STEPN: Death Spiral Or Alarm?

The floor price of STEPN continued dropping early today. With a $40 Solana price, new users were able to once join the game by paying less than $100. The price of GST on Solana had also fallen below $1 and that of GST on BSC was below $3. Panic, it seems, was spreading through the market.

The main reason why STEPN ia showing such weak performance is because of the disastrous performance of its Co-Founder Yawn in an AMA on June 1st. In his AMA, Yawn tried to appease users’ panic by stating “the purpose of this project is not financial”. However, his statement raised people’s anger even more than before, especially with his threats to end the AMA if people kept asking financial-related questions. After all, he said, STEPN was positioned as a move-to-earn game, not a pay-to-move trick. If people wanted to pay to work out, why didn’t they instead pay for a gym pass or use some traditional fitness apps instead? People came to STEPN because they wanted to earn.

This is not the first time STEPN’s Co-Founders have been flooded with criticisms for inappropriate public statements. Different from Web2 projects, the Co-Founders of a Web3 project cannot be hidden. They might hide their names, but they cannot hide their voices. Since Web3 is still at a very preliminary stage, people are investing in projects for the people who run it. Thus, entrepreneurs in the era of Web3 are required or even forced to make appearances and voice calls because the value of a Web3 project is maintained by consensus which is generated through community. That community is formed through a seemingly endless stream of communication. Many people mentioned that STEPN’s discord channels had a good atmosphere in which people were willing to share with each other. Chinese users even crowdfunded a blue shoe box for Jerry, STEPN’s other Co-Founder, as his birthday gift.

In some people’s eyes, STEPN has fallen into a death spiral after only three months of its flourishing. As continuously underscored, the key to a Web3 project is its community and many now believe Jerry and Yawn have lost their trust in the community. Perhaps the negative community emotion is too strong, but Yawn soon popped up in another discord group after the disastrous AMA and underscored that the team is still building the product and will release a new version soon. However, users may have just witnessed the suicide-like performance of the team too many times, and the price failed to rebound. Several influencers have also announced that they have cleaned out their STEPN accounts since they no longer feel this is a trustable team.

Some, however, still believe that STEPN will pull itself together. After the company announced its decision to close its services in the Mainland of China last week, I interviewed Henry Zhang, a San Francisco-based KOL who has over 31k followers on TikTok and 1k subscribers on YouTube. He joined STEPN in the early days of the company and is still managing a group chat with around 800 members regarding the company. Even if STEPN’s decision was controversial, he kept confidence in the project. As someone with a cross-border e-commerce and traditional finance background, Henry underscored his take goes beyond the vision of Web3. “It has become more than a pure Web3-running app. Its business has expanded to a very broad scale and will bring extra value to it. Its financial stability not only relies on the exchange fee but also comes from its versatile business income channels.”

When asked how Zhang thought of STEPN’s decision to leave Mainland China, he replied “it is a normal decision that many giants have experienced. Google left Mainland China. Uber left Mainland China. Airbnb left Mainland China as well. However, they are still outstanding companies.”

Regarding the controversial performance of the team, Zhang said he is still optimistic, saying that “the team is making many right decisions and their expanding revenue channels will keep the project healthy.”

Others are keeping a more cautious attitude. WhoKnowsDAO, a Chinese Web3 DAO built for information curation, hosted a Twitter Space on STEPN this week. Most speakers held the belief that STEPN would not die since it has accumulated a large user pool. However, in the future, the key metric to track the project performance should be the new user growth instead of daily or monthly active users that is currently being used. If the project cannot attract new users to join in the future, the company’s condition might still be dangerous.

During the space, guests also raised a very interesting point. Although the trust crisis between Yawn and the community seemed to stem from STEPN’s exit from Mainland China and the following weak price of sneakers and tokens, the problems between them have existed for a while since STEPN has edited its minting cost multiple times. “As a Web3 community member, you might think, how can you change the game’s rules without discussing it with me? From an investor perspective, VCs might think how can you keep the old rules if you have already seen its weaknesses? The project people might think it is my project and definitely, I can change the rules.” In other words, in the era of transition from Web2 to Web3, the roles of users, projects, and VCs are also in the transformation.

In an ideally decentralized Web3 project, users, or NFT holders, are also investors in the project. However, most Web3 projects are still have third-party investment involved, and participants might have different understandings and interpretations of the roles that each side should play in Web3. Such a contradiction can raise the difficulty of keeping discussions to a harmonious level.

More than ten hours after the AMA, Mable Jiang, STEPN’s Chief Revenue Officer replied to a Twitter post by one of the most vocal influencers in the Chinese STEPN community to apologize to users and make an earnest request for more time and tolerance. She continued tweeting later in both Chinese and English to stand with Yawn despite his inappropriate statements to the community since the team had decided to ban him from public speaking and promises to improve operations. I am not sure whether Mable’s voice made any difference, but the floor price of sneakers on both Solana and Binance Smart Chain is slowly going back up.

Mable Jiang joined STEPN as its Chief Revenue Officer one month ago. She graduated from Columbia University with a Bachelor’s degree in History of Arts and Statistics. Before joining STEPN, she had been working as an investor in the blockchain field for years and is the host of a podcast program. People have viewed her as the Sheryl Sandberg of STEPN.

Similar to the early stages of Facebook, STEPN was founded with a very strong engineering and geek culture. The culture helped both Facebook and STEPN reach their first peaks because they had to make a good product first. However, the lack of business expertise limited their further growth since the road from a good product to a constantly growing, high-retention, and royalty-streaming business is not a linear path.

After Mable joined the team, STEPN has had multiple feel-good information releases that stabilized the situation for the short term, including STEPN’s plan to launch realms to allow hosts to fork the game, which will introduce multiple cultural experiences to the platform. STEPN has also decided to launch its own DeFi Exchange while also striking up a partnership with Strava. We cannot conclude how much Mable contributed to that progress, but many people believed she has been instrumental in organizing the business side of the project. Compared to Jerry and Yawn, Mable has not had as much visibility since she joined the team. The community currently is full of the comments wondering “why Mable did not host the space”, and “Mable knows how to communicate”.

We have no clue what Mable is thinking of at the moment. Meta just announced Sandberg’s leave but Mable seems to be staying put for now. Through her personal Twitter account, she mentioned that she had met the team during the 2018 bear market, and so she trusts the team and believes the team is willing to build a bigger vision of itself rather than making a quick buck. In her eyes, “Yawn has always been that admirable big brother who has an unlimited supply of cat emojis in his IM”.

However, users are not there to make friends. They want to make money.

As mentioned earlier, in the Web2 era, Zuckerberg could hide behind his network until he had to answer to Congress. But in the Web3 era, founders have to face similarly sharp questions every single day in the community. Web3 sets a higher requirement for founders in their emotional stability as well as their ability to empathize with others while also demanding top notch presentation skills. There is an old saying in China, that the water that bears the boat is the same that swallows it up. When the community no longer mutually respects and trusts each other, they give up and leave.

I am not trying to be short with STEPN since the company does help many people build a habit of working out regularly and encouraging an overall healthy lifestyle. As Henry Zhang underscored in our interview, “Even if the revenue is only $1, you are still earning. It’s only about the cost recovery period. However, when you have built your habit, it is worth more.”

SEE ALSO: STEPN Closing Services in Mainland China

Even though many users have decided to quit, Henry is still holding his Sneakers tightly, “months ago many people told me this game would not survive for another three months, but it is still here. I am still strongly confident about it.” Henry screenshotted his running record and sent it to the group chat to show what he was doing on a regular basis. The message seemed to be “keep calm and do not worry.”

After all the hubbub dies down, things should improve from where they stand right now.