Analysis of StepN: Why did it suddenly become popular? Is the economic model sustainable? What is the future development direction?

StepN quickly became popular around the world, triggering widespread thinking in the industry. Its success is inseparable from the choice of niche track, the satisfaction of user needs, the team's rapid development and implementation, the thinking on models and gameplay, the "tap water" of a large number of industry leaders, and the support of Binance. More importantly, the team has not yet fully released the potential of the project itself, and the future development direction after completing 0 to 1 is worth paying attention to.

On the other hand, both GameFi and Move To Run have their own cycles, which may be relatively short-lived. As the popularity decreases, prices fall, old players get tired of them, or a large number of imitations appear, will StepN become a "flash in the pan"? This is also a question worth thinking about.

1. The reason why StepN became popular

StepN is an app that combines elements of GameFi and SocialFi. It has attracted many users outside the crypto circle through the move-to-earn model. The popularity of StepN can be attributed to two points: first-mover advantage and skyrocketing prices.

From the play-to-earn Axie, to the write-to-earn Monaco, to the move-to-earn StepN, a new gameplay can always attract a lot of attention in a short period of time. From the perspective of game settings and token models, StepN is not essentially different from Axie (at least as of now), but its game experience gives people a feeling of "out of the circle", providing a long-lost hot spot for the market in the first quarter when sentiment was low.

There are many doubts that it is similar to CX Panqubu, and the FOMO momentum is similar. But to be honest, there are no similar products in the mainstream crypto field. StepN has received investments from Sequoia India, Solana, Binance, etc. Mainland users need to create an overseas account first to participate, which has a high threshold. It is quite different from Qubu.

In the crypto world, "pulling the price" is the best publicity. The surge in the price of StepN's governance token GMT is definitely a booster for StepN's popularity. Since its launch, the price has risen from a minimum of $0.01 to a maximum of $2.23, thanks to the unlocking cycle of GMT and the game's upgrade system, and it is inseparable from the promotion of Binance.

Source: Official website

Currently, the only GMT unlocked are Launchpad and airdrop, and the airdrop started on March 14. In other words, from the launch on March 9 to the airdrop date, the only selling pressure on GMT was Launchpad, and Launchpad is almost free of cost (shorting BNB can hedge the risk of price fluctuations), so most profit-makers will choose to sell a small part and keep most to gain higher returns.

The game upgrade system is shown in the following table:

source:

https://medium.com/@syunz1912/3,000 words of dry goods detailed explanation of stepn gameplay -61218e8fa4a5

If users want to upgrade their shoes to the highest level, they must buy GMT, so GMT has a huge buying demand in the early stage. Not only that, the upgrade process takes a lot of time.

According to the table, it takes a total of 465 hours, or nearly 20 days, to upgrade a pair of shoes from level 0 to level 30 (although users could theoretically upgrade their shoes to level 27 before GMT went online, in reality, there were almost no shoes above level 10 on the market before March 9. Even if you start upgrading from level 10, it will take 17 days). Users can only earn GMT when they upgrade to level 30. This means that GMT only has a small amount of selling orders from Launchpad in the first 5 days, and airdrops will only appear from the 6th day, and the real selling orders (i.e. "mining and selling") will not gradually increase until around the 17th day.

2. Is the revenue and expenditure model sustainable?

Consumers vs. Investors

The traditional revenue and expenditure model of games is essentially the same as that of insurance. The income of insurance comes from the majority of people who pay premiums but have not made claims, while the expenditure comes from the minority of people who make claims. If the premiums collected are not enough to cover the claims paid, then the insurance product cannot rely on internal circulation to continue operating. For example, the universal health insurance of a certain island and the pension insurance of a certain country can only rely on government financial subsidies to maintain this game that is not profitable.

Similarly, if a game has more users who make money than users who spend money, then it is ultimately a game of "left foot stepping on right foot", and the money earned by users must be lost by the latecomers. This is why we have always emphasized that the focus of GameFi is on Game rather than Fi. If a game can make users willingly spend money to buy skins and props without asking for monetary returns, then this game must be sustainable.

StepN follows Axie's dual-token model, which can effectively prevent the game from being affected by the rise and fall of the governance token. From the perspective of game sustainability, the game token GST is more important than the governance token GMT. If we compare GST to an insurance product, then the upgrade, repair, and breeding of shoes are equivalent to collecting premiums, and running rewards are paying claims. Whether GST can balance supply and demand determines whether the game can operate sustainably.

There are two ways to adjust supply and demand: first, to increase revenue, that is, to increase premiums; second, to reduce costs, that is, to reduce claims. In terms of cost-saving, the team has made clever designs. The first is to set a limit on the length of time you run every day:

The second is diminishing marginal returns: as can be seen from the table, the more shoes there are, the shorter the average time and the longer the payback period (the specific payback time can be calculated on the WeChat applet "STEPN Assistant").

