A highlight from Episode 122 - Sweat Economy - Building The Economy of Movement with Web3
Whole industries are born when you can break a trade -off that is considered standard. In our world, the trade -off is if you want to be healthy, if you want to be active, you got to pay. You got to buy a kit, you got to get your membership, you got to do all of these things. How can you be physically active if you're not paying? Actually, because it's beneficial to you and to a lot of people, we believe that you should be paid for it because it is incredibly valuable. Welcome to the Crypto Altruism podcast, the podcast dedicated to elevating the stories of those using Web3 for good. I'm your host Drew Simon from CryptoAltruism .org. Now, before we get started, a quick disclaimer. While we may discuss specific Web3 projects or cryptocurrencies on this podcast, please do not take any of this as investment advice, and please make sure to do your own research on investment opportunities or any opportunity, including its legality. And now, let's get on to the show. Welcome and thanks so much for joining. Whole industries are born when you can break a trade -off that's considered standard. I think that bears repeating and I can't think of a better example of this than Move to Earn. For too long, exercise has seemed like more of a chore for many and a very expensive chore at that, with the pricey gym memberships, expensive equipment, you name it. With the advent of blockchain, however, there is a unique opportunity to disrupt this and transform exercise from a chore into a rewarding and income -generating activity. To dive into this, I'm excited to welcome Oleg Fomenko, co -founder of Sweat Economy, an OG in the Move to Earn space with a mission to reward movement to inspire a healthier and wealthier planet. We discuss how Web3 tools can incentivize healthy actions, the evolution of Move to Earn, onboarding hundreds of millions of users to Web3, and much more. So without further ado, please join me in welcoming Oleg to the Crypto Altruism podcast. Okay, Oleg, thank you so much for being here today on the Crypto Altruism podcast. Such a pleasure to have you. Thank you very much, Drew, for having me. Very nice to meet you, Drew. Thank you very much for having me. So excited to have you. I had mentioned this before we got on the call that I've been following it for quite a while, and I'm really fascinated by this whole Move to Earn movement that's going on and how Web3 tools can really change how we get people to be excited about wellness and making healthy life choices. So before we get there, I want to learn about your aha moment that got you excited about Crypto and Web3 in the beginning. I learned about Bitcoin in 2011 from a childhood friend who described what it was, and that definitely perked my interest. Stupid as I was, well, stupid as I am, I got really, really hooked on technology. And I read an awful lot about how it works, the white paper, the Byzantine generals problem, and just basically as much background as I could. In 2011, there wasn't an awful lot. Then I have installed BT Guild. That was the first sort of pool mining software on my old laptop and put it in the corner, and it was sort of chugging along there for about a month, and they mined a few satoshis. Well, actually quite a few satoshis, but because the price was like 20 cents, it wasn't even covering the electricity that I burned on it. And I just threw away a laptop's hard drive for quite a bit right now these days. So I got hooked on tech, and despite the low prices, I actually didn't buy an awful lot of Bitcoin back then. And I had a very interesting sort of music streaming startup back then, and I was trying to figure out how we can do something in crypto, but at best we could just accept Bitcoin payment, which was cumbersome, slow and not terribly interesting, and just handful of people even knew what it was. So opportunity represented itself in 2014 when I started talking to my co -founders about the problem of why are people not as active as they want to be? How come that I used to run some crazy distances and climbing some of the highest mountains in the world, and all of a sudden I couldn't even complete 5k. And, you know, kind of one conversation after another, we very quickly realized that the reason why 100 % of people want to be more active, but they can't, is because nature didn't build us to be active. Nature built us to survive, which means preserving calories rather than spending them. And nature was so serious about it that it gave us this behavioral feature that helped us surviving back then, but right now it's probably a behavioral bug that prevents us from being able to burn those calories called present bias that stops us from, you know, kind of moving and forces us to sit, unless there is a mammoth on the horizon that, you know, that we need to run and kill, or there is something about to make us into food and then we need to run away. And we realized that there is only one solution to present bias, instant gratification. So we kind of went, ooh, so can we actually create instant gratification for every step you take? And that's the story of Sweatcoin. As the name would suggest, we were thinking about building it on