STEPN: a growing blockchain game considered a cryptocurrency pyramid scheme

The blockchain game STEPN has been popular among the cryptocurrency community since January 2022. Some people invest their own money and make big profits by continuing to play, while others call the game a cryptocurrency pyramid scheme and try to get their money back. Let’s try to figure out what STEPN is and whether it is really a cryptocurrency pyramid scheme.

What is STEPN and how does it work?

STEPN is an application created on the Solana blockchain that allows you to earn cryptocurrency on the principle of «Move to earn» (users move and receive rewards in digital assets). According to the project’s developers, STEPN combines earnings with a healthy lifestyle, encouraging users to move constantly.

To start earning money on the platform, you first need to buy your first pair of sneakers — invest your money in NFTs — in addition to downloading the app. In other words, to be able to earn rewards, you need to invest a considerable amount of your own savings — more than $ 1200 (Charles Ponzi would definitely be happy at this point). After receiving the virtual sneakers, users start earning millions — this is how it would look like in an ideal world, but free cheese is only in a mousetrap. After the purchase of NFT sneakers, the program starts tracking walking/running/training/any movement in real time using GPS, mobile internet, and accelerometer, as well as accruing rewards.

What are NFT sneakers and how do they help in obtaining tokens?

Sneakers from STEPN are NFT tokens, each of which has different characteristics and provides distinctive benefits. First of all, you should pay attention to the types of sneakers, as this determines the speed at which you need to move with the training mode turned on.

• Walker — speed from 1 to 6 km/h (it is better to keep the average range of 3−4 km/h);
• Jogger — speed 4−10 km per hour (optimally 7 km per hour);
• Runner — 8−20 km per hour (optimally 12 km per hour);
• Trainer — you can keep the speed in any range from 1 to 20 km (such sneakers are more expensive than others).

The following characteristics are quality and basic attributes. It is worth noting that the higher the quality of the sneakers, the more points are given for each level. They can be used to upgrade attributes.In general, the following characteristics affect the attributes of sneakers:

• Efficiency — affects the number of GST tokens awarded per workout;
• Successfulness — affects the frequency of receiving and quality of gift chests (gems);
• Comfort — affects the amount of GMT tokens awarded for walking/running (unlocked at level 30);
• Durability — affects the rate of wear of the sneakers.

Sneakers in STEPN can be upgraded to level 30. The higher the level, the higher the earnings. You can also mount sneakers and create new pairs. For minting, you need to have 2 pairs of sneakers (2 different NFTs) — combining them gives you a box that can be sold or opened to get a third pair of sneakers. The cost of a minting varies depending on the number of mints with sneakers and their quality:STEPN tokens

Like many M2E and P2E games, STEPN has two tokens: GMT (management) and GST (game).

TheGST token is a STEPN gaming token that is awarded for walking, running, and other movement. It has unlimited emission, which is controlled by burning mechanisms. For example, after each run, the strength of the sneakers decreases slightly. To repair them, you need to burn GST. GST is also needed for leveling up and for mining. Thus, the issue and price of GST directly depend on the activity of users:

• The more they walk and spend energy, the more tokens they are awarded. Users can sell tokens and thus influence the price;
• You can also use GST to level up your sneakers, repair them, or mount them. This has a positive effect on token issuance and, accordingly, on its value.

TheGMT token is a STEPN management token used for project management. It was sold during the token sale on the Binance Launchpad. GMT has a limited issue of 6 billion tokens. Some users are already preparing for the upcoming functionality and are upgrading their sneakers to earn GMT by upgrading the Comfort feature, which affects the availability of GMT.

The more users buy sneakers, the more energy is credited to their account (one pair of sneakers gives 2 energy, 3 pairs — 4, and 9 pairs of sneakers (i.e. 9 NFTs) can get 9 energy) — the more tokens participants receive.

Types of earnings in the game

• Constant movement to get tokens;
• Trading or selling your own sneakers;
• Mystery box — gems (gifts that the user can receive after active movement and either sell or exchange for other «goodies»).

How does STEPN work?
All user earnings are generated solely by the influx of new participants who start investing by buying sneakers. In other words, it is profitable to make and sell sneakers as long as there are users willing to buy them at a high price. In this game, demand creates supply. Hence the constant advertising, posts on social media, and calls from «friends of friends» to register. Accordingly, the demand for sneakers is generated by the influx of new users. As soon as the number of new participants begins to decline, the cost of the sneakers will fall, and mining and resale will simply become unprofitable.

The situation is the same with the GST token — its price is growing as long as there are a large number of users who buy GST to upgrade their sneakers and mine. If mining ceases to be profitable, then the token will not be bought as actively, and its value will start to fall.

So, is STEPN a pyramid scheme?

Actually, the situation is not so clear. In most cases, cryptocurrency pyramids cease to exist quite quickly after receiving enough funds from users and facing a decrease in demand, which means that they cannot pay rewards to new users. However, STEPN has been on the market for a long time, and the demand among users is not decreasing.

Huge cryptocurrency companies such as Sequoia Capital, Solana Ventures, and Binance have invested in the project — would these platforms invest in the Ponzi scheme and encourage their customers to do so? Most likely not.

However, it is worth paying attention to the bugs that users report from time to time. Among them is the incorrect calculation of movement speed (the tracker gives an error even when all the necessary conditions are met and refuses to credit tokens). Also, after some updates, users complained about the disappearance of tokens during the transfer of funds. The developers have already solved this problem, but there is no guarantee that this situation will not happen again and users will not lose their tokens. STEPN is a centralized application, so players cannot store NFTs on a separate non-custodial wallet — in case of blocking or other incidents, users may lose access to their rewards.

The project team can influence users' earnings by simply adjusting the system parameters. All thanks to the reward calculation formula:

N — Energy consumption;
PSE and PSEC are the sneaker efficiency and the user efficiency coefficient (including gems and other boosters), respectively;
X — average speed;
Y — NFT stability index;
Two variables are worth paying attention to: randbetween (Parameter1, Parameter2) and System value. The value of the first one is unknown and not specified anywhere. According to the technical documentation, developers can change the value of the second one at their own discretion.

Therefore, there is no unambiguous answer to the question «Is STEPN a Ponzi scheme?» because there are both pleasant «perks» and noticeable «bugs». The No Worries editorial team does not recommend investing in unverified types of income, cryptocurrencies, or NFTs. We recommend that you rationally weigh the pros and cons before investing your own savings in any project.