Is #STEPN a Ponzi?

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Is #STEPN a Ponzi? coinmarketcap.com/cryptown/articles/26001 Came across a provocative article, which got me thinking about P2E games and DeFi projects in general. One can put up a convincing argument that in essence, they all are Ponzi schemes. Here are some of my thoughts on this topic 🧵

2/8 When the value of the rewards from a project (or game) relies on continuous influx of new users, the economics become Ponzi-like. For such projects, value plummets as user influx drops as there isn't anything sustaining it anymore. We've seen this happen to many projects.

3/8 Especially when a token is inflationary (e.g. $GST, $SLP, $ATLAS), there is tremendous sell pressure for users who want to "cash out" their earnings. To combat this, projects devise ways for users to sink their hard-earned tokens into, instead of selling them.

4/8 Projects typically offer even more rewards of the same token if you lock/burn your tokens. #STEPN does this by enticing users to spend their $GST in multiple ways, e.g. to upgrade their virtual sneakers, so that they can increase the amount of $GST they can earn in future.

5/8 But once majority of uses have fully upgraded their shoes and influx of new users slow, the demand for $GST will drop. Then the reward rate might be reduced, causing old users to leave. Leavers will sell their $GST and others will follow as price drops further & further.

6/8 This is the typical “💀death spiral” for most crypto games & DeFi projects, even those that used to be hugely popular once. How to prevent it? Now, that will be the billion 💵 question. Theoretically there has to be higher burn/buy pressure than sell pressure. But how?

7/8 New projects need meme-inducingly high levels of rewards to gain widespread recognition and user adoption. High rewards are not sustainable without continuous new users, but they can’t be reduced for fear of existing users leaving for better rewards elsewhere.

8/8 So, is #STEPN a Ponzi? I’m loving #STEPN especially how it’s getting me to 🏃🏻‍♂️ regularly. The biggest struggle they face will be sustaining user growth, which gets harder as the entry barrier (price of 👟) keeps increasing. I hope they overcome it, but can’t imagine how.