Understand Sweatcoin, which just received funding, in three minutes: A low-threshold STEPN?

Original Title: 《Sweatcoin Deep Dive》

Written by: KOOKY

Compiled by: Amber, ForesightNews

Translator's Note: On July 28, Sweatcoin, which is transitioning from a Web2 fitness app to a Move-to-Earn app, completed a $13 million funding round, with investors including Electric Capital, Spartan Capital, Jump Crypto, GSR Capital, and the NEAR Foundation, as well as Polkadot co-founder Bjorn Wagner, Polygon co-founder Sandeep Nailwal, and Civic founder Vinny Lingham.

The Sweatcoin team aims to leverage its existing step-counting model and launch the SWEAT cryptocurrency. SWEAT will initially be built on the NEAR blockchain. On September 12, Sweatcoin will convert the points accumulated by users into tokens.

What is Sweatcoin?

Sweatcoin is a Move-to-Earn app available on both Android and iOS platforms, with over 90 million total users. The project was developed by SweatCo Ltd, founded in 2014 by Oleg Fomenko, Anton Derlyatka, Danil Perushev, and Egor Khmelev.

The app rewards users with Sweatcoin based on their physical activity and movement data.

Features and User Experience

Once you download the app from the app store, register using your Google account or phone number, and grant the app some necessary permissions, you can start earning through Move to Earn. Unfortunately, I did not receive any Sweatcoin rewards during my testing. I ensured that the app had no background restrictions, but it still did not work. This may be related to the app not accurately recognizing my phone.

While my friends reported positive experiences using the app, I saw several posts emphasizing the same issue when I visited an unofficial Sweatcoin forum with over 12,000 members. I have not yet tried to contact the team, but to be honest, I hope they can improve compatibility.

The app is mainly divided into four tabs:

Home

Here you can check your Sweatcoin balance, the number of steps you took that day, invite friends, sign up for daily 20-minute double reward events, and receive up to 3 extra rewards each day.

Regarding the critical issue of the step "conversion rate," testing shows that every 1,000 steps can be exchanged for 1 Sweatcoin. Since the platform charges a 5% commission, you will only receive 0.95 Sweatcoin.

I quite like the commission fee that makes the project "sustainable." Additionally, the design where tokens are only minted through user activity fundamentally distinguishes it from those so-called reward step products in Web2.

For free users, you can earn a maximum of 10 Sweatcoin per day, while premium users can earn twice the token rewards of regular users, with a daily reward cap raised to 95 Sweatcoin (50,000 steps). As a cost, the subscription fee for premium users is 3,050 Indian Rupees (about $40) per year.

When you invite others to download and use the app, you can earn 5 Sweatcoin as a reward.

Regarding the double reward events, you have the chance to earn double the usual Sweatcoin within a certain 20-minute period. Since I personally could not verify this, I had my friends test this feature. During their 4 days of testing, they succeeded on 3 days.

Additionally, there are daily opportunities to earn extra rewards three times a day, with each reward ranging from 0 to 1,000 Sweatcoin. For example, you can choose to watch an ad to receive these rewards. However, during testing, these ads would forcibly redirect to the app store, which was a terrible experience.

Marketplace

The marketplace is where you can redeem Sweatcoin and includes four options.

• Shopping. You can exchange Sweatcoin for discount vouchers, products, and gift cards. However, currently, there are very few categories in the store, and most of them are out of stock. The only available item during testing was the Apple Airtag, priced at about 4,000 Sweatcoin. The retail price of the Apple Airtag is 3,190 Indian Rupees (about $41). Based on this, the value of one Sweatcoin is approximately 0.80 Indian Rupees (about $0.01). If you switch the region to the United States, the products in the store will be relatively richer.
• Donations. Users can donate their Sweatcoin to various "charity" activities.
• Auctions. Auctions are held every other day, where you can bid on products/gift cards. I checked the last 15 auctioned products, and here are some statistics. The average price of listed products was $406, the average highest bid was 30,349.6 Sweatcoin, and the average Sweatcoin price was about $0.013.
• Crypto. Currently, only one advertisement for the SWEAT cryptocurrency is displayed.

Wallet

Mainly used to view income records and future claims for cryptocurrency.

Challenges, Friends, and Events

Users can participate in various challenges on this page, with the chance to win prizes or donate your Sweatcoin to charity. You can also follow your friends, and you will be able to see their steps.

Step Verification Process

According to the team, they use a mature algorithm to filter vibrations and shakes and identify real movement data. The team analyzed that only about 65% of the total steps recorded by an average user's phone are recognized as real activity and converted into Sweatcoin.

Sweat Token

The Sweat token will be a cryptocurrency and will coexist with the Web2 token Sweatcoin after its launch in the future. Sweat team CEO Henry Child explained the reason for this coexistence design in an AMA, stating that the team prefers to provide a larger market scale and user base for the product. The team understands that they cannot bring everyone onto the cryptocurrency train from the start, and they do not want anyone to miss out on this product.

While this sounds reasonable, I would prefer to see the team make their Web3 product equally manageable so that ordinary people can enjoy the benefits of open currency without needing to know the intricacies of cryptocurrency.

The distinction between the two tokens is as follows:

Source: Sweat

The SWEAT token will be built on Near. In the future, users holding Sweatcoin points can exchange them for SWEAT at a 1:1 ratio. According to the official timeline, the token will be issued in September this year, and the Sweat Foundation will mint enough SWEAT for users to exchange when the token is issued.

As of June 2, 2022, over 8 million users have created non-custodial Sweat wallets.

Token Distribution

Of the initially issued tokens:

• 63% of the tokens will belong to the team;
• 7% will be used for ecosystem incubation;
• 30% will be allocated to users.

From any perspective, this is not a "fair launch," and it is worth noting that there is no upper limit on the supply of Sweat tokens.

After the TGE, the only way to mint SWEAT will be through user activity. The validation of activity effectiveness will be entrusted to some reliable nodes, with SweatCo Ltd being the only validator in the early stages. The fee for this validation is 0.5%, compared to the 5% of Sweatcoin. Over time, the difficulty of minting SWEAT tokens will continue to rise.

After the TGE, only the first 5,000 steps will convert to SWEAT tokens, while the rest will convert to Sweatcoin.

It is claimed that if your physical activity remains below a threshold, you will also incur some "penalties" for "not exercising." Additionally, a burning mechanism will be introduced in the token economic model to address potential inflationary pressures.

Valuation

Let’s try to derive a valuation using the previously calculated average price of a Sweatcoin and the token unlocking timeline chart.

At the initial stage of token issuance, it is expected that around 4 billion tokens will be unlocked. Based on the previously estimated price of $0.013 per token, the initial circulating market value could reach $5,200.

For a platform token like Sweatcoin, this is a relatively fair valuation. However, once the token enters the crypto world, the valuation is expected to undergo significant changes. According to official data on the total value of goods and services redeemed with points in its marketplace, the total value (GMV) of products redeemed by users reached $70.76 million in the first quarter of 2022.

In comparison, Axie Infinity had a GMV of $481 million in the first quarter of 2022. At the end of the first quarter of 2022, Axie Infinity's circulating market value was $6.5 billion. A simple conversion shows that Axie’s GMV is 13.5 times that of Sweat, suggesting that SWEAT's potential circulating market value could reach $9.564, which would mean a price of $0.24 per SWEAT.

Of course, since the end of the first quarter of this year, Axie's market value has dropped by 73%, so it may be difficult for Sweat to achieve a circulating market value of $1 billion in a bear market.

SWEAT has a major competitor in the G2E space, namely STEPN. The market value of STEPN's GMT token once reached $1.54 billion, but it has also fallen about 50% from its peak.

Several key factors that could influence market value/valuation include:

• Overall performance of the crypto market;
• The download volume of the Sweatcoin app has been steadily increasing, with the team expecting the user base to reach 137 million by the time of token issuance;
• The product has been online for over 5 years;
• Given the current market conditions, the lack of a supply cap may not be very attractive to investors;
• Market demand for the SWEAT token.

Market Demand

The market demand for the token depends on several key factors:

• Utility (what is the token used for?);
• NFTs. NFT providers will have to pay SWEAT to sell NFTs to users. Users will be able to use SWEAT to purchase and upgrade NFTs;
• Advertising. Advertisers must use SWEAT to reach users;
• Premium subscription services;
• Governance. Locked SWEAT (veSWEAT) will be used for governance in SWEAT DAO.

What are the benefits of holding tokens?

• Users can earn NFTs by staking a significant amount of SWEAT;
• New validation nodes must stake a large amount of SWEAT to run for nodes;
• Users will earn token rewards through staking;
• Users who stake or hold more SWEAT will have higher minting limits;
• On-chain and off-chain rewards will be distributed proportionally based on the amount of SWEAT held or staked;
• Users holding a higher number of tokens will receive higher referral rewards.

Marketing

Marketing refers to how to leverage various social media platforms to reach your existing and potential customers. In the crypto world, the influence of Twitter and Discord is enormous. As of the time of writing, Sweat's Twitter has 170,000 followers, and Discord has over 56,000 members.

For a cryptocurrency project that has not yet issued tokens, these numbers are not bad. Of course, the team needs to find ways to maintain the growth momentum of these numbers.

Conclusion

Compared to STEPN, Sweatcoin's competitive advantage lies in its almost no barrier to entry. In contrast, STEPN requires users to own or rent an NFT to start earning, which is too cumbersome for most new users. (I believe) for a dApp to become mainstream, it must not be perceived as a Web3 project but rather as a project that effectively utilizes Web3 technology.