Bill Xing is head of financial products at crypto derivatives trading platform Bybit.
Stepn is on a massive “run” this year, if you’ll pardon the pun. The app that rewards users with crypto tokens for walking, jogging, or running has inaugurated a new genre of game called “move-to-earn.” The game’s utility token Green Satoshi (GST) and governance token STEPN (GMT) can be traded for Solana’s native token (SOL) or the USDC stablecoin. Early adopters of the game were keen to share their fun and boast about their profits, with some claiming to earn $200 per day by exercising outside.
The price of GST started climbing March (you can’t yet earn GMT through the app) amid the first wave of Stepn hype, and peaked at around $8 in late April before crashing along with the rest of crypto market. The price fell further upon news of Stepn blocking users in China, and is currently trading around $0.18, a 97% drop from its April 28 high.
A glut of GST tokens has also been a factor in the recent price decline. As our insights team at Bybit has noted, the circulating supply of GST swelled from 20,000 to nearly 50,000 in May.
Meanwhile, a look at the tokenomics of Stepn reveals that, like most play-to-earn (P2E) games, it adopts a cyclical structure—first nudging users to earn in-game tokens, then pushing them to spend more to rack up more in the future. New Stepn players must first invest in NFT sneakers, and are then encouraged to earn in-game tokens that allow them to mint more sneaker NFTs, which they can rent or sell on secondary markets. And so on.
In the past, these systems have proved to be unsustainable. If no new external capital is injected into the project, the cycle will eventually produce a diminishing token price, and the failure to attract new users to carry on the cycle. Skeptics of these projects might use a less charitable description: Ponzi scheme.
But calling Stepn a Ponzi, which describes a deliberate investment fraud, would be premature and unjust to the team behind it. Many new projects implement a Ponzi-like structure in their early phases to bootstrap growth. It’s what they do after this bootstrapping phase that should inform our final judgment. For now, it’s important to recognize Stepn’s pioneering role in the emerging move-to-earn field where projects are seamlessly tying in the real world with the virtual one, using Web3 mechanics to push users away from their computer screens and out into the real world.
Stepn is encouraging us to head outdoors and adopt a healthier lifestyle. Future innovations within this space will build on this idea and follow a similar path of integrating the real world into the Web3 space.
As for how Stepn might perform in the long term, it’s worth looking at P2E projects like Axie Infinity, which employs a similar sort of token structure.
Axie Infinity rose to fame in 2021, and peaked at approximately 6.6 million users. Due to the large number of players and its unlimited mint of in-game tokens, the game’s burning mechanics proved insufficient. Axie created an immense supply of tokens that, combined with a gradual decline in demand, triggered a downward spiral.
The history of Axie suggests that a sustainable move-to-earn model will require constant updates to keep the activity fun and engaging, and to attract a steady inflow of new users. Offering a sustainable return on the time and money users invest will also contribute to lasting demand. The upshot is that Stepn’s team will have to pay attention to the project’s tokenomics, and ensure that the token’s price remains valuable. Stepn also must ensure that the time it takes for a new user to break even is not too long.
There are signs Stepn understands these challenges. As our analysts have noted, the company is adjusting the required GST for each shoe-minting in response to the fluctuating GST token price. It also added restrictions such as a 48-hour cooling period and minimum level of the “parent sneaker” NFT before being able to mint new sneakers. Meanwhile, Stepn has yet to push into staking, which would help sustain a reasonable price for its GMT token.
This all shows some forethought on how to make the game sustainable long term. However, the team will have a hard task keeping up with its expanding user base by ensuring the game provides a fun and rewarding experience.
For now, it’s unclear Stepn will be able to do this. There is a risk the project suffers from something that affects the current crop of P2E developers, namely an ability to fully understood the consumer behavior and needs of actual gamers. They have been targeting investors and people interested in making money, and not real users who will stick with and sustain the game long term.
Overall, it’s still very early days for move-to-earn, and Stepn still has time to adapt and avoid many of the pitfalls of Axie and the P2E world. But, if Stepn wants to succeed, the team had better run, not walk.