The STEPN Story So Far
STEPN’s premise is simple: you get paid to move.
The “move-to-earn” lifestyle app debuted with a closed beta in December 2021 and has since maintained steady growth by onboarding new users via weekly Discord calls and Twitter spaces.
Engaged community members are rewarded with NFT sneakers, which allow them to begin earning Green Satoshi tokens (GST) by running, jogging, or walking around their neighbourhoods. Depending on how long they had been playing and how many pairs of sneakers they had, users might earn anywhere from $5 to $50 per day at the time.
As the cold winter months came to an end, the prospect of earning valuable tokens for running around outside became even more appealing. The game went into open beta, and anyone with an activation code could begin to play.
By March, STEPN had seen over 100,000 downloads from the Google Play store. The game’s developers now claim that it has over 800,000 daily active users (Dune Analytics data shows the number is closer to 90,000), and daily transactions of STEPN’s NFT sneakers have reached an all-time high of 264,000. This is significant because STEPN’s primary source of revenue is generated by taking a 6% cut from secondary market trades of its sneaker NFTs. The greater the number of NFTs created and traded, the more money STEPN makes.
The value of STEPN’s fungible tokens has also skyrocketed in recent weeks. GMT, the game’s governance token, reached a record high of $4.11 in April after trading for cents just a few weeks before. GST, earned by playing the game, also experienced a similar rise, reaching $8.51 in late April as move-to-earn mania peaked.
GST/USD chart (Source: CoinGecko)
Though the prices for both tokens have since dropped, they appear to be holding their value. Because players require GST and GMT to repair and upgrade their sneakers, demand should remain high as long as people continue to play.
Is STEPN Long-Term?
Sceptics have questioned whether STEPN’s token economy can continue to compensate people so generously for their daily jogs, given that STEPN is a new crypto project offering lucrative returns to its players. It is crucial to comprehend the game’s mechanics to determine whether the STEPN economic model is viable.
While players only need one pair of STEPN’s NFT sneakers to begin playing, having multiple pairs allows them to earn more GST tokens. Sneakers generate energy on a daily basis, and every five minutes spent moving converts one point of energy into an amount of GST tokens determined by the sneakers’ efficiency rating.
Players who own at least two pairs of sneakers can also “mint” new pairs by burning GMT and GST tokens. “Virgin” sneakers that have not been used to mint new shoes require fewer tokens, with the cost increasing with each mint. After minting seven times, sneakers will no longer be able to mint.
The economic structure of STEPN is similar to that of Axie Infinity, the first successful play-to-earn game. In Axie Infinity, players burn AXS and SLP tokens to “breed” Axies, which are required to play the game and earn tokens; in STEPN, sneaker minting is the name of the game.
Axie Infinity and STEPN both rely on new players to keep the game profitable for existing players. If demand for new sneakers falls, their price on the secondary market will also fall. This means that fewer new sneakers will be minted, relieving GST and GMT of buying pressure. Meanwhile, those who are already playing the game will continue to earn tokens to sell on the open market, causing the value of GMT and GST to plummet in a race to the bottom.
This is what happened to Axie Infinity after it became popular during the “NFT summer” of 2021. Token prices and demand for Axies skyrocketed as more players joined the game, sped up by gaming guilds renting out their Axies to players who couldn’t afford a set in exchange for a share of their earnings. Nonetheless, as a result of so many players earning and selling the game’s SLP token, its value decreased, making it less appealing to newer players.
Axie Infinity’s honeymoon period eventually wore off, and the game struggled to retain players. When the monetary incentives vanished and fewer people played the game for fun, demand for Axies and the tokens required to breed them plummeted. The price movement of the game’s flagship AXS token perfectly encapsulates this story. AXS has risen from $4 in May to an all-time high of $164 in November. Six months later, it’s worth slightly more than $20.
AXS/USD chart (Source: CoinGecko
STEPN, on the other hand, has implemented some new mechanics to balance its token economy. GST, the game’s earnable token equivalent to Axie Infinity’s SLP, has more uses than just creating new sneakers. GST is required for players to repair sneakers (which is required to continue earning), unlock more sneaker sockets, level up sneakers, and upgrade sneaker gems. While this new feature should help keep demand for GST high, increasing players’ profits, it does nothing to prevent the game from entering a death spiral once player growth plateaus.
In addition, STEPN has greater control over its growth rate because its invite-only sign-up method limits the number of new players who can join the game. This is integral for the management of the STEPN economy. According to Twitter user PhABCD, STEPN’s sneaker inflation is currently on track to increase by an unsustainable 31,000% over the next year. The game’s designers have two options for slowing sneaker production: raise the cost of minting new shoes or reduce demand by slowing user growth.
However, there will come a point when there aren’t enough new players or when shoe minting is no longer profitable for existing users. At this point, STEPN’s economy is in danger of collapsing, potentially crashing its tokens and NFT sneakers.
Looking to the Future
While it is unlikely to happen tomorrow or even next month, previous play-to-earn games demonstrate that STEPN’s current model is unsustainable. A crash is almost unavoidable unless the game undergoes drastic changes.
Given this, it appears that the STEPN team’s primary goal is to keep the game running as long as possible in order to profit from sneaker NFT trading fees. According to a recent TechCrunch article, STEPN currently earns more than $100 million per month in trading fees. If this trend continues until the STEPN team’s vested GMT tokens begin to unlock in January 2023, the game will have earned nearly as much as the total value of those tokens at the current price of $1.37. As the team’s tokens unlock incrementally until 2027, most of its profits will most likely come from trading fees. The value of the vested tokens is almost irrelevant, and they should not be interpreted as proof that the STEPN team has any real stake in STEPN’s long-term success.
Furthermore, anyone associated with STEPN appears to be very cautious about who they talk to and who can contact them. Rather than speaking with crypto-native publications, the game’s creators appear to be more interested in getting STEPN into Web2 media outlets like Forbes and TechCrunch. The official email address listed on the STEPN website is inactive, and anyone directly associated with the game on Twitter has their direct messages disabled. It’s almost as if STEPN is bracing itself for a storm of controversy by making its operations as watertight as possible.
Those who began playing STEPN early are raking in tokens and are likely several orders of magnitude ahead of their initial investments. However, those who are just starting out may find it more difficult to profit in the future. STEPN has undoubtedly made people money while also encouraging many more to adopt a healthier, more active lifestyle. But will that be enough to keep players interested when the rewards run out? Let’s see.