STEPN

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As illustrated in the diagram above, many of Stepn’s core interactions assist in creating a ponzi-like structure where incumbent player earnings are largely fueled by increasing numbers of new entrants. New players must, before playing at all, buy shoes, with the only way to buy shoes being from another player. Once in the ecosystem, existing players are able to earn their own GST & GMT and are therefore not required to inject additional capital into the ecosystem. Players may however choose to accelerate their progress through purchasing additional GST & GMT from other players, an interaction that further favors earlier entrants who have had the benefit of extra time to accumulate these tokens. At each stage of this process, the primary source of additional returns to existing players comes from new players entering the ecosystem. This drives the perceived ponzi-like dynamics, as incumbent player returns are primarily affected by new user growth. 

Currently, there are also  limited opportunities for GST and GMT holders to spend tokens earned on any action outside of this feedback loop, and limited opportunities  (due to developer controls and permissioned structure) for incumbent players to add value to the ecosystem outside of introducing new players to it. Stepn is pursuing partnerships with leading brands that could lead to new sinks for GST and GMT tokens and generate further demand for sneaker NFTs, although it is difficult to imagine such partnerships changing the relationship between incumbent and new players

While the user flow above gives a preliminary overview of how users interact with the ecosystem, the token utility and supply section expands on Stepn’s core assets and provides further insight into their particular drivers of demand.

Token Utility

Token utility classifications answer the question ‘what can the asset owner do with this asset’, and focus on benefits to end-users rather than benefits to the protocol. All classifications are based on a token utility typology of discrete utilities developed from corollaries from non-crypto environments. Classifications are based on implemented vs roadmap functionality, are non-exclusive, and are relative to the time of publication. 

Stepn assets have three live forms of utility. Support for further categories has been announced but is not currently implemented.

The key utilities associated with Stepn’s core assets are in its membership and commodity properties.  Stepn sneakers represent the key to the overall ecosystem and therefore carry a strong degree of value for users in the form of its membership utility.  Once a user becomes an active participant in the ecosystem, each of Stepn’s GST and GMT tokens' primary utility comes in the form of its commodity property. Within Stepn’s design, these tokens act in place of how soft currency may act in traditional games, being used for in-app purchases to either breed or upgrade sneakers; the GST and GMT tokens are typically spent or burned to either produce new NFT sneakers or to upgrade the earning potential of a user’s existing NFT assets. In both of these cases, the goal seems less focused on enhancing enjoyment of game-play within the app (though there are some minimal progression and customization elements, most upgrades also impact sneaker earning capacity), and more on either capitalizing on the earning opportunities provided or to re-invest in the ecosystem with the expectation of increasing earning opportunities later.

In addition to the membership and commodity properties detailed above, it should also be noted that Stepn’s project materials describe planned but as yet unimplemented infrastructure that would confer the GMT token both governance and dividend utilities if implemented. These additional utilities would likely introduce tensions with GMT’s commodity utility: the commodity utility incentivizes users to expend the token to receive upgrades, lowering balance, while governance and dividend utilities typically incentivize users to hoard tokens.

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Token Supply

Following conventions used in the design and maintenance of virtual economies, token supply is explained via three questions. How assets were issued, how much of it, and under what conditions is answered via initial distribution findings. How the asset supply expands over time is answered via source findings. How liquid asset supply shrinks over time, either through usage and burn, is answered via sinks findings, with the hard/soft distinction indicating which types of sinks temporarily lock up supply v. which permanently reduce it.

Stepn’s GST token exhibits similar properties to that of Axie Infinity’s smooth love potion (SLP). Both represent utility tokens with uncapped supplies that are minted through in-game mechanics carried out by users. Tokens like these often contain the risk of unsustainable supply inflation, especially in the case of suddenly increasing user adoption.

Find Satoshi Lab is aware of this risk, and as a result continues to control the supply parameters of not only GST but also the rate with which new sneakers are minted. While the intention of this could be seen as in the best interest of Stepn’s users, it is nevertheless a dynamic that users should be aware of, as developer intervention could occur at any point in time.

Stepn’s attempt to innovate has some  admirable aspects marred by its strategy for growth and implementation of P2P markets. Many people find it difficult to sustain commitments to being physically active. The Stepn dApp attempts to motivate end-users through three sources; its gamified (progression, self expression, etc.), social, and economic elements. Yet the systems supporting the gamified and social sources are nascent — Stepn’s growth strategy focused on initial adoption from primarily economically motivated end users and the dApp has yet to appeal to a wider base. Stepn perhaps may have appealed to broader markets through the development of its gamified and social elements had there not developed a public perception of being ponzi like. 

There’s something of a tragedy in this, as, in departing from B2C models by including players as financial beneficiaries of dApp player growth, Stepn ended up creating a system where new players coming into the system seem to have a primary motivation that is only fulfilled if more new players come in after them. (i.e. a ponzi-like dynamic.) One would have preferred an outcome where players’ valuable contributions to dApp success (from adoption, engagement, community, etc) are compensated through some sort of financial return — in contrast to the status quo of no share whatsoever —and  there was a softer relationship between new and incumbent players. (Such as might have been made through a mechanic where ecosystem fees are pooled and redistributed to walkers, providing a source of returns that does not depend entirely on new players entering the system.) Stepn’s reception and the cynicism inspired may make it harder for like projects to launch better alternatives. That would be a shame.