Sequoia India leads the investment, interpreting how "STEPN" ignites the blockchain gaming market

Author: Qin Xiaofeng, Planet Daily

First published in early March

In the past few months, the hottest blockchain game in the GameFi market has been "STEPN." This game is built on the Solana blockchain and claims to be the world's first Move To Earn (earn while moving) NFT game.

In January this year, "STEPN" announced the completion of a $5 million seed round financing, led by Sequoia Capital India and Folius Ventures, which made headlines; recently, Binance Launchpad announced that it would soon launch the STEPN governance token GMT, reigniting the enthusiasm of blockchain game players.

Amidst the praise, "STEPN" has also been questioned as a "copy of Qubao." However, a careful analysis of the economic models and gameplay of the two reveals essential differences.

The core model of "Qubao" is a Ponzi scheme that relies on recruiting new users for dividends, with tokens continuously issued and no consumption scenarios, ultimately leading to price collapse and project exit. "STEPN" does not rely on recruiting new users; instead, it has developed diversified sports gameplay and designed various token application scenarios, ultimately achieving a dynamic balance between token minting and burning.

"STEPN's goal is to encourage millions of people to lead healthier lifestyles, bring them into the Web 3.0 world, and make a positive contribution to carbon neutrality," the official STEPN statement said.

Is the innovative gameplay of "Move To Earn" really reliable? Can the emerging player "STEPN" succeed in breaking out like "Axie Infinity" and bring incremental growth to the crypto market? Odaily Planet Daily personally experienced this game and will deeply analyze the project's economic model and development prospects in the following text.

(1) Web3 Blockchain Game "STEPN," Popular Overseas

"I'm glad to witness the origin of 'Move to Earn.' I believe that in 2022, more people will be obsessed with STEPN." Recently, Scott Dunlap, Vice President of Adidas and CEO of Runtastic, expressed on social media. This is not the first time Scott Dunlap has praised STEPN; he has previously tweeted multiple times recommending the project and claimed that "STEPN will be the dark horse of the industry in 2022."

Many others, like Scott Dunlap, are optimistic about STEPN. Over the past few months, numerous fund managers and crypto KOLs have transformed into "word-of-mouth" promoters for STEPN, recommending this blockchain game to users both inside and outside the community. They either affirm it on social media or write articles introducing gameplay and analyzing the economic model:

• "This is such a simple design. People equip NFT sneakers and earn tokens by walking or running. The game includes a complete decentralized wallet with SWAP exchange, cross-chain conversion functions, and a comprehensive anti-cheat mechanism to prevent exploitation," said Mike Dudas, former Google Wallet executive and partner at 6th Man Ventures.
• "STEPN is the first of its kind, filled with gamification and mobile earning mechanisms. Soon, every runner will earn tokens and collect NFTs while tracking their progress. This intersection of crypto incentives, NFT collectibles, and real-world utility provides us with a solution for the integration of the physical and digital worlds," said Dan Patterson, partner at Sfermion.

STEPN is a Move To Earn NFT game based on the Solana public chain, previously ranking fourth in the Solana "Hackathon" blockchain game section and receiving an official grant reward.

Move To Earn games are a new form of GameFi where players can use their exercise data as gamified input to earn tokens and NFT rewards.

"Back in early August last year, STEPN generated this idea. Although it was not the first project to propose the M2E concept, STEPN was the fastest to 'cash in' on this idea, completing product delivery in just 120 days," the STEPN team stated.

According to the official website, in November last year, STEPN launched its beta version, inviting over 1,000 players from 43 countries to participate during the testing phase, achieving a weekly player retention rate of over 70%; in December last year, it launched the public beta version, and within less than a month, STEPN's download volume in the Japanese app store surpassed that of Nike, igniting overseas forums. Currently, STEPN has over 30,000 daily active users and is hailed as the next "Axie Infinity."

(1) Diverse Gameplay, Breaking Out of Homogeneous Competition in Blockchain Games

The basic gameplay of STEPN is quite simple: players equip NFT sneakers in the game app and earn token rewards by running in the real world. The earnings can be used to upgrade or repair sneakers to improve "earning" efficiency or can be sold directly.

The specific steps are as follows: players first need to download the STEPN App from the official STEPN website and register a STEPN account via email; after registering and logging in, players can create or import an existing Solana wallet in the game and transfer SOL from an exchange to the wallet address to purchase NFT sneakers and receive game rewards.

In the app market, players can purchase NFT sneakers, which come in four different types: Walker, Jogger, Runner, and Trainer. Different types of shoes have certain speed limits for players; for example, the speed limit for Walker is 1-6 km/h, and exceeding this range will result in no token earnings. The prices of different types of shoes also vary, with Trainer being the highest due to its broad speed limit of 1-20 km/h.

Each type of sneaker is further divided into five qualities: Common (gray), Uncommon (green), Rare (blue), Epic (purple), and Legendary (orange). The attributes and token earnings generated by shoes of different qualities vary.

After purchasing NFT sneakers, players can officially participate in the game. The gameplay includes:

· Single-player mode: Players click "Start" on the game page to begin running and earn tokens; under the same NFT sneaker conditions, the longer the exercise time, the more tokens earned. Of course, there is a daily exercise time limit ("energy"), and once it is exhausted, token earnings will stop, which will be highlighted in the economic model analysis later.

· Minting new shoes: Players can use two pairs of sneakers that have reached level 5 to mint new shoes. Each sneaker has 7 chances to mint new shoes; each minting produces a shoe box that players can either sell directly in the NFT market or open to continue upgrading and minting new shoes.

Interestingly, when minting new shoes, "mutations" can occur, meaning even two pairs of common shoes can mint high-quality or different types of shoes. Some players in the community have reported minting an Uncommon shoe from two Common shoes and selling it for over a thousand dollars.

· Renting sneakers: If you have many sneakers, those that have reached level 10 can be rented out; during the rental process, no deposit is required, but the NFT cannot be transferred out of the account; ultimately, STEPN will charge an 8% tax rate on the revenue split, with a fixed income distribution ratio of 3/7 between the renter and the owner. The rental gameplay can collaborate with future gold farming studios for revenue sharing, bringing considerable income to NFT players.

In addition to the three gameplay types mentioned above, STEPN will also open a marathon mode where players can choose to participate and ultimately earn significant rewards based on their rankings. Furthermore, it will support a background mode in the future, allowing players to earn GST without opening the STEPN App, as the app will directly obtain step counts from the player's mobile device health data. Note: For specific gameplay and rule introductions, you can click to read related articles.

(2) Some Issues Still Need Improvement

"The design of the STEPN game is indeed quite good, but it can be a bit 'troublesome.' Sometimes, if you walk without swinging your arms and keep your phone in your pocket, the data may vary, leading to a decrease in the number of tokens earned," Player A reported to Odaily Planet Daily.

In fact, the root cause of the above issue lies in the design of STEPN's anti-cheat mechanism. To prevent players from falsifying exercise data for improper benefits, STEPN uses a gravity sensor to obtain players' exercise conditions. The "wavelength" of human movement varies significantly under different exercise states, proving the authenticity of the player's exercise.

Of course, this mechanism may occasionally have "collateral damage." For example, in cold northern regions, players may just want to keep their phones in their pockets while walking, leading the system to determine them as inactive, which requires the project team to further optimize the system algorithm for more accurate exercise state detection.

In addition to the above issues, some players have reported that STEPN often fails to track steps or has inaccurate data in underground passages or office buildings. STEPN has stated that these issues are mainly due to unstable GPS signals, and there is currently no ready-made solution, but they are researching a new algorithm—during the latest Beta test, its GPS accuracy improved by 70 times compared to traditional running apps and GPS devices.

In the game, players need to transfer SOL from their wallet address to the spending account in the game system to purchase NFT sneakers and receive game rewards. However, sometimes the transfer time between wallets is long, and the operation between the two accounts is inconvenient; internal wallet transactions occasionally face difficulties, and the existing NFT market appears chaotic, making it hard to view historical records. To address these issues, the official recently announced that in the next version upgrade, the spending account will be merged with the wallet, and the NFT market will be upgraded to facilitate user transactions.

Finally, some players have reported that the NFT floor price has risen from the initial 1-2 SOL to the current 8-10 SOL, and the price of the token GST has also increased, leading to higher game costs for new players and extended payback periods. Of course, this issue reflects the rising popularity of the game to some extent, which is a common challenge faced by all blockchain games during their growth phase and is currently difficult to resolve effectively.

(2) Is STEPN a Copy of "Qubao"?

For sports enthusiasts, the "Move To Earn" model indeed brings considerable income to this group. This has made STEPN a hit, quickly breaking into the mainstream and becoming a new favorite in the blockchain game market.

However, some users interpret STEPN's model as "exercise equals mining," inevitably recalling the popular game "Qubao" from a few years ago. Some skepticism also suggests that STEPN is a copy of Qubao and will inevitably lead to collapse. But is this really the case? Will STEPN repeat the same mistakes?

STEPN believes that the fundamental reason for the failure of projects like Qubao and other similar projects lies in the inability of the project team to find a balance between token minting and burning, and the emergence of GameFi precisely addresses this issue. To this end, STEPN has designed a more comprehensive economic model and adopted a dual-token model.

First, let's analyze the economic model of Qubao. Its gameplay requires players to invest in scrolls, generating candy tokens through scrolls and activity levels; if new users are invited to purchase scrolls, higher activity levels can be obtained, leading to higher earnings. The end result is that the game becomes a relay race of recruiting new users, violating the original purpose of exercise. Additionally, Qubao's candy tokens are continuously issued with no consumption scenarios, leading to a waterfall-like price drop and eventual collapse. Over two years, the number of victims of Qubao increased to 120 million, and it was investigated by police in multiple regions for suspected pyramid schemes, illegal fundraising, and financial fraud.

The most essential difference between the STEPN model and Qubao is that players do not need to recruit new users or offer rewards for inviting users; STEPN uses a dual-token model, setting multiple application scenarios to increase token consumption while continuously creating "barriers" to reduce output, achieving a dynamic balance between issuance and consumption.

Specifically, STEPN has two tokens: GST and GMT, which have overlapping functions and roles but also differ. The supply of GST is unlimited and is mainly generated when players exercise in single-player mode or background mode; GMT, on the other hand, is limited (6 billion tokens) and can be obtained when sneakers reach the highest level (level 30).

In terms of output, STEPN has set a daily output limit, and the GST and GMT earned by players each day are limited. Initially, players can earn a maximum of 5 GST per day, and after upgrading their sneakers, they can increase their daily GST earning limit to 150; the daily earning limit for GMT is 5.

Regarding usage scenarios, the main uses of GST and GMT are as follows:

1. Upgrading sneaker levels. Players can burn GST in the game to upgrade their sneakers from Lv1 to Lv28, but the number of tokens required for upgrading increases exponentially with the sneaker's level; to upgrade from Lv28 to Lv30, players need to burn both GST and GMT. The token consumption required for each upgrade stage is as follows:

Data compiled by community members

2. Accelerating upgrade time. Each upgrade requires time; for example, upgrading from level 29 to 30 takes 30 hours, and some users can choose to accelerate the upgrade, which also requires using GST as the token, with the cost of acceleration increasing exponentially at each level.

3. Sneaker repairs. Each time NFT sneakers are used for running, they wear down (with a maximum score of 100, which decreases continuously), and once the wear exceeds 50%, the token generation efficiency will significantly decline, meaning players must continually maintain their sneakers, with GST being the basic token for maintenance, creating strong demand.

4. Minting new shoes. Minting ordinary, green, and blue shoes requires burning GST; while minting purple and orange shoes requires burning GMT, with the number of tokens needed increasing linearly with the number of mints. For example, minting two ordinary shoes with 0 mints for the first time requires 200 GST, which is currently about $700. The specific data is as follows:

In addition to the major functions mentioned above, GST can also unlock gem slots (gems can increase skill points for sneakers) and upgrade gems as well as reset sneaker attributes.

GMT can be used for high-end in-game activities, such as renaming sneakers and advanced upgrades; more importantly, GMT can be used for game governance. The profits in the game are voted on in a DAO manner, and GMT holders will decide how much of the game's profits will be used for carbon neutrality as rewards for them. Additionally, by locking GMT in the profit pool, players will also gain higher voting rights.

Many people may compare GST and GMT in STEPN to SLP and AXS in "Axie Infinity," but there are significant differences between the two.

SLP is uniformly minted, with no continuous token burning, only being burned in specific application scenarios (like breeding), which can lead to inflation as the generation of tokens outpaces their consumption. Moreover, excessive intervention by game developers in the game economy can irreversibly alter market expectations regarding external interventions, making such interventions increasingly ineffective. STEPN iterates on the foundations laid by predecessors, designing various "token application scenarios" for paying players to fully utilize their tokens; at the same time, it also accommodates players without NFTs, providing them with a window to enter the game (rental system).

"By carefully analyzing the economic model of Axie Infinity's native token SLP, we have clearly identified the challenges in game token design—if the supply of game tokens is unlimited, how do we balance supply and demand? From Keynes to Hayek, from token circulation to network effects, we have conducted research," the STEPN team stated. "We found that the uniform minting of game tokens must be managed through the uniform burning of game tokens to convert them into different forms of assets. This conversion can be voluntary, mandatory, or structural. The temporary minting of game tokens must be managed through the consumption of game tokens to create value beyond currency."

The end result aligns with the team's expectations: after the launch of GST, its price has remained stable without dramatic fluctuations. Recently, influenced by market sentiment, some new users began hoarding GST, causing the price to rise to $3.5 at one point.

In summary, STEPN has established a dual-token economic model: on one hand, it creates diverse scenarios for GST and GMT, enhancing usability; on the other hand, it controls the output of GST and GMT, reducing selling pressure through a dual approach. Players find it difficult to simply rent and sell for profit, and asset returns are implicitly limited and diversified. This helps to address the issues previously faced by blockchain games, aiding in avoiding a death spiral during bear markets, which is precisely the greatest hidden danger faced by most blockchain games.

(3) Paradigm Shift from P2E to M2E

In 2021, "Axie Infinity" became popular in Southeast Asia, expanding the "Play to Earn" (P2E) model beyond the crypto community and introducing more people to GameFi blockchain games. The emergence of "Stepn" has similarly sparked a wave of change in the blockchain game industry: a paradigm shift from P2E to M2E.

From a gameplay perspective, previous blockchain games had high professional requirements for players, who needed to learn relevant skills, and some gold farming studios even trained players specifically. STEPN, however, focuses on the more refined "M2E" concept, which has a broad base and low operational threshold, allowing players to participate in the game simply by clicking "Start" on the homepage and exercising.

For users outside the crypto community, the learning cost of blockchain is high, and if blockchain games add a lot of complicated operations, it will further hinder traditional users from entering the blockchain world. In this regard, STEPN is undoubtedly more user-friendly for those outside the community.

STEPN believes that "M2E" has vast market potential. A survey mentioned on the project's official website indicated that in 2017, there were 55.9 million people in the U.S. who participated in running and 111 million who engaged in walking for fitness; in 2021, the online fitness industry achieved a 33% annual growth rate. If expansion can be achieved in this field, it means that M2E games can drive millions of people into the Web 3 market. Therefore, to further promote this concept, STEPN has previously sponsored two charity running events in Australia.

Additionally, using sports and health as a starting point further enhances STEPN's social value. Previous blockchain games required players to stare at the screen for long periods and perform manual operations; STEPN liberates players' hands and eyes, allowing them to gain health and economic benefits through exercise.

"Unlike the Play to Earn games we've seen, Move to Earn projects create a system that connects the on-chain world more closely with the real world. It is no longer just decentralized finance dressed in a gaming facade, nor is it merely to incentivize players to earn rewards while monotonously clicking through pages with almost identical mechanism designs. Instead, it fully mobilizes their enthusiasm for exercise, providing passive income while also promoting physical fitness," the STEPN team stated.

More importantly, adhering to the values of low carbon and health, STEPN also contributes to the global carbon neutrality cause.

According to the official plan, GMT holders will decide through community voting how STEPN allocates project fund profits to purchase on-chain Carbon Removal Credits, thereby supporting the global carbon neutrality cause in a more open and transparent manner. Additionally, users can voluntarily choose to donate their GST—these GST will be converted into USDC or fiat currency to purchase carbon neutrality credits or be burned.

(4) Conclusion

Every game has its own lifecycle, and maintaining the longevity of a game is very challenging. To address this dilemma, the vast majority of games continuously introduce new and diverse gameplay in an attempt to retain old players. However, repeated version iterations gradually increase the learning costs for new players.

STEPN has learned from this lesson, adhering to the simplest exercise gameplay, allowing more users outside the community to easily enter the world of blockchain games and participate in the blockchain wave through health and exercise. At the same time, through a dual-token economic model, it creates a balance between token minting and consumption, helping to avoid the game falling into a death spiral during bear markets.

STEPN's philosophy has also garnered capital favor. In January this year, STEPN announced the completion of a $5 million seed round financing, led by Sequoia Capital India and Folius Ventures, with participation from Solana Ventures, Alameda Research, 6th Man Ventures, Sfermion, former ParaFi Capital partner Santiago Santos, and Republic Asia partner Zhen Cao.

The new M2E paradigm is changing the future of blockchain games.