In terms of open source, StepN has also designed many ways to burn GST, such as the shoe repair, upgrade, and breeding mentioned above. But for users, the ultimate goal of all this is still to obtain more GST. If the GST burned is not as much as the earned GST, no one will want to continue playing. Therefore, true open source should be that users are willing to play even if they lose money. Just like people buy accident insurance, most people do not want this insurance to really come in handy when they buy it.

In other words, a good income and expenditure model should be one in which the number of consumer users is greater than the number of investment users.

StepN’s consumer users mainly come from the social field

How can ordinary GameFi projects attract consumer users? Of course, it is to improve the entertainment of the game. Assuming that GTA5 is changed to GameFi mode, even if the currency price returns to zero, it will not drive away loyal players. As for the StepN product, it is probably difficult to improve the entertainment from the perspective of the game. After all, no matter how much fun gameplay is added, it still has to be implemented in "Move", and "Move" is always boring.

Many people have expressed the view that "even if the price of StepN shoes goes to zero, at least I got some exercise." But this statement is a typical self-consolation after being trapped. Running for the purpose of making money, once losing money, tell yourself that I am exercising.

In fact, running is boring. Without the motivation of profit, most people find it difficult to stick to it. So why do we see so many people running in real life? Except for a few people who really love sports, most people run for spiritual benefits such as "having a good figure to improve their image" or "showing their mileage on social media to show that they have a rich life". These are essentially social attributes.

Therefore, StepN's consumer users will mainly come from SocialFi rather than GameFi in the future.

StepN How many consumer users are there currently?

Unfortunately, although the StepN team claims that this product is GameFi + SocialFi, we haven’t seen too many social elements so far. If just taking a screenshot and sharing it on a social platform is considered social, then everything can be SocialFi. Rather than Adidas Vice President Scott Dunlap giving StepN verbal praise on social media, I would rather see him announce a joint release of the Rose replica 1.5 digital version with StepN, preferably with a highlight shot of Rose from NBA Top Shot.

This is the sports blockchain project that I most want to see. At present, it must be admitted that most people buy their shoes just to make money, because there is really nothing fun and nothing to show.

So do investment users account for a large proportion? To answer this question, we need to analyze the net flow of GST. The following figure shows the net outflow of GST as shown by the on-chain data:

Source: https://dune.xyz/yehjames/STEPN

The above address is the official wallet, namely the Spending Account. Users need to transfer GST from their personal wallet to the Spending Account before they can repair or upgrade their shoes. After running, they also need to transfer GST out of the Spending Account before they can sell them.

On March 1, Binance announced the launch of the 28th Launchpad project - STEPN (GMT). On the same day, GST changed from net outflow (earned through running) to net inflow (burned through repairing, upgrading or breeding shoes), and the coin price soared from $2.6 to a maximum of $4.0. After the good news was exhausted, GST entered a net outflow state again, and the coin price gradually fell back to around $3.4. Fortunately, since March 16, GST has been basically in a state of supply and demand balance, so the coin price has also been stabilized. The price of GST will directly determine the price of shoes, so the floor price of shoes has basically remained at $800-$900 in the past half month. It can be seen that the supply and demand balance of GST is very dependent on the number of new players. With the opening of the rental market in the future, more and more "wool-pulling" users will pour in. How to stabilize the price of GST is particularly important: a sharp rise will hinder new users from joining (shoe prices soar), and a sharp drop will not retain old users (revenue is significantly reduced).

If the on-chain data of Spending Account can reflect the real supply and demand of GST, then it means that investment users like me account for a larger proportion. If the real data cannot be obtained from the chain, that is another problem.

summary

For a game to operate sustainably, the number of consumer users must be greater than that of investment users. StepN is positioned as GameFi + SocialFi, but the sport of running determines that the plasticity of the game is poor, so the product should cultivate consumer users more from the social level. But so far, StepN has not shown too many social elements. In the interview, the official seemed to focus more on establishing the NFT market, rather than developing social elements that are more similar to Web2.

Judging from the current on-chain data, if there are no new users entering the market, GST will be in a net outflow state. Therefore, we have reason to worry whether GST can withstand the selling pressure once investment users pour in as the rental market opens.

Appendix: Supplement to the interview with the team

Q: What is the current number of users and regions?

A: The daily active users are about 100,000 and the monthly active users are about 500,000. We have not opened registration and need an invitation system. Due to restrictions on local laws and regulations, downloads are not open to regions such as mainland China. The user sources are ranked as Japan, the United States, France, Russia, the United Kingdom, and Taiwan, China. Japan has a lot of Move to Earn game traditions, so it is accepted quickly. About 30% of users are outside the cryptocurrency circle. We don't want gold workers to enter and destroy the game ecosystem, so we have not opened the rental market, nor have we canceled the invitation system and opened free registration.

Q: Cross-chain? What is the future development direction?

A: We will cross-chain to BSC soon, and cross-chain to Ethereum may be later. Our future development direction is to become an NFT market, or even the largest trading platform in the NFT field. Users can not only buy shoes here, but also other NFT products. We are developing NFT markets on BSC and Solana, and will soon merge platform wallets and local wallets.