blockchain back then, but forking Bitcoin was slow, cumbersome and expensive. Building on Ethereum, we discussed with Vitalik in 2015. We met with him in London. That wasn't really an option because it was just too early. It was a research grade code back then. And we launched in 2016 centralized. And we thought, you know what, give us six months, maybe 12 months, there will be some wonderful blockchain that, you know, we're going to migrate onto. Little did we know that it would take until 2021 for blockchain to get fast enough and robust enough to be able to hold our scale. So, you know, we looked every year and we analyzed everything that was sort of popping up. And until 2021, the answer was consistently, no, we were processing more transactions per second than theoretical throughput of any chain. And in 2021, all of a sudden there was this explosion, there was Algorand, Solana, Polygon, Avalanche, BNB, well, BC back then, and Flow and Celo and, you know, kind of all of a sudden it just sort of, there was a rush of these new technologies. And we got really excited and put a team on this and analyzed more than a dozen different chains. And sort on of after spending, I think, four or five months, we made a decision that we want to build on near. And yeah, the rest is history. We launched last September and it's going incredibly well, incredibly well. I'm sure that we're going to have an opportunity to talk about some of the numbers and metrics and, you know, sort of, yeah, totally. Definitely. I mean, you've had quite many, many, many achievements and it's really grown at an incredible pace and the amount of people that you have engaging with this platform now every day. And, you know, it's good that you really took that time to kind of like, you know, think and make sure that you had the right blockchain, the right timing. And it sounds like you made a good choice there with Near. And sustainable business model as well and token economics. Yeah, for sure, for sure, which is great. And so you talked a little bit at a higher level about sweat economy, but do you mind giving an overview to our listeners of, you know, what it is, what the mission is of your organization? Sure. The mission of the regional sweat coin and that's what economy is to make the world more physically active. And, you know, it seems like it's sort of a tree -hogging mission. And the reality is it couldn't be further away from truth because we actually realized that physical activity has tangible financial value. When I say that your physical duty has value, everyone nods, like you just did right now. But if I ask how valuable it is, people kind of go, could you reframe the question? Could you use different words? I'm like, no, I don't have to. Typically, if something is valuable, it has value attached to it. And here we have something valuable, but we cannot attach any number to it. Maybe there is an opportunity there. And then we started thinking there is an interesting economy that draws parallel with physical activity. It's attention economy by some estimates attention economy now is about $7 trillion business, all the Googles, Facebooks, everything advertising related sits in there and actually quite a lot more. And the interesting parallel between physical activity and attention is that like attention, physical activity is valuable to you. You know, when you pay attention, something starts, you know, you can engage with something, you can get new idea, you can meet somebody, you can, you know, potentially entering some sort of a conversation transaction and purchase something. Very similarly, physical activity is a better physical state, it puts you into a better mental state, it extends your life. And like attention, physical activity is beneficial for a lot of other parties, a lot of other participants on the market, starting from your family that is, of course, would prefer to have you physically active rather than not because they want to enjoy your company for longer, they want you to be in a better mood. Your healthcare provider, your insurer, your employer are all interested in you being physically active and actually prepared to pay for it. Especially insurers, they know very well that your health insurance and your life insurance, if you're physically active, should be a lot cheaper because you're a lot better risk and you genuinely a lot better business for them. Now, attention economy exists and it's $7 trillion, movement economy or physical activity economy doesn't. There is absolutely nothing there. We can talk about it, we can discuss these use cases, but it doesn't exist. And then we thought, hang on a second, in order for humanity not to spend 200 years building this economy, why don't we actually think of creating a token that is tokenizing your physical activity and makes it into a liquid asset that you can exchange with other parties? That's how the concept of Sweatcoin and now Sweat was born. So coming back to your original question, Sweatcoin is our health and fitness app. Despite the name, it's actually not crypto because for eight years we couldn't operate in crypto. We got 240 million users using this application. And when we could move to Web3, to blockchain, it was too late to tell