Stepn For Sol

December 2022

STEPN for SOL

Just something fun for the holidays. Stepn Sneaker

Disclaimer

None of this is financial advice, nor an inducement to purchase any NFT, token, or security. Please do your own research. This is just my experience, for the curious.

Introduction

As a tech laggard, I wholly missed the windfalls of early steppoors and speculators. With much of the value wrung out of the coins (GST, GMT) by the likes of Alameda, Wintermute, et al, the question stands: is it still worth hanging around the STEPN ecosystem? I’ll give you a rundown of my first week experience with the app, as I try to find out.

STEPN as a Box

While GMT is a fixed supply, GST (the primary token earned for steppin’) is infinite supply. As rule #1 of crypto and DeFi, we always ask: “what’s the token for?” In this case, it is an infinite emission token meant to subsidize the ecosystem and incentivize activity. This neatly fits SBF’s Box Model wherein (I’m paraphrasing) the object is that you put some tokens in a box, it entitles you to take more out of the box. The name of the game is to be first to get them out. Fortunately for us, Alameda and the sharks have already had their exit, so maybe we can enjoy the game in peace. But, on the whole, with a token structure like this, you can only expect the price to decrease as the supply inflates in perpetuity. So what then? You need to get paid faster than everyone else.

Game Plan

We acknowledge we need to earn as fast as possible, to win the proverbial race to zero in GST. For this reason, it makes zero sense to spend any effort or time to level up your sneakers to respectable levels. Somebody has already invested a lot of time and money to do this, so I popped over to magiceden.io and bought the cheapest level 30 (highest level) runner I could find, no frills, but it had 110 efficiency. With this first sneaker, we were set to earn GST as fast as possible based on…

The equation

GST is earned at a rate defined by the equation: Stepn GST Earning Equation

The basics are that:

You must be within your sneaker’s target range (1-6 km/h walker, 4-10 km/h jogger, 8-20 km/h runner). You don’t get paid outside of the range.
You must have energy (if it zero, you earn nothing).
Your sneaker must have durability > 50% or the earning rate is derated.
Most important, GST is earned proportional to the cube (^3) of efficiency (and an efficiency modifier, that we’ll ignore for simplicity). This being the reason we decided to buy a sneaker with the highest efficiency, and skip on pretty much everything else.

Great, we’re all set to go outside and earn. But lo, we head off at a good clip, hearing coins jingling in our headphones, and 10-15 minutes out, all earning stops. WTF?

Artificial Constraints to Earning

As a means of constraining the earning power of low level users, there are a couple of limits imposed that you have to break free from, in order for any of this to be worthwhile. The two major ones I know of are:

Energy System. You only earn while you have energy. The limits are determined by the number of sneakers you own, and how rare they are. You start with something miserably low like 2, and with 3 NFTs you get 4, which gets you 20 min of time. Own 9 NFTs and you bump up to 45 min of duration, and I feel that is the sweet spot. You need 30 NFTs to get another 15 min (60 min total), which dramatically increases the marginal cost to earn. So I stopped at 9 NFTs.
Max GST earning per day. Based on sneaker levels, and maybe some other stuff, you have a hard cap on the number of GST you can earn per day. Higher level sneakers allow you to earn GMT instead of GST, and for this, it should be noted that there is no daily cap. But at level 30 you are still stuck with a 300 GST/day limit, which sort of determines how much time you can really spent earning (probably 60-90 minutes and you’ll top out).

Sneaker Quiver

As you have gleaned so far, I have nine (9) sneakers, all of which are floors, except for my level 30 that I bought for 5.5 SOL. Total investment: 17.7 SOL. I have low level sneakers of all types (runner, walker, jogger), which I could use for dumb activities like walking in an airport or mall, but mainly I expect to use the app while running outside. Buying at the floor means you stand to lose less than if you venture out buying more expensive sneakers, particularly ones that are uncommon or rare, but offer little economic benefit versus the additional cost of procuring them. All of this entitles me to:

9 “energy” units. Refills 25% / 6 hours (100%/day), for a total 45 min of runtime per day. Equates to about $1.5-2/day or 0.15-0.2 SOL/day, but only if I use it.
300 GST cap/day; or unlimited GMT (I have not tried yet, but I will see what that looks like)

Capital Efficiency

While there is some upfront cost to buy NFT sneakers and upgrades, generally, when looking at the GST/GMT returns you get for activity on the app, it is actually quite capital efficient. Whereas you can get about 0.047%/epoch, or about 0.02%/day staking SOL (~0.05 SOL/epoch per 100 SOL), on a total investment of 17.7 SOL, I have been able to recoup about 0.1-0.15 SOL/day, or about 0.5-0.8%/day. Granted, this “yield” does not compound, but as it is released you can stake it, too, to offset this a bit. The other glaringly obviously fact is that a) the NFTs may not be worth anything by the time you have paid back your initial investment, and b) the price of GST will most likely decrease faster than the price of SOL, and most definitely versus USD(C). This would be the “risk” that is required to earn your substantially greater “yield” versus staking sol. The other obvious fact is that this is a strategy with limited upside. You are probably only able to squeeze up to $10/day or ~1SOL/day out of STEPN, at all. If that’s meaningful money to you for an extracurricular activity, great, but it’s pretty clear we’re not going to get rich on this.

Performance

Without further ado, I’ll provide the no bull breakdown of my current “investment” after 3 days: PNL

We’ve got a hole to dig out of, having to buy a level 30 sneaker, but this should be done in the next two weeks. Expect that that the payback on the entire portfolio will be protracted, as GST and possibly the floor continues to decline versus SOL, and USD.

Recap

Stepn piqued my interest when I saw just how much fuggin money was coming out of their wallet. I am unsure about the total number of users, but it clearly has some very invested and die-hard users. TBD on whether I come out ahead. This was not a comprehensive write-up, as I’m pressed for time. But I will update on my progress, and follow up with other things I’ve learned. Final thoughts: I would not consider Stepn or its NFTs an investment. It is a game. Try to win. But most of all, it is for fun. If nothing else, Stepn has provided us the motivation to leave our dark studies and offices to go touch grass. Get after it.