Since last year, there have been bear market fears in financial markets, and the crypto space is no exception. In particular, the recent collapse of LUNA has exacerbated market concerns.
Many people think that STEPN will become a representative project of the collapse after LUNNA, because they all suddenly become popular with high returns, and the product logic is based on the expectation that more and more people will join.
So is STEPN a Ponzi scheme? Is the ending a crash or a bubble?
Ponzi schemes and the Ponzi model
STEPN is Ponzi, but when we discuss Ponzi, we need to distinguish whether we are discussing the “Ponzi Model” or the “Ponzi Scheme”.
A Ponzi scheme is a pyramid scheme. The “scam” is because its economic model is unsustainable. It promises high returns, and then uses the money of the latecomers to reward the early entrants. When there are not enough latecomers to join, it will quickly crash.
The whole process of the Ponzi scheme does not create value, but a porter of value—removing the east wall to make up for the west wall, but this is not the reason for the collapse. After all, the essence of finance is the exchange of value across time.
What really makes the Ponzi scheme collapse is because the whole process of value transmission has no externalities, it is just a game of drumming and passing flowers. Therefore, in order to maintain the high returns of the scam, there must be more latecomers to support the first entrants.
So it’s not that there are no latecomers, the Ponzi scheme will collapse, but when the “new” amount cannot cover the amount necessary to maintain the existing amount, it will collapse instantly. Note that there must be more “new” than “existing”.
All Ponzi schemes are Ponzi schemes, but Ponzi schemes do not mean Ponzi schemes, otherwise pensions in all countries in the world are Ponzi schemes.
The difference between them is whether the “external value” generated by the project can gradually offset or even completely replace the drumbeat. For example, last year, the investment rate of return of my country’s basic pension insurance fund reached 10.95%. If there is no external value, then the more new additions, the bigger the bubble, because new additions mean more pressure to cash out.
There is no doubt that STEPN’s economic model is a Ponzi model, and its high returns are actually the latecomers supporting the first entrants. As for whether STEPN is a Ponzi scheme, it depends on whether the growth of its externality value can offset the pressure brought by the new increase in time.
Growth pressure for StepN
There is no perpetual motion in the physical world, and even if there is a perpetual motion phenomenon, it is unsustainable, and the same is true in the financial world.
STEPN’s governance token is STEPN (GMT), and although it has fallen 61.5% from its high of $4.11 at the end of April, it has risen 1470% from its price at the beginning of its launch in March.
For the game mechanics of STEPN and the basic knowledge necessary to play, you can refer to “Using GameFi+SocialFi to Realize “Move to Earn” previously released by Chain Tea House. Can STEPN carry the unfinished ideals of Funbu? “, here only briefly introduces STEPN’s economic model, focusing on STEPN’s growth pressure.
STEPN’s gameplay is “Move to Earn”, that is, to buy running shoes NFT, and then run to earn GST tokens as rewards. GST tokens can be used to repair running shoes and buy/open blind boxes to obtain gems (which can enhance the properties of running shoes).
GST is equivalent to the game currency of unlimited output, and you can buy running shoes and gems with no upper limit, so many ordinary players are playing gold, that is, regular running to earn GST tokens.
There are also users who make money through arbitrage through Mint, by consuming GST and GMT tokens, pairing two running shoes, and getting new running shoes.
It is undeniable that there are real players, but the influx of new users and gold-playing studios are all for the super high annualization. The annualization here is the token GST that motivates every day to run.
The logic is: buy running shoes – stimulate more people to Mint – consume more GST tokens – raise the price of GST tokens – attract more people to buy running shoes to earn GST tokens…
Therefore, whether it is focusing on running or focusing on Mint, the benefits of users of the entire STEPN ecosystem come from more people joining. Of course, this process will also stimulate the rise in GMT prices.
If we look at it as a pure running APP, then StepN does not have any growth pressure at all, just maintain the existing users. But STEPN’s users are obviously for Earn instead of Move, so the prices of GST and GMT tokens are very important, they determine the cost of users, and also determine the life and death of STEPN.
Note that it is not that higher GST prices are more attractive. The sharp increase in GST is beneficial to old users, but it will increase the cost of new users, thereby prolonging the return period.
Therefore, GST needs to grow, but not too fast, which is no less difficult than walking a tightrope.
If STEPN’s daily rate of return (over 2%) is a reasonable rate at present, then STEPN’s users will need to exceed 370 million next year, which is more than the world’s most user-friendly fitness app, Keep. More importantly, STEPN will still face growth pressure next year, and it will be more difficult to reach.
If the externality value is not considered, STEPN will collapse, but it cannot happen when the number of users decreases, because the collapse has already been triggered when the user growth is not fast enough.
The logic is: Fewer people buy running shoes – Fewer people Mint – More and more GST tokens – GST token prices fall – The return period is further extended – Fewer people buy running shoes…
Now that STEPN’s growth has slowed, if it continues, the bubble will burst sooner or later.
