What is StepN?
An offshoot of the play-to-earn model, move-to-earn crypto app StepN exploded in popularity, growing to more than 300,000 daily active users in a few months. The idea of rewarding players for walking, jogging, or running gave birth to hundreds of other apps, and M2E was named the hottest GameFi trend of 2022. The renowned VC fund Sequoia Capital invested $5m in StepN when it was nothing but a pure concept and hit the jackpot as the app started generating $3 to $5 million in net profit from trading fees a day and has been earning up to $100 million every month. Moreover, StepN raised funds from Binance Labs, the VC arm of the Binance exchange.
However, the initial hype seems to run out of steam, as the number of active users has reached a plateau, Dune data indicates. In just a month, StepN’s Green Satoshi Token (GST) dropped 91% from its ATH, and the floor price of the NFT sneakers required to earn GST went down from 13 SOL in May to just 4.1 SOL at the time of writing. Such a decline can be partially attributed to StepN banning users from mainland China as it failed to comply with the country’s regulatory policies. Additionally, the StepN app has to deal with massive DDoS attacks after introducing its new anti-cheating system based on a machine learning algorithm.
However, only 5% of users are Chinese, as was stated by StepN developers. Vietnam, the Philippines, and Thailand, where move-to-earn games are very popular, stay in the game. Therefore, the current sell-off is mostly due to players’ FUD, short for fear, uncertainty, and doubt. Still, that doesn’t necessarily mean that the token will recover – in the crypto industry, the belief in system collapse can become a self-fulfilling prophecy, as Vitalik Buterin wrote on Luna crash. So, is there any hope for StepN price to recover? To find out, we should take a closer look at the game’s tokenomics.
How does StepN work?
Your typical P2E game usually follows the same pattern: there’s an NFT that the player has to purchase to enter the game, then there is a token that can be earned and is used to participate in the game’s ecosystem, such as upgrades, repairs, level-ups, etc. Players can opt to reinvest their rewards or cash out. The latter is less desirable for the company as it drains the token’s liquidity pool and pushes the price down. For that reason, developers are focused on retaining tokens within the game through burn mechanisms to maintain the demand.
As we can see, StepN is no different. To earn tokens, the player should first buy a sneaker NFT. These sneakers can be one of the following categories, walker, jogger, runner, and trainer, based on the expected speed of the player. Depending on its rarity, the NFT is classified as common, uncommon, rare, epic, or legendary. The rarity is determined by the four attributes of the sneakers: efficiency, luck, comfort, and resilience. Additionally, each attribute has a corresponding gem slot, so players can upgrade their digital shoes by installing gems.
Besides getting Green Satoshi Tokens through movement, there’s an option to randomly obtain mystery boxes while exercising. The box may contain gems, GST tokens, trainer sneakers, or nothing at all. Also, a player with two shoes can “breed” them and mint sneakers that can be sold on the marketplace. Additionally, there’s a Green Metaverse Token (GMT) that can be earned after reaching a certain level. That makes StepN tokenomics similar to the one of Axie Infinity, with GST (SLP) being the unlimited supply utility token while GMT (AXS) is the capped governance token.
Most P2E games depend on the constant influx of new users to sustain the price of the game currency and provide handsome earnings for players. The token price depends on the buying pressure, while the buying pressure relies on the new and current players who burn tokens for in-game upgrades to earn more in the future. Once the number of active users reaches a plateau, the price of the token starts going down. As a result, early adopters are in a win situation, while newer players don’t even get the return on their initial investment of NFT. Looks like a classical Ponzi, doesn’t it?
StepN's model
In the guest article for CoinMarketCap, StepN acknowledged the problematic nature of play-to-earn gaming yet claimed it’s possible for a game to retain the earning potential and not fall into the complete Ponzi. According to StepN, the key to success is strong tokenomics with active management, bringing real value to users, and bonding curve mechanisms to manage the game economy.
Bonding curves are yet to be introduced to P2E gaming, so there’s no point in digging deeper into the concept. And speaking of active tokenomics management, StepN indeed pays close attention to sustaining the token demand. Game’s tokenomics ensures that players keep spending GSTs for sneaker upgrades and acceleration, repair, minting, and opening gem slots. Additionally, being an invite-only game, StepN can control the flow of new users, significantly prolonging the time until daily new capital inflows drop to zero. However, all these steps do not solve the problem of system unsustainability and just temporarily delay the inevitable collapse.
But what about bringing value other than simply earning money? StepN claims that its game provides real-life benefits to players by improving their fitness and mental condition. While it’s hard to disagree that running outdoors is good for your health, the movement generated by StepN users doesn’t add any value that would otherwise be used to sustain the game economy.
Bottom line
At this point, the death spiral for StepN looks almost inevitable. Almost, because there’s still some hope left. The new influx of players can slightly improve the situation, as activation codes to enter the game become easier to get. Plus, the newly introduced guild model is likely to draw more players from low-income countries. StepN guilds will purchase sneaker NFTs and lend them out to “scholars” – players who work under managers hired by guilds. However, guilds are likely to harm the long-term sustainability, extracting value by cashing out immediately.
Another option for StepN is to find additional streams of revenue. Some community proposals include putting audio commercials for 30 seconds per walk, paying GST to skip the ads, or partnering with real shoe brands to advertise on the platform. However, it’s unclear whether StepN devs would opt for such a solution.
Although the price of GST may never reach its ATH again, the drop doesn’t necessarily mean the failure of the product. Take, for instance, Axie Infinity SLP and AXS tokens that dropped 98.5% and 89% from their all-time highs, respectively. Yet the game still has a huge and dedicated fan base, having earned the rightful place as the pioneer of play-to-earn gaming. The same is likely to be true for StepN, as its brand is widely recognized in the crypto industry. Obviously, for people who entered the game on the wave of hype, the ROI time is likely to take years with the current prices. On the brighter side, many community members value StepN for associated health benefits and will likely stay in the game despite the shrinking rewards.
