A new NFT model has recently hit the news, StepN, which is a game/program/model in which users have the opportunity to buy an NFT sneaker which represents their real sneaker and is linked to their movements via their cellphones or smartwatch. They can then be rewarded with cryptocurrency according to how much they actually move in any given day. I thought I’d look at this model in more detail.
Though not a Vietnamese based game–it’s co-founded by two Asian-Australians–StepN requires a buy in of the approximately $1000US in order to obtain the NFT that is linked to a step counter app that can be downloaded to a mover’s phone. By tracking the number of steps the NFT shoes take, a mover can earn the game’s utility crypto tokens, GST. This token is on public exchanges and can, therefore, be exchanged for more valuable crypto or eventually hard currency. GST currently has no restrictions on the amount that can be placed in circulation. The founders say that someone can earn up to $450US worth of crypto a day for running an hour. The governance token, GMT, is limited to 6 million tokens and can only be earned once a mover has reached level 30 in the StepN biosphere.
The article points to two flaws in this model, both of which are intimately known to Vietnamese NFT investors as the Axie Infinity play-to-earn has recently suffered them.
First, with an unrestricted supply of the utility token GST, the more people who use StepN the more GST will be issued and the value of the GST issued will decrease against other currencies, thus decreasing the incentive to walk/run and making it harder to recoup the initial investment. However, this is moderated by the ability to actually earn the governance token within the StepN ecosphere. WIth Axie Infinity, players were only able to earn the unrestricted coin. The problem, rather, is that once the six million tokens of GMT enter the ecosphere, the founders lose the incentive they have built into the game. In theory, once a mover reaches the elite level 30, they must use their GMT in order to purchase the increasingly expensive upgrade NFT options. And even if they cash out their GMT on a crypto exchange, the only place that the GMT truly has value is in the StepN ecosphere in which case the GMT will be returned to the ecosphere and used to make purchases and thus return to the founder bank. Whether that will be enough to avoid the issues of inflation that floundered Axie Infinity and other play-to-earn games in the past is uncertain. The economics are too new and it is difficult to predict (especially for someone who isn’t an economist) the outcomes.
The other issue raised by the article is the concern that this move-to-earn model is similar to a pyramid scheme in which the early adopters are really the ones who will benefit as subsequent adopters’ buy-ins will be used to fund the payment for the early adopters. This would be true if the GST and GMT were not exchangeable on a public crypto exchange, but in this case, the time of buy-in is less a determinant than the level of movement. This means that the infusions of value into the ecosystem from new entrants will benefit those at level 30 and above rather than those who came first. While albeit, those who came to StepN first are likely to be the first ones to reach level 30, that placement is not exclusive nor is it dependent on time of adoption.
For me, StepN is the first platform based on the blockchain which actually seems to have some benefit to mankind. Cryptocurrency, which requires proof of work to mine, does not direct that work towards any potentially useful result, it is simply the use of computational power to churn through algorithms. I remember when I was in high school and college you could donate your unused computer time to the Search for Extraterrestrial Intelligence to help the project process findings from its radio telescopes. While not necessarily a hugely useful contribution to society, it was, at least, a contribution. Cryptocurrency has failed to meet even that level of usefulness.
And the NFT craze has yet to truly do anything useful. Basketball pictures, bored apes, and other signed (blockchain located) images and content that have largely been sold for the profit of the one selling them. Even Axie Infinity and other play-to-earn games do nothing to actually contribute to society other than to entertain those low level players in the Philippines who rent out their time to rich landlords from Europe and America. Axie does not create anything or accomplish anything. It is simply a way to move funds between landlords and players and founders and investors. There is no net gain to the ecosystem of society.
With StepN, for the first time, the concept of NFTs and cryptocurrency are being used for a purpose which helps people and improves the lives of those who buy the NFTs. Though it is possible to rent out the NFT sneakers to others to run and walk and earn the owners of the sneakers GST and eventually GMT, it is not the main goal. The main goal is to encourage physical fitness, and it accomplishes this in two ways. First, there is the cost of buy-in. Nearly a thousand dollars to buy a pair of NFT sneakers. That’s a considerable investment and to fail to run/walk in order to recoup that investment would mean a negative result for the purchaser. Second, there’s the reward of cryptocurrency to encourage positive behaviors. A carrot and stick approach that might be much more effective as motivation than other means.
Ultimately, StepN is the first time I have seen a real world utility to NFTs. With luck, this will succeed more on the merits of individuals actually running/ walking rather than renting out their NFT sneakers to other runners and the benefits will be duplicated in other areas of endeavor. Imagine an study-to-earn or a volunteer-to-earn model that would encourage students to spend time hitting the books or individuals to help others. With the increasing capability of technology to monitor behaviors through phones and other sensors, who knows what the limit of potential for the (blank)-to-earn model might be.