The externality value of StepN
But STEPN and LUNA are fundamentally different – LUNA only has speculative attributes, STEPN also has game and social attributes, but at this stage it is dominated by speculative attributes.
So even if STEPN suddenly collapses at this stage, for the vast majority of users, they should pay for the fitness card.
Of course, the vast majority of users own a very small portion of the funds… The loss is only considered by the super users and advanced users who account for the vast majority of deposits – they are willing to pay for STEPN’s game value, but certainly not willing to pay so much many.
STEPN avoids the fate of collapse, the only direction is to increase the externality value.
In fact, STEPN also tried to de-bubble in the same way, although it had little success, after all, it had been kidnapped by the Golden Studio.
STEPN’s direction is to increase the value of externalities. There are many ways to achieve it. In a word, it iterates around gameplay and social attributes. This may seem like nonsense, since every GameFi project describes the future that way. But the difference between STEPN and ordinary chain games is that STEPN is not only a product of the virtual world, but also controls users to exercise in the real world for one hour a day.
At least from the perspective of PUA (that is, PUA as you understand it) to apply Internet slang, STEPN is a product that has successfully occupied the “user’s mind”.
According to STEPN’s latest official statement, “We work to minimize the sharp fluctuations in GMT and GST”.
For example, the double GST reward event was introduced to stabilize the price of GST. Such as raising the cost of Mint, but reducing the need for GST, and replacing it with more GMT tokens. The measures are to suppress the price of GST and increase the price of GMT.
These minor fixes can only play a temporary role, the bigger change is dynamic minting, which is the latest Mint model.
For example when GST < $2, Mint cost is 200GST, i.e. less than $400 cost is all GST. When GST > 10 USD, Mint cost is only 40GST, and 160GMT is required, where the GMT price is determined by the market. In short, GST will have different Mint strategies in different price ranges.
At current GST and GMT prices, Mint costs about $510.
Although STEPN officially has high hopes for the dynamic minting scheme, considering the lessons learned from LUNA and UST that have just happened, when the downward spiral starts, this dynamic minting will accelerate the thunderstorm.
As we said earlier, perpetual motion machines do not exist, StepN avoids the fate of collapse, and the only direction is to increase the value of externalities.
Everything STEPN officially does to add value to externalities can be grouped into two categories.
One is to guide users to shift their attention from profitability to health. Discover value from running and gradually replace the value brought by yield.
In fact, for ordinary users, this does work. Many people used to walk no more than 30 minutes a day. Because of STEPN, they now walk or jog for 1 hour every day, which has brought about changes in their bodies and even their living conditions.
But don’t forget that ordinary users are only in number. The real economic value of STEPN is dominated by super users and advanced users. They are few in number, and most of them are driven by economic rationality. STEPN should be ready for them to leave. .
The other is donating the proceeds to charity, which is building the STEPN brand.
For example, working with Nori to combat climate change and achieve carbon neutrality, $100,000 per month for carbon removal, that is, to pay for carbon removal through Nori’s market. In cooperation with the FTX.US team, the auction proceeds of the No. 999 sneaker will be donated to charity through the FTX Foundation.
In fact, there is a third type of method. At present, there are ideas but no action. That is to support the mini-union centered on STEPN, that is, to encourage users to establish a small union composed of people around them. It can be understood as the use of push orders to cut down the vassal, but no support policies have been introduced yet.
STEPN’s Ponzi model is destined to be unsustainable, and it will usher in a thunderstorm moment, and the skyrocketing or slumping GST price will trigger a thunderbolt. Although the STEPN team tried to revise the economic model to avoid a thunderstorm, it was still something that would happen sooner or later.
But unlike the Ponzi scheme, STEPN has external value, which has the possibility of a turnaround – external value gradually replaces drumming and passing flowers.
The potential of STEPN’s externality value is higher than other GameFi projects, because STEPN is not only a product in the virtual world, but also dominates users to exercise for one hour a day in the real world, which will have more profound changes to the body and even life.
At present, the STEPN team’s actions to increase the value of externalities are to stimulate the experience of ordinary users and build brands. These actions cannot bring immediate effects, but can bring longer-term and more useful value – scolding when it crashes will be much less.
STEPN is still very immature in adding externality value, and it is no more externally valuable than the fun step created by the owner of a bicycle shop in Changsha.
If we ask for the standard of excellent Internet product people, obviously STEPN still has a lot of iterations around gameplay and social interaction. But who knows if it can be achieved? After all, from the controversy caused by the launch of BNB Chain, it can be seen that the product capabilities of the STEPN team are indeed in a hurry.
Therefore, we cannot predict when STEPN will collapse from the perspective of God, because there are many uncertain factors that can combine different results.
But in any case, STEPN is a Web3 product with external value. As for whether the external value can be discovered to replace the growth pressure, the STEPN team can only give time to answer.
“Whether it’s a bear market or a bull market, we’ll stay the course and focus on what we do best – building!” the latest answer from the STEPN team.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/stepn-is-ponds-but-can-its-externality-value-de-foam/
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