Analyst Colin Wu warned of the dangers of STEPN

What’s new? Crypto analyst Colin Wu released a report criticizing the STEPN blockchain game. According to him, the project has signs of a Ponzi scheme and also resembles a virtual casino, as the rarity of the NFT sneakers purchased by users, on which their earnings depend, is determined randomly. Wu argues that the number of users of the project is growing rapidly and that developers are releasing native governance tokens GMT too quickly. The analyst believes that because of this situation, the project may repeat the fate of the Terra blockchain ecosystem, which collapsed in May 2022.

Colin Wu’s report

STEPN is a Move-to-Earn project. To participate in the game, users need to purchase sneakers in the form of NFT, which can later be improved and modified. The project has two native tokens — GMT (governance token) and GST (token for reward payments).

What else did the analyst add? Wu noted that the project has experienced at least two “explosive” rounds of growth. The first one happened when the number of users skyrocketed from 10 000 to 300 000. The second one was when GST tokens appeared on the Binance Smart Chain (BNB) and Solana (SOL) blockchains.

The analyst noted that GST reward tokens on Binance Smart Chain and Solana are not compatible between blockchains and are effectively different tokens with no common demand, supply or value. This can have negative consequences, as there have already been instances where the token’s rate has differed significantly between each other on different platforms.

Wu has also noticed that digital shoe prices plummet when the airdrop is announced. Thus, during one of the first airdrops, the price of NFT sneakers fell from 35 BNB to 5 BNB.

Earlier, the project’s tokens GMT and GST experienced sharp drops of 60% and 92% respectively in a month. As of June 22, 09:10 UTC, GMT is trading at $0,75 and GST at $0,2, according to Binance.

On June 11, STEPN created its own multi-chain decentralized exchange (DEX), DOOAR. In the first phase of the platform’s launch, exchanges would only be available to STEPN users within the application itself and only for the Solana blockchain.