Move-to-earn ventures (overview of ventures on getchai.xyz) like STEPN are Ponzi schemes. The apps lure users to invest - early investors then profit from more recent investors. But, there is hope for these apps. Founders could create appealing apps that are not tied to monetary incentives and/or enable third-parties to inject money into the ecosystem.

Here is how most of the move-to-earn apps work:

1. Sign-up and buy an NFT accessory (e.g. a sneaker)

2. Track movement with their app and earn a non-asset-backed token

3. Upgrade, repair, or mint a new NFT accessory

4. Sell an NFT or token to another user

There is an appetite for move-to-earn apps

Most people are lazy and need motivation to move - money is motivating. STEPN has shown great success with the straightforward Ponzi model. At the time of this writing, the ecosystem coin has a market capitalization of ca. USD 1 BN (whilst being in an economic downturn).

People are making money, but don't be the last person standing

The current move-to-earn ventures all suffer from the Ponzi scheme mechanic. The apps reward players to move with tokens and NFTs (sneakers or other artifacts). Tokens and NFTs only hold value, as long as new players buy tokens and NFTs of the early investors with new capital. Profitable for the company in the short term, but not sustainable in the long term.

These games are still basic

Users can top up money, spend money on an NFT and track their movement, but that is it. Some of the play-to-earn apps (a variant of move-to-earn, where people are playing a game and earning money) are more sophisticated, but the gameplay mechanics are still basic.

How to fix move-to-earn apps

There are two options to break out of the Ponzi scheme mechanics:

1. Create a compelling sports app that people will use (in single-player mode) even if it wasn't for the monetary incentives (see Chris Dixon’s Crypto Tokens blog post). Not a trivial feat, as companies like Strava, Nike, Runtastic (aka Adidas), and Garmin all have apps

2. Have a third-party inject money into the system to get something other than a token in return, i.e. user movement data or customer loyalty

Non-blockchain examples (non-exhaustive) that have a functioning action-to-earn mechanics:

• Miles and More: people are flying with Star Alliance airlines because they need to travel. Miles and More rewards users for their loyalty with points and gives discounts. Airlines and partners are paying for a customer's loyalty

• Keller sMiles: people are using running apps to do sports already. Keller sMiles is rewarding users who connect running apps with their app with points that they can use in the Keller Sports e-commerce shop

• Payback: people are shopping at their local supermarkets and are being rewarded to swipe a card at the cash register to track their purchase. Retailers are willing to pay Payback for user data and customer receives discounts in return

STEPN will need to find a third party who is willing to inject money into their ecosystem

It is unlikely that STEPN will create an app better than the incumbents anytime soon. There are three options to fix it. Build an app orthogonal to other running apps, e.g. with a running app integration. Increase customer loyalty of a third party. Allow a third party to access customer data (privacy adherent).

STEPN will only be able to thrive going forward if they fix their economy. Otherwise, they are facing a collapse like Axie infinity.