STEPN pushes the frontiers of fitness with NFTs
On July 2, 1997, the Thai government was forced to unpeg the Thai baht from the US dollar. The event sparked mass panic, as everyone scrambled to avoid the anticipated free fall and devaluation of assets, resulting in massive capital flight from the country.
An international chain reaction was set into motion, devaluing currencies across the Asian economy. The Indonesian rupiah plunged 80%, the South Korean won dropped nearly 50%, and the Malaysian ringgit plummeted 45%.
While we managed to avoid a full-blown global economic meltdown, the 1997 Asian financial crisis nevertheless had severe financial consequences on the region, as well as the worldwide economy at large.
Game designers in the play- and move-to-earn space have a lot to learn from real-world historical events. The proverb has been repeated over and over — those who fail to learn history are doomed to repeat it.
In many ways, designing a game is much like running a virtual country, complete with its own treasury, citizens, and digital economy.
As STEPN explodes in popularity, we’re quickly becoming a virtual country ourselves, which comes with all the intricacies of designing monetary policy for a real-world country.
Taking a look at the digital economies of the biggest play-to-earn games in the space, a common issue is a hyperinflation. The most prominent example is Axie Infinity, which saw the price of SLP, its in-game currency, plunge over 90% in the past several months.
To be sure, we pay our due respects to Axie for pioneering the P2E movement. The game is changing people’s lives around the world, especially in Southeast Asia, while onboarding millions of people to web3.
But while Axie has enacted measures to cap supply and stabilize prices, such volatility has severe consequences on the economic structure, wiping out millions in value and generating FUD and unpredictability.
As we build STEPN from the ground up, we’re working hard to stand on the shoulders of giants and learn valuable lessons from those who came before us. Our number one priority is to design a vibrant, resilient economy that will deliver value to our users for years to come.
Our design philosophy
When it comes to building a resilient digital economy, there are countless areas we’re focused on. Tokenomics is a crucial lever, and we’ve made sure to think far ahead in how we’re laying out our design.
Like Axie Infinity, we employ a dual token system. GST, our in-game currency, is much like Axie’s SLP. That is, its supply is uncapped and will be used as a medium of exchange and can be used (burned) to breed, upgrade, or repair sneakers. GMT, our governance token, is much like Axie’s AXS and will have a fixed supply of 6 billion tokens, to be distributed over time.
So what sets us apart?
Axie’s inflation challenge is driven by the fact that more players are cashing out their SLP rather than reinvesting them into the game to breed new Axies. With insufficient demand, the token is expectedly depreciating, which drives even more players to cash out into more lucrative stores of value. As a result, mass capital flight ensues and players begin to default to immediately sending their assets elsewhere after earning SLP.
To incentivize users to spend in-game, it’s crucial to design as many possible ways to retain economic value and activity within the game.
Of course, we never want to discourage users from cashing out. Instead, we engage in positive reinforcement — enticing users to reinvest their earnings into the game and thus creating an ecosystem where keeping their tokens and NFTs on the platforms, as investments even, is more valuable than it would be to cash out externally.
This manifests in several forms. For example, we have plans to roll out multiple token use cases beyond just breeding, repairing, or upgrading sneakers. The GMT token, for example, will also be used as a way for users to vote on donating to carbon offsetting programs.
In addition, we’ve created a complex earning structure that hinges on multiple variables, meaning it isn’t one-dimensional. GST rewards are distributed depending on multiple attributes, like the type of sneaker you own, the speed of your movement, and the different attributes of your sneakers, such as efficiency, luck, comfort, and resilience.
This minimizes the effectiveness of pump-and-dump actors and disincentivizes one-time gold rushes. And it also means that we’re able to minimize the likelihood that a single association, for example, a guild, can hoard inventory and enact multi-player attacks against the economy.
Attract with incentives, retain with network
But beyond just tokenomics, there’s even more at play to retain users and deliver value.
As Chris Dixon puts it, token incentives are a powerful way to bootstrap networks, which are essentially the lifeblood of the internet. Think about apps like Twitter, Instagram, Airbnb, and more. The value of these companies lies within their user base.
The token network effect is already taking place with STEPN. Over the past few months, the app has skyrocketed to 200,000 daily active users.
But while many games are able to garner that initial user spike, growth will inevitably eventually plateau. For games without a strong community — one that’s invested in the actual game — the ecosystem will collapse.
With the way many of these economies are structured, the first sign of trouble (or the next earning opportunity) will spark an exodus and capital flight — not unlike the 1997 Asian financial crisis. Eventually, token incentives go down, but the network effects and native utility that are meant to retain players have not been properly built-in.
Thus, it’s important to examine the native value of a game and its utility. Simply put, is the app designed to be fun in and of itself? Are users here simply because they want to earn money, or because they genuinely enjoy the game? And are they able to develop useful, valuable social connections, in other words, strong networks?
While it’s important to acknowledge that all users have some level of desire to make money and value extract, there needs to be a balance of users who authentically love the game itself and are invested in playing/engaging with the game even without the presence of monetary incentives.
STEPN is still in its exponential growth phase right now, but the team has already anticipated this eventual challenge when it begins to scale and is already making sure to design its app to be addicting, rewarding, and fun even beyond earning crypto.
For example, tapping into human psychology, STEPN employs daily energy allowances to bring users back daily as well as sneaker level-ups that help users see the visual progress of their exercise. We’re naturally wired to feel more motivated and excited when we can mark progress over time, and STEPN leverages this with twin positive feedback loops — physical benefits, such as feeling good and looking good from exercising, as well as digital benefits, from visually seeing their sneaker attributes and levels go higher and higher.
This is fostering a strong, robust network that is running and engaging with STEPN because they have a genuine enthusiasm for staying fit and getting healthier. Already, there are many signs that STEPN is attracting genuine, enthusiastic users who are excited about the game itself and about getting fitter and healthier, even more so than the rewards.
Perhaps the most powerful signal of this is that many users who came to earn money are staying because they’re seeing the physical rewards and benefits of the app. The STEPN Discord is filled with stories of people who say they haven’t run for years and have now developed a daily exercise habit thanks to STEPN.
This is only the start. Ahead, STEPN has plans to innovate even beyond move-to-earn to create a long-lasting social ecosystem, complete with strong native utility and network effects.
STEPN is learning valuable lessons from the past and previous mistakes of play-to-earn games and has the potential to become an even bigger force in both the crypto and fitness space.
Four months into launching, this is already starting to manifest. STEPN users are investing in their fitness and their gameplay, with most users reinvesting more in-game than they are cashing out — engaging with the game rather than trying to extract as much cash or value as possible. We’re very excited to usher in the next phase of our growth!