Two months ago, we introduced the move-to-earn (M2E) app STEPN in the article Gamifying exercise on the blockchain: StepN. Shortly after, STEPN’s GMT token rallied and hit a record high of $4.03 on April 28, according to CoinMarketCap. STEPN also became one of the most influential Web3.0 projects.
STEPN today paints a different picture. GMT has fallen and is trading at $1.39 at time of writing. Many are voicing concerns about STEPN’s unsustainability. They worry that STEPN might follow in LUNA’s footsteps — because its token economy is also based on the expectation of new capital inflow i.e. more and more people joining the app.
Crypto Twitter personality Algod, who famously made (and won) a bet with Terraform Labs CEO Do Kwon on LUNA’s price drop, also spoke out on STEPN.
Credit: @AlgodTrading / Twitter
Doubt on Token Economy
As explained in our previous article, StepN employs a M2E model in which users buy running shoes NFTs and exercise in real life, earning GST tokens as rewards which can be cashed out.
Let’s focus on STEPN’s token economy. In the M2E model, “Earn” is a very important factor. Currently, STEPN’s ROI is about a month from the time users buy their first NFT sneaker, upon which they start earning GST tokens. This can be very lucrative. This high rewards return has attracted many to mint NFT sneakers, thus increasing demand for GST (used to upgrade or mint new NFT sneakers) and increasing GST price. High GST price incentivizes even more people to join STEPN.
When users reach level 30 in the game, they start earning rewards in GMT. GMT is STEPN’s governance token and is issued from the STEPN treasury, which consists of marketplace trading fees, NFT loyalty fees and other in-app income. With more existing users reaching level 30, STEPN would need to keep attracting new capital to maintain its treasury and pay out rewards.
The problem: Once STEPN’s ROI becomes less attractive, fewer people will be incentivized to buy the NFT sneakers and GST token consumption drops. Token supply increases and its price will drop, further decreasing ROI. At this point, STEPN may see its token prices drastically fall.
Recent STEPN Developments
Recently, STEPN moved to improve its token economy by allocating more use cases to GST and GMT. Previously, users only spent GST when upgrading sneakers. Now, every five levels in-game is a rank and users have to spend GMT as well. For example, if users upgrade sneakers to level 5, it costs 10 GST + 10 GMT.
Currently, StepN is still in a growth phase, especially with its recent BNB Chain integration. This helps with onboarding new users. Its daily active users and daily minting shoes are also trending upwards, according to Dune Analytics STEPN Dashboard.
Credit: Dune Analytics
However, while there are still gains to be made for now, STEPN could potentially collapse once the number of new users drop i.e. growth of new capital inflow drops. Some critics liken this mechanism to pyramid schemes.
Like in many DeFi projects, STEPN users participate for the high APY. STEPN’s token economy requires that users continue to participate without cashing out their rewards, or that new users continue to replace those who have cashed out. Only time will tell if STEPN can achieve this.
One point of optimism is that STEPN has helped some users to shift their focus from profitability to health i.e. via making users start exercising. If STEPN works on meaningful gameplay to retain interest among users (aside from APY returns), this could make STEPN more sustainable in the long term.
The views expressed in this article are the author's alone and do not necessarily represent the views of ApolloX.
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