everybody, like, look, from tomorrow, it's going to be completely different game. tokenomics is going to be different. You can't do that. So we had to put out a new token that's called Sweat and it is a crypto token built on NIR. And effectively the way the two businesses work together is you choose, you either play Web3 game and you just create your crypto account and then your steps are converted into Sweat. Or as a lot of people, you know, kind of choose to, they don't opt in and then they get Sweatcoins, which is a centralized points, think of it like air miles that you can gather and you can use inside Sweatcoin, but they cannot be traded on exchanges. They are not real crypto and not as liquid as Sweat, the token. And of course, these two tokens have very, very different token economics. Sweatcoin, for every 1000 steps, you earn one Sweatcoin and Sweat is constantly demanding an increase in number of steps in order to meet next Sweat. This way, supply dynamics are a lot healthier and we have become deflationary already from the month of July. So July and August circulating supply has been slowly shrinking. Wow. Interesting. So much going on there and like incredible. First of all, with the amount of folks that you've been able to onboard the love, the idea of like offering, you know, Web3 and Web2 version, because it might just be those people that maybe aren't quite ready yet, but want to experiment a bit, want to learn about the technology first, then it gives them an easy kind of entry, you know, accessible entryway, which is great. And so you talked about the Sweat token, which is the built on the near blockchain. And that's kind of the for the Web3 version, the currency that kind of behind this whole movement economy. So you talked about that users will get this, they'll earn this from from walking, engaging in that physical activity. What can they do with these with these tokens once they actually receive them? What's the like utility of them? Yeah, no, there is there is plenty. But actually, if we take a step back, because I think in the crypto world, a lot of people are sort of obsessed with the word utility. I actually think that the more important question is, if you ask somebody, why is this token valuable? Yeah, what is the answer to that question? And I have answered to both of these questions. But I would like to start with the one that I think is more relevant in long term, why is Sweat valuable? And the reason why Sweat is valuable is because it is produced by your verified physical activity. So when you move, and if you try to cheat, it doesn't work. In fact, if somebody is trying repeatedly to kind of break into the system and you know, sort of game it, then we just disable accounts and they can never return. But if you put in genuine physical activity, so you sweat it, then we verify it. And we issue with this token that is tokenized physical activity of yours. And because of that, there is no single question in people's mind that it is valuable. It's a very, very different relationship to a string of numbers that sort of miraculously appeared out of, I don't know, nothing, airdrop, I don't know, whatever activity. And then people, majority of people, not crypto natives, but crypto curious are wondering, why does it have any value at all? Why is it not zero? And that is an extremely difficult question to answer. Now we don't have this problem. However, crypto educated or crypto informed you are, that's my physical activity. That's my sweat. That's not zero because, you know, it cannot be, you know, can I sweat it over it? Right. And this is an answer to the longterm question. So in five years, 10 years, 15 years, 20 years time, when people are going to be talking about why is sweat valuable, they're going to say, are you kidding me? It's a tokenized physical activity. How can it be zero? However, it doesn't stop there. You know, in order for us to build movement economy, in order for us to feel sweat with this meaning that it is tokenized physical activity, in order for us to establish financial, you know, kind of number or just a value to it, we need to play a game in the interim that is effectively creating utility and demand drivers for sweat. For a lot of projects, that's all they do. We do have a longterm vision that I've just described to you. The short term vision is extremely simple. You need sweat in order to participate in our kind of network in our platform, you stake sweat, and you earn interest by taking sweat, you also have access to a lot of rewards that are linked to health and fitness, well being fashion, etc. So this is an extremely engaging thing for our users, you are also earning sweat from our learn and earn. And because 90 % of our users are brand new to crypto and web3, they are seeking and are very interested in information. So what is taking? How does it work? You know, how do you transfer? How do you receive crypto? So we are building this whole ecosystem of effectively onboarding products and information, how do you become a proper crypto native? Last but not least, are a lot of functionalities that are being rolled out right now as we're ramping up for our US launch. The most exciting one is Sweat Hero. It's a free NFT game that effectively, if you engage, