Since its launch in December, StepN, an app that lets users walk and run to earn tokens, quickly became a household name in the world of blockchain play-to-earn games, or GameFi. Two to three million users worldwide are now active on the app each month, StepN co-founder Jerry Huang recently told TechCrunch.
That number is a far cry from the one hundred million player size that popular Web2 titles enjoy, but in the crypto world, it’s a significant breakthrough for a five-month-old app. As of May 22, the market capitalization of StepN’s native GMT token stands at approximately $860 million.
Founded by Huang and co-founder Yawn Rong in Adelaide, Australia, StepN debuted at a Solana hackathon in October. After finishing fourth, its exposure to the event helped attract its first batch of beta users. When it was officially launched two months later, word of the app being able to earn while staying fit had already spread through the blockchain community. Without any splashy advertising campaign, dozens of users signed up.
Within weeks, StepN was growing so fast that the team had to limit the number of daily signups. Today, tens of thousands of new users are joining the app every day, according to Huang.
Huang, a serial entrepreneur, and Rong, a blockchain venture capitalist, initially self-funded the project because the pair were “financially stable.” But in September, they decided the fundraiser could bring in other meaningful resources like partnerships and publicity. The founders spoke to more than 100 investors and revised their pitch deck more than 40 times before closing a $5 million funding round from Sequoia Capital and others in November.
“We didn’t have a product at the time and a lot of investors didn’t understand what we were doing. Sequoia did. The process of answering investor questions also helped us refine the product to where it was later,” Huang said.
Indeed, the fast-growing app appears to be self-contained for now. He generates a net profit of $3-5 million per day from trading fees and earns up to $100 million per month. In April, he picked up another round of strategic investments from Binance.
Is it a game?
Some argue that what makes StepN – and other blockchain games like Axie Infinity – so successful is the fact that it’s basically financial products with a playful twist.
To start earning tokens and logging mileage on StepN, users must first spend at least 12 sol or around $600 for a pair of virtual shoes at the current market rate. The digital shoes come in the form of a non-fungible token (NFT) that runs on the Solana network and Binance’s smart chain and can therefore be resold later, but the entry fee is still not an insignificant amount for any casual player.
Over time, StepN users will need to accumulate new kicks to level up. the the usual payback takes about a month, after which people can start earning up to several thousand dollars a day depending on their level, activity, and current StepN token price. In other words, gambling can be quite lucrative.
In the eyes of some gaming veterans, the gameplay of most existing GameFi apps is “easy and insane”. Axie Infinity, for example, features cute blob-like creatures that fight in simple battles. As such, Web2 game incumbents are entering GameFi in droves, pledging to bring quality back to the industry.
Huang begged not to agree. “A lot of triple-A games put too much emphasis on aesthetics and big budgets, but they’re not really innovative when it comes to gameplay, whereas some seemingly simple games like Plants vs. Zombies come with gameplay brilliant that makes them last,” said Huang, who ran his own game studio in China before moving to Australia a decade ago.
“Many GameFi newcomers blindly pursue triple-A productions,” he continued. “But if they hadn’t already succeeded in web2, why would they be in web3? Some seemingly simple games aren’t so simple behind the scenes, for example, the way we design our app economy.
Is it sustainable?
Other critics question the financial viability of gambling to win. Maintaining such a business model means that the gameplay must either be so addictive that users continue to play without cashing out their coins, or the app continues to attract new users who buy only to replace those who cash out. Critics have even drawn parallels between gambling to win and pyramid schemes.
Axie Infinity was unable to sustain its meteoric rise. Sky Mavis, the Vietnamese game studio behind the game, was valued at $3 billion in a $150 million funding round last October. But its token has lost more than 80% of its value since peaking in November at $160, and its sales volume has fallen from $754 million to just $5 million.
Losing a few thousand dollars isn’t the end of the world for most StepN users, who are in their 20s and 40s and come from wealthy countries like the US, Japan, and Europe. China, where crypto trading is banned, accounts for less than 5% of its user base, Huang said. But Axie Infinity players are concentrated in developing countries like the Philippines and Venezuela, many of which are betting a significant portion of their savings on gambling, a major source of their income during the COVID pandemic.
StepN offers a double solution to sustainability. For one, it is working on a price stabilization mechanism to ensure that the cost of its parts is always at a rate at which the shoes are affordable for new users, but also not so cheap as existing users. don’t have the incentives to make new shoes, i.e. create new shoes on the blockchain and sell.
Price manipulation is achieved through its dual token system. When the price of its GST “Utility Coin” is too high and the shoes become expensive, StepN will ask players to burn its GMT “Governance Coin” to craft new shoes. GST’s supply increases accordingly, leading to a liquidation and a drop in its cost.
Huang also argued that the fitness component of StepN makes it fundamentally different from Axie Infinity. “Yes, users can earn money with StepN at first, but over time they will also get used to staying active, so they will continue to walk or run regardless of financial rewards.”
“A lot of people don’t see StepN as a real game. They also don’t see it as a running app because users can earn revenue from it,” said Curt Shi, founding partner of Welinder & Shi. Capital and an early investor in StepN “It’s hard to define what it is right now, but time will tell.”
Application that kills?
Huang’s other defense is the role StepN could play in evangelizing blockchain to the world. An estimated 30% of app users have never used blockchain services before.
“Many people may have used centralized exchanges like Binance and Coinbase to trade, but few know what a DEX is [decentralized exchange] is, neither have they traded NFTs on a marketplace or owned a self-service wallet. We have the potential to integrate tens of millions of Web3 users and I think that’s a very significant thing.
“I think people pay too much attention to the [sustainability] problem,” the founder continued. “ROI can slow down over time, but all games have lifecycles. You also need to look at the value created by an app.”
Momentum may slow sooner than expected for the app amid crashing crypto stocks. Venture capitalists are warning startups to prepare for a “crypto winter” and industry giants like Coinbase are putting the brakes on hiring. As consumers lose faith in the market and become less willing to spend on tokens or NFTs, blockchain applications that rely on attracting new users to boost their savings may face more hurdles.
But Huang is finding a silver lining in the current downturn. “There was a lot of foam on the market. Now that the bubble is bursting, our shoes will become more affordable, and only the [blockchain] apps with a real use case will survive.
“The market was clearly bubbly, so it’s a good thing that [StepN’s market cap] decreased over the past few days,” Shi said. “Maintaining an ultra-high market cap can be stressful for the team, and now the team will be more focused on the product itself and we believe StepN will outperform in the downside and be a winner in the next bull market.”
Operating with a growing team of 70 people in countries including Australia, UK, US and Singapore, StepN’s next step is to build a social product around its community of token holders. . The challenge now is to prove that it can continue to attract a steady stream of new riders.