The Secret Reason Move To Earn Cryptos Aren’t Sustainable (But This Is)
When I first read about SexN I thought it was a joke. Apparently, it’s not. They’re paying people tokens for engaging in sexual activity. I think this signals the climax (sorry) of the “x to earn” idea.
I’ve been interested in this space because they offer the opportunity to tap into an uncorrelated asset class–one that, like yield farming, has a reason for making money even when the market goes down. The only real winner in this space so far, though, has been StepN.
Earning Cryptos: Winter Special Edition
Early adopters for StepN have undoubtedly made lots of money, even after a massive sell-off. Just have a look at the performance of their governance token.
That move from $.15 to a fairly steady $1 is still a 667% return even during a crypto winter. And yes, if you were looking for a time to get involved, now might be it (as the hype has diminished).
(Actually, I’m going to add this to the “NFT” category of tokens in the watch list. That way subscribers can get a better idea about when might be the best time to join in–or at least sell the coin.)
While I do think that GameFi can make money and even some move to earn ideas can make money, they aren’t generally going to sustain large returns. I want to look at why that is in this piece and then look at what might be sustainable in its place. Let’s start with the problem.
How does StepN Make Money?
Well, as I’ve covered in this video on GameFi, “x to earn” crypto products don’t actually have many ways to innovate over web 2.
Benefits of Earning Cryptos
The only conceivable advantages they might have are:
- They could tap into yield farming (most don’t)
- They could achieve better margins (as smart contracts automate a lot of web 2 processes)
The decentralization and community participation of crypos is an advantage, but not a financial advantage.
The way that StepN makes money, then, is the same way FitBit does (owned by Google).
Now Google has promised that they will not make money by geotracking your FitBit data and reselling that to advertisers. They already have your phones for that (remember?). They want it to track your health data, which they’ll then “distribute” (= sell) in different ways to the health care industry.
The only reason Google spent $2.1 billion acquiring FitBit was that the smaller firm owned licenses and had established partnerships with healthcare providers.
StepN does the same thing–though they presently focus only on the geolocation stuff. Which …. Fine. I think that StepN does offer an improvement over FitBit since it does cut you in on some of that profit. It’s better than Google.
That’s an unfortunately low bar to cross, but they do cross it.
The thing is, most people–those who are late to the game–aren’t going to make lots of money with StepN. The reason is that geolocation data is pretty cheap and getting those healthcare provider partnerships isn’t easy.
The thing is, even if StepN makes $3000 per user per year (an exceptionally generous estimate), and then cuts the user in to 33% of that (also generous) an individual user will only make $1000 annually.
I know, it’s nice to get paid to be healthy. But for most people, even for those not living in the US, $1000 annually is a long way from life-transforming.
You have to remember that the basic business model of everything Silicone Valley is scale. It is definitively worth your time to read Naval Ravikan’s Almanac so that you understand how successful VCs from the Valley think (link here).
- Notably, it’s fundamentally opposed to the Warren Buffett emphasis on compound interest.
Without going into all the details, here’s the idea.
- At $2000 per user, you’ll need 1k users to have $2m in annual returns
- If you have 1m users, you now have $2b in annual revenue.
The point is, these ideas only work with large numbers.
But as an individual user, you are never going to scale. Duh.
That is the fundamental reason why move to earn won’t give most people life transforming wealth.
What Is This Model Good For?
Apart from those who get in early, this model is good for something in our society that could be revolutionary.
Instead of play to earn, have play to give.
Instead of move to earn, have move to give.
You see, individually, that extra $1000 annually isn’t life-transforming. But StepN has more than 850k active users at any moment right now.
If those people donated half of that hypothetical $1000 in earnings (so $500) to charities, it would make an enormous impact.
That’s nearly half a billion annually ($425m) from people just getting in shape. You see, play to give and move to give use scaling dynamics in the right way. So, you’ll actually make an impact on this approach.
Now, I don’t have exact figures on StepN’s annual user gain (and no one does because it would be nearly impossible to calculate). What I’ve outlined is a proof of concept.
Earning Cryptos In Winter: A Sustainable Approach
Still, I think this is a better idea than those currently on offer in the crypto world because it takes advantage of scale in the right way. In short, it offers a new venue for charitable causes to find desperately needed resources.
Crypto additionally has the advantages of on-chain transparency and increased efficiency through the use of smart contracts. Those are three enormous advantages that traditional charity work doesn’t have:
- Scaling capacity
- Increase transparency
- Increase efficiency
Of course, I have some very precise ideas for which charitable projects could benefit directly from this approach. But I’ll announce those after our team has a working prototype.
For right now, I hope you’ve learned two things. First, that the x to earn idea holds out limited prospects for transforming most people’s financial lives. Second, that harnessing that power for charitable purposes will make a difference because it uses scaling mechanics in the right way.
And for the immediate future, sure, have a second look at StepN. I doubt it’s headline grabbing knock-off (SexN) will fare as well.
This week I wrote a number of pieces that are related to this post, so you might want to have a look if you’ve missed them.
That’s it for this week. Remember to join us on Discord if you haven’t already.
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