Is it viable to turn a step-tracker into a crypto earning mechanism?

 

Introduction

Imagine the year is 2054.

You wake up and check the sleep logs on your phone (implant). Damn! Only 3 hours of REM sleep — that means you aren’t going to earn enough SLEEP tokens to subsidize your breakfast. 

You find your virtual sneakers, which also happen to be connected to the blockchain, and hope that by the time you make it to the rations kitchen, you’ll earn enough tokens to purchase a nutritious lunch bar.

Existence has become a struggle to earn tokens through everyday activities.

As usual, there are two kinds of people – those that see this scenario as a great marketing opportunity and everyone else who finds this concept dystopic. Unsurprisingly many crypto companies are jumping onto this trend as a marketing opportunity.

The STEPN app, which allows users to buy NFT sneakers and earn tokens while running is looking like another example of this.

This article does a deep dive into how STEPN works, why its economic model might not be sustainable and how it essentially functions like a glorified freemium game.

Key takeaways
  • STEPN is an app that allows users to earn cryptocurrency by walking. 
  • Buying more expensive “sneakers”  (NFTs) ensures that a user can earn more tokens
  • The tokenomics are unsustainable, similar to the play-to-earn game Axie Infinity
  • Many within the cryptocurrency space have suggested STEPN is a Ponzi

Why STEPN?

The STEPN app was created by the developer FindSatoshi Lab during a 2021 hackathon. It is a smartphone app that lets users earn a cryptocurrency called Green Satoshi Token (GST) by walking, jogging or running for a specific time period that refreshes each day. It was developed as a “move-to-earn” cryptocurrency which takes inspiration from augmented reality games like Pokemon Go.  

What problems does it solve?

According to the white paper, the app is supposed to incentivize people to be more active. However, it functions very similarly to other play-to-earn projects where a user needs to purchase NFTs to get started and they can rent out their NFTs to other players. Beyond marketing, there doesn’t appear to be a clear need for the blockchain to be involved. 

How does it work?

The app takes the freemium model of mobile gaming into crypto.

Once you have a pair of NFT sneakers, you must wait for your Energy to refresh. One you have 1 Energy, you can move and earn for up to 5 minutes. Then you’ll be able to earn GST tokens, as well as governance tokens depending on your sneaker and speed of movement. There are other power-ups that can be purchased and shoe-minting events that help you get better sneakers.

Early on, just like Axie Infinity, some players made $50 USD per day just by walking. However, this ecosystem also relies on more players joining and “renting” out shoes to other players to use.

This mechanism is unsustainable and in a bearish cryptomarket, it could lead to a quicker collapse.

STEPN Gameplay

Each day, there are daily energy and daily token caps that restrict how much a person can earn in a set period of time. Early on, players will start with 2 energy with a maximum cap of 20 energy than can be spent in a day. 

Sneaker NFTs can be burned to earn GST and the governance token, GMT as well as a better sneaker. With a better sneaker, a payer can increase the energy caps.

Similarly, users are initially capped to earning 5 GST tokens per day but this can also be upgraded to a higher limit. The factors that affect how much tokens you earn are:

  • Total energy
  • Movement speed
  • Sneaker attributes and level
  • Gems (akin to powerups)
  • NFT Badges

STEPN earns a tax/fee from many of the in-game activities ranging from 2 percent to 8 percent of earnings.

Anti-cheating system

STEPN also detects whether someone is cheating or not. This involves looking at GPS location information, motion sensor and health data, as well as their own machine learning algorithm. It isn’t really clear how this works and it could end up being problematic. A lot of machine learning software is baked in with biases and inefficiencies, meaning it could disproportionately flag specific groups of users as cheaters.

Scholars

Remember that Rick and Morty episode where it is revealed that the battery inside Rick’s flying car is powered by a pocket universe? In that pocket universe, there is a planet that Rick has convinced to walk so that they can produce electricity, which he syphons off.

People who buy more expensive sneakers can rent them out to players that can’t afford them and earn a cut of their rewards.

With Axie Infinity, players quit once they weren’t able to earn any money leaving people who rented out their NFTs angry.

It turns out that many people don’t enjoy play-to-earn games. Also, requiring others to earn tokens for you is a shaky proposition at best.

Privacy

The Privacy Policy for STEPN allows it to pass along your data to marketing partners. It is also unclear what security measures are in place to prevent data from being taken or misused. This is a growing concern in the cybersecurity space.

Tokenomics and Ecosystem

There are two tokens within the STEPN ecosystem. 

GST is the in-game token with an unlimited market cap. This is a token that exists on the Solana and Binance blockchain.

GMT is capped at 6,000,000,000 total tokens. Only 30 percent are distributed to users through the game while the rest of the distribution is vested to team members, advisors, and treasuries. 

Vesting means that the tokens are delivered gradually over a predetermined schedule. However, vesting doesn’t really prevent anyone from dumping tokens early, allowing early investors to make a lot of money while dumping the right to receive those vested tokens. If they dump a lot of these tokens at once, it can crash the price and the ecosystem.

Governance

By staking and locking GMT, people can earn voting rights within the ecosystem. The longer the GMT is locked, the more weight a user receives when voting. Profit distribution is set to be determined by GMT stakers, splitting between dividends and carbon offsetting. While carbon offsetting is used with the best of intentions, it does not work.

How much can you earn?

This depends largely on how much money you drop on NFT sneakers.

Starting off, you can earn about $25 for 10 minutes of activity but with the freemium model. Of course you can always pay for better sneakers and earn more.

Market highs and lows

On Solana, there is a $35 million market cap for GST, which goes for $0.25 per token on the market. This is down from a high of nearly $9 in April of 2022. Less tokens are traded through Binance. 

The governance token GMT has a market cap of $367 million with a current price of $0.61 per token. At its peak in April 2022, the token was worth $4.11.

STEPN is Not a Stable Investment

Simply put, this play-to-earn freemium model is not decentralized or sustainable.

The collapse of Axie Infinity was a sobering moment. The price of GMT swings may be due to the Ponzi-like nature of the ecosystem which requires more new users joining.

It is notable that this time, it is people from within the crypto space calling out the project.

Conclusion

STEPN another twist in the cryptocurrency ecosystem, using “move-to-earn” mechanics and allowing users to generate GST and GMT tokens. 

STEPN works very similar to Axie Infinity which nearly collapsed due to its unsustainable virtual economy:

  • It costs hundreds of dollars to get started with basic sneakers
  • Users can buy up and rent out sneakers to other players, increasing their earnings and influence over the ecosystem
  • The majority of tokens will not be distributed to users within the ecosystem
  • Without a steady supply of new users, there are less sales of NFTs, less people using the app, and the token prices go down
Sources

https://www.coingecko.com/en/coins/stepn 

STEPN WHITEPAPER

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