How Long Can the Move-to-earn Myth STEPN Last?

Interest in Move-to-earnapps is skyrocketing. But previous attempts to create a crypto game economy have shown that the excitement won't last.

STEPN Stories So Far

The premise of STEPN is simple: move is paid.

The "earn money" lifestyle app launched in private beta in December 2021 and has maintained steady growth by attracting new users through weekly Discord calls and Twitter spaces. STEPN Ambassadors will reward participating community members with a pair of the game's NFT sneakers, allowing them to start earning Green Satoshi Tokens (GST) by running, jogging, or walking around their neighborhood. Back then, players could earn between $5 and $50 a day, depending on how long they played and how many pairs of sneakers they owned.

STEPN's growth accelerated as the cold winter ended, as the prospect of earning valuable tokens for running around outdoors became more attractive. The game switched to an open beta, and anyone with an activation code can start playing.

As ofMarch, STEPN has been downloaded more than 100,000 times through the Google Play Store. Now, the game's developer is boasting that it supports more than800,000 daily active users (Dune Analytics data puts the number closer to90,000), and daily transactions of STEPN's NFT sneakers are at an all-time high of 264,000. This is important because STEPN's main source of income is generated by taking a 6% cut of sneaker NFT transactions on the secondary market. The more NFTs created and traded, the more money STEPN makes.

STEPN’s fungible token has also surged in recent weeks. The game’s governance token, GMT, reached an all-time high of $4.11 in April after trading for cents a few weeks ago. GST earned from playing games saw a similar rise, peaking at $8.51, as the money-making frenzy reached its peak in late April.

GST/USD Chart (Source: CoinGecko)

Although the prices of these two tokens have now cooled, they seem to be maintaining their value. Since players needGST and GMT to repair and upgrade sneakers, demand will remain high as long as people keep playing.

Is STEPN sustainable?

As a new cryptocurrency project that offers lucrative rewards to its participants, skeptics questionwhether STEPN’s token economy can continue to pay people so well to go about their daily jogs. Understanding exactly how the game mechanics work is critical to understanding whether the STEPN economic model is sustainable.

While players only need one pair ofSTEPN's NFT sneakers to start playing, owning multiple pairs means they can earn more GST tokens.Sneakers generate energy daily, and every 5 minutes of movement converts 1 point of energy into an amount of GST tokens determined by the efficiency level of the sneaker.

Players who hold at least two pairs of sneakers can also"mint" new shoes by burning GMT and GST tokens. "Virgin" sneakers that are not used to mint new shoes require fewer tokens, increasing the cost per mint. After seven mintings, the sneakers will no longer be minted.

The economic structure of STEPN is similar to that of Axie Infinity, the first game to be wildly successful. InAxie Infinity, players burnAXS and SLP tokens to "breed" Axies, which is required to play the game and earn tokens; in STEPN, sneaker minting is the name of the game.

Both Axie Infinity and STEPN rely on new player additions to keep the games profitable for existing players. If demand for new sneakers dries up, their prices on the secondary market will drop. This means fewer new sneakers will be minted, removing GST and GMT buying pressure. Meanwhile, those who have already played the game will continue to earn tokens to sell on the open market, driving the value of GMT and GST to the bottom in a race to the bottom.

If such a scenario sounds far-fetched, it shouldn't. That’swhat happened to Axie Infinity after its popularity surged during the “NFT Summer” of 2021. As new players entered the game, token prices and demand for Axies skyrocketed, and gaming guilds renting out their Axies to players who couldn't buy them accelerated to buy a set in exchange for a portion of their revenue. However, with so many players earning and selling the game's SLP tokens, its price drops, making it less attractive for new players to start with.

Eventually, Axie Infinity's honeymoon period was over, and the game struggled to retain players. Once the monetary incentive is gone and fewer people play the game, the demand for Axies and the tokens needed to breed them will drop. The price action of the game’s flagship AXS token perfectly sums up the story. AXS surged from $4 in May last year to $164 in November, an all-time high. Six months later, it was trading at just over $20.

AXS/USD Chart (Source: CoinGecko)

However,unlike Axie Infinity, STEPN has introduced some new mechanisms in an attempt to balance its token economy. GST is an earnable token similar to Axie Infinity's SLP that has more uses in the game than creating new sneakers. Players need GST to repair boots (keep earning what they need), unlock more boot slots, upgrade boots, and upgrade boot gems. While this added utility should help keep demand for GST high and thus increase game profits for players, it won't stop the game from going into a death spiral after player growth stagnates.

In addition, becauseSTEPN can limit the number of new players entering the game through its invitation-based registration system, it can better control its growth rate. This is an integral part of managing the STEPN economy. As Twitter user PhABCD recently pointed out, STEPN's sneaker inflation is currently on track to grow at an unsustainable 31,000% over the next year. To slow down the production of sneakers, the game's designers have two options: increase the production cost of new shoes or reduce demand by slowing user growth.

By managingSTEPN's growth, designers can temporarily prevent it from flying too close to the sun. However, there may come a time when there aren't enough new players, or forged shoes aren't profitable enough for existing users. At this point, STEPN's economy is in danger of collapsing, which could lead to the collapse of its token and NFT sneakers.

looking to the future

While it may not happen tomorrow or even next month, previous play and earn games show that STEPN's current model is not sustainable. Unless major changes are made to the game, crashes are almost inevitable.

With this in mind, it appears the main goal of the STEPN team is to keep the game alive for as long as possible in order to profit from the sneaker NFT transaction fees. According to a recent TechCrunch article, STEPN is currently bringing in over $100 million in transaction fees per month. If this continues until the STEPN team's scheduled GMT tokens start unlocking in January 2023, then at the current price of $1.37, the game will make almost as much money as those tokens are worth combined. With the team's tokens gradually unlocked by 2027, it is likely that most of its profits will come from transaction fees. The value of vested tokens is almost irrelevant, and they should not be considered evidence that the STEPN team has any real interest in STEPN's long-term successful game.

Also, anyoneassociated with STEPN seems to be very cautious about who they talk to and who they can contact.Since we first reported on the game in March, Crypto Briefing has tried several times to contact STEPN team members and ambassadors, but has received no response. Rather than talking to crypto-native publications, the game's creators seem more interested in getting STEPN into Web2 outlets like Forbes and TechCrunch. There was no response to official emails on the STEPN website, and anyone directly related to the game on Twitter turned off their direct messages. It almost feels like STEPN is anticipating controversy and making its operations as error-free as possible ahead of the impending storm.

Those who play STEPN earlyare raising tokens and potentially increasing their initial investment by orders of magnitude. However, anyone just starting out may find it more difficult to make a profit going forward. STEPN really makes people money and encourages more people to adopt a healthier, more active lifestyle. But is that enough to keep players when the rewards dry up? let's see.