up till the STEPN group’s vested GMT tokens begin to unlock in January 2023, the sport may have made virtually as a lot cash as the entire worth of these tokens on the present value of $1.37. Because the group’s tokens unlock incrementally till 2027, there’s an excellent probability that almost all of its income will come from buying and selling charges. The worth of the vested tokens is nearly irrelevant, they usually shouldn’t be thought of proof that the STEPN group has any actual pores and skin within the recreation concerning STEPN’s extended success. 

Moreover, anybody concerned with STEPN seems to be very cagy about who they speak to and who can contact them. Crypto Briefing has tried to contact STEPN group members and ambassadors a number of instances since we first lined the sport in March and has not acquired any response. As a substitute of speaking to crypto-native publications, the sport’s creators seem extra fascinated by getting STEPN into Web2 media shops resembling Forbes and TechCrunch. The official e mail on the STEPN web site is unresponsive, and anybody instantly related to the sport on Twitter has their direct messages turned off. It virtually looks like STEPN is anticipating controversy and is making its operations as water-tight as attainable earlier than a coming storm. 

Those that began enjoying STEPN early are raking in tokens and certain up on their preliminary investments by a number of orders of magnitude. Nevertheless, anybody simply starting might discover it harder to revenue going ahead. STEPN has actually made folks cash and inspired many extra to take up a more healthy, extra energetic life-style. However will that be sufficient to retain gamers when rewards dry up? Let’s see. 

Disclosure: On the time of penning this function, the creator owned SOL and several other different cryptocurrencies. 

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