In 2018, Sweatcoin launched an app that rewarded users with virtual coins for exercising, which could be exchanged for vouchers from partner brands. About three years later, in 2021, the Move to Earn game STEPN was introduced, allowing users to earn financial rewards through physical activity. Although STEPN shared many similarities with Sweatcoin, the closest concept to existing Move to Earn services, it integrated NFTs and cryptocurrency into its ecosystem, allowing users to monetize in-game assets. Users purchase NFT sneakers to earn rewards by running, and the GST tokens they receive can be converted into cash.
By July of last year, STEPN had reached a market capitalization of KRW 2.895 trillion. In September, it recorded explosive growth with 4.7 million registered users, marking the beginning of the Move to Earn era.

Following STEPN’s success, Sweatcoin, which can be considered the original M2E, also jumped into the Web 3.0 space with its 1 million users, and new M2E games benchmarking STEPN entered the competition backed by blockchains like Polygon, Solana, and Near Protocol. Many teams, including Step App, GetKicks, and Walken, entered the market as the “next generation of STEPN,” and domestic M2E games like Snkrz and Tracer also began to emerge. While STEPN still boasts the largest market capitalization among M2E projects and has recently maintained a stable coin price, the actual number of active players dropped significantly after the coin price (GMT) fell from nearly $4 at the end of April last year to the $0.50 level. Consequently, the main selling point for new M2E game companies has become “sustainable coin value.” Given that current M2E games have fewer gaming elements compared to other blockchain P2E games and that the majority of users start playing primarily to earn money, maintaining a stable coin value has become the most critical factor in determining success or failure in this sector.

Currently, numerous M2E games are appearing on the market after benchmarking and refining STEPN’s structure. Today, we will analyze the structure of this game through the representative case of STEPN and discuss what aspects need to be improved to create a successful next-generation M2E.

The M2E Growth Curve

Looking at STEPN’s growth curve over the past year or so, it experienced explosive growth after launching its initial tokens and NFTs, listing on various exchanges, and generating user interest, which was further fueled by the promotion of its profitability. Because sneaker NFTs were required to earn GST tokens, users purchased large quantities of GST for their initial setup, and this increase in demand drove up the coin's price. As the price of the coin rose, the projected return on investment increased as well, and user generated content (UGC) shared on various social media platforms detailing how long users had played and the profits they had earned continuously attracted more users. Beyond being a first-generation M2E game, this growth is attributed to the fact that the virtual asset market was booming at the time and public perception was improving.

After its steady growth, STEPN began to plummet starting last May. The market freeze following the Luna-Terra collapse, combined with an increase in GST supply, caused the coin's price to drop, reducing the game's profitability and leaving demand unable to keep pace with supply. Beyond the case of STEPN, the same phenomenon is occurring in most M2E and P2E (Play to Earn) games. The process of coin devaluation and user attrition can be summarized as follows:
Inflow of initial users and increased demand for initial setup for mining → Rise in coin price → Increased coin supply due to users optimizing settings and mining → Inflation and drop in coin price → User attrition.
To prevent such in-game economic inflation or user attrition, many M2E games, including STEPN, are introducing various solutions. By implementing in-game economic policies to prevent inflation or by diversifying revenue streams and attracting new users, the instability of M2E can be improved.

Tokenomics Improvement Plans

Since last June, STEPN has been consistently announcing improvement plans for its tokenomics (token + economics). Notable updates implemented during the last 2-3 quarters include the HP system (stamina is consumed the more you run) and the Mystery Box update. Unlike the past, where one could earn an endless amount of coins by purchasing sneakers and Gems to increase mining efficiency, users must now regularly recharge HP for mining, and furthermore, HP must be maintained at 100% to mint NFTs. Through the Mystery Box update, they created a system where a wider variety of boxes appear and a large amount of coins must be consumed to open higher-grade boxes. Existing users had only been purchasing 'Efficiency' Gems to increase mining efficiency to earn coins, but with the upgrade to box rewards, the ratio of investment in 'Luck' Gems, which increase the probability of obtaining boxes, has increased. As a result, the HP system became a major burn mechanism for GST (the utility coin received as a reward), serving as a medium to control supply, while the Mystery Box update served as a burn mechanism and simultaneously increased the demand and price of previously overlooked Gems, playing a role in balancing the in-game economy.

In the fourth quarter of last year, STEPN succeeded in reducing the circulation of GST for the first time since its launch through the Rainbow Sneakers update. In this update, STEPN released Rainbow Sneakers that allow users to farm (the act of earning in-game coins) the governance token GMT, and made it possible to obtain them only with a low probability through the 'Enhancement' function, where 5 regular sneaker NFTs are burned to obtain a new NFT. Rainbow Gems, which increase the mining efficiency of Rainbow Sneakers, were also made obtainable only by burning 3 existing Gem NFTs, thereby controlling the circulation of the numerous bred NFTs and GST. Ultimately, STEPN showed signs of resolving coin price volatility to some extent this year and succeeded in rebounding the price of GMT back to the $0.5 level on the 15th of this month.

STEPN's tokenomics improvement policy has mainly focused on creating burn mechanisms for coins and NFTs and adjusting the demand for in-game items. Policies to prevent inflation through the diversification of burn mechanisms are used in many second-generation M2E games. Tracer, which launched its beta version last June, is a representative case that put effort into building this type of tokenomics. Tracer is a domestic M2E game where you can combine four parts to create a sneaker NFT and replace each part to create sneakers with new forms and functions. The utility coin $TRC of Tracer is burned when leveling up sneaker parts, repairing durability, disassembling sneakers, and combining parts, and it is also scheduled to be burned through games such as Piggy Bank mode, Challenge mode, and Team Battle mode. When burn mechanisms are diversified in this way, there are more devices to control inflation, which increases the probability of being able to adjust coin inflation without harming the user experience.

In addition to increasing burn mechanisms, many P2E and M2E games are reducing supply by adjusting reward amounts based on the increase in the number of users and by directly burning or buying back coins. However, since a sharp decrease in reward amounts can also lower user motivation and lead to a greater risk of users leaving after disposing of their NFTs, these adjustments must be kept within an appropriate range. One of the most stable ways to distribute rewards without significantly harming user profits is to create revenue sources apart from NFT trading or coin transaction fees. Since Sweatcoin started as a Web 2.0 service and gathered users, it has well-established a system to generate revenue through in-app advertising and partnerships by collaborating with other businesses. Sweatcoin maintains its ecosystem by periodically buying back large amounts of its coins after generating revenue through these methods.

Marketing Improvement Directions

Even if a game has sophisticated tokenomics, it is difficult for an M2E game to maintain the value of its coin without new influxes, so all M2E games conduct viral marketing to attract new users. Typical Web 3.0 games conduct marketing through in-app social and invitation features, as well as on Discord and Telegram, and on social media, they run campaigns centered on Twitter and YouTube, where the relevant user ratio is high. Most M2E apps and their Discord and Telegram communities are running marketing campaigns that reward users for inviting new users.
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STEPN is currently running a campaign through its 2022 Recap event that encourages users to share their annual achievements on Instagram and Twitter, which has shown high participation numbers so far. GetKicks focuses on growing its community by running events on Twitter that involve retweets or comments. Step App promotes its moral values through PR and influencer marketing to attract users. They advertise their service by collaborating with famous athletes, including Usain Bolt, and emphasize with influencers that a healthy lifestyle is their motto. In terms of profitability, Step App has stated that they have no VCs and have ensured fair coin profit opportunities for all users. Meanwhile, Sweatcoin, which has over a million Web 2.0 users, targets both Web 2.0 and Web 3.0 users simultaneously and is conducting extensive performance marketing on major social media platforms including Facebook, Instagram, and TikTok, in addition to Twitter, Discord, and Telegram.

Looking at the marketing campaigns for M2E games conducted so far, there is a notable tendency to attract users by emphasizing profitability. However, as mentioned in previous P2E game analyses, maintaining an ecosystem with a user pool solely focused on profit requires a constant influx of new users or a stable Web 2.0 revenue stream. Of course, increasing burn mechanisms that offer gambling-like thrills can help burn some coins held by profit-seeking users, and various M2E games, including STEPN, are utilizing this. However, for stable coin value to be maintained fundamentally, it appears necessary to either: 1. Increase the influx of Web 2.0 users to generate revenue through advertising, partnerships, etc., or 2. Form NFT and coin value through an increase in users who enjoy the game for its gameplay elements rather than profit.

First, the method of increasing Web 2.0 user influx and generating Web 2.0 revenue is a marketing strategy that can be used by apps that can be played without NFTs, such as Sweatcoin and SuperWalk. Unlike other games that encourage new user invitations within social media platforms like Discord, Telegram, and Twitter, this involves gathering users through major social media performance ads and traditional Web 2.0 advertising channels, just like general games or applications. While the probability of new users directly purchasing in-app coins or NFTs may be low, they will generate revenue through general app revenue structures such as in-app advertising.

The importance of attracting game users is recognized by most M2E apps, and they are adding various game elements to their services for this purpose. Step App is pushing for a combination of social and game elements through running in the metaverse using augmented reality, and Tracer is developing games such as team battle modes and territory capture. While most games currently only run marketing like “bring in new users to a money-making app and get paid more,” for M2E to succeed in the long term, the number of users focused on the actual gameplay must increase. To achieve this, user acquisition itself must be driven by advertising the game's elements.

Conclusion

Since the M2E craze began early last year and with the volatility of coin prices, many users, and companies have been in constant discussion about sustainable M2E game models. Following the price collapse of STEPN, claims that M2E itself is a Ponzi scheme gained traction, and public wariness toward M2E games has intensified. In reality, it is true that for standard M2E and P2E games consisting only of profit-seeking users, it is difficult to maintain coin value unless there is demand for initial setup NFTs driven by new user acquisition. Therefore, from the moment tokenomics are established, diversifying burn mechanisms and asset values while developing gameplay elements can bring sustainability to M2E games. Furthermore, marketing strategies should also be conducted based on platforms and promotional methods tailored to the target user group, considering the user personas necessary for the game's sustainability.