Analysis

Why You Should Be Worried About STEPN

Key Takeaways

  • STEPN has soared in reputation, with greater than 800,000 each day lively customers in response to the sport’s builders.
  • Nonetheless, 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 in peril of coming into a demise spiral, as has occurred with earlier play-to-earn video games.

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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 easy: 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 means 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 start out incomes Inexperienced Satoshi tokens (GST) by operating, jogging, or strolling round their neighborhoods. On the time, gamers may make anyplace from $5 to $50 a day, relying on how lengthy they’d been taking part in and what number of pairs of sneakers they owned. 

Because the chilly winter months ended, STEPN’s development accelerated because the prospect of incomes invaluable tokens for operating round exterior turned much more interesting. The sport switched to an open beta, and anybody with an activation code may begin taking part in. 

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 each day lively customers (Dune Analytics data reveals the quantity nearer to 90,000), and each day transactions of STEPN’s NFT sneakers are at an all-time excessive of 264,000. That is essential to notice as a result of STEPN’s main income is generated by taking a 6% reduce from trades of its sneaker NFTs on the secondary market. The extra NFTs are created and traded, the more cash 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 just a few weeks earlier. GST, earned by means of taking part in the sport, noticed an identical 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 individuals preserve taking part in. 

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 individuals so handsomely to go on their each 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 start out taking part in, proudly owning a number of pairs means they’ll earn extra GST token. Sneakers generate power each day, and each 5 minutes spent shifting converts one level of power into an quantity of GST tokens determined by the sneakers’ effectivity score. 

Gamers who maintain not 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 associated fee rising each successive mint. After minting seven instances, sneakers will not be capable to mint anymore. 

STEPN’s financial construction is much 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 current ones. If demand for brand spanking new sneakers dries up, their worth on the secondary market will fall. This implies fewer new sneakers will get minted, eradicating shopping for strain from GST and GMT. In the meantime, these already taking part in 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 state of affairs sounds far-fetched, it shouldn’t. That is what occurred to Axie Infinity after it surged in reputation throughout 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. Nonetheless, with so many gamers incomes and promoting the sport’s SLP token, its worth eroded, making it much less enticing for newer gamers to start out. 

Finally, Axie Infinity’s honeymoon interval wore off, and the sport struggled to retain gamers. As soon as the financial incentives disappeared, and fewer individuals have been taking part in 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)

Nonetheless, 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, stage up sneakers, and improve sneaker gems. Whereas this added utility ought to assist preserve demand for GST excessive and thus improve gamers’ income from taking part in, it does nothing to cease the sport from coming into a demise spiral as soon as participant development plateaus. 

Moreover, as a result of STEPN can restrict the variety of new gamers coming into the sport by means 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 lately pointed out, STEPN’s sneaker inflation is at the moment on monitor to extend by an unsustainable 31,000% over the following 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. Nonetheless, there’ll doubtless come a time when there received’t be sufficient new gamers or minting footwear received’t be worthwhile sufficient for current customers. At this level, STEPN’s economic system might be in peril of unraveling, which may 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 objective is to maintain the sport alive for so long as doable to revenue from sneaker NFT buying and selling charges. Based on a recent TechCrunch article, STEPN at the moment 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 can have made virtually as a lot cash as the overall worth of these tokens on the present worth of $1.37. Because the group’s tokens unlock incrementally till 2027, there’s a great probability that almost all of its income will come from buying and selling charges. The worth of the vested tokens is nearly irrelevant, and so they shouldn’t be thought-about 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 discuss to and who can contact them. Crypto Briefing has tried to contact STEPN group members and ambassadors a number of instances since we first coated 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 about getting STEPN into Web2 media shops similar to Forbes and TechCrunch. The official e mail on the STEPN web site is unresponsive, and anybody straight 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 doable earlier than a coming storm. 

Those that began taking part in STEPN early are raking in tokens and sure up on their preliminary investments by a number of orders of magnitude. Nonetheless, anybody simply starting might discover it tougher to revenue going ahead. STEPN has definitely made individuals cash and inspired many extra to take up a more healthy, extra lively 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 writer owned SOL and several other different cryptocurrencies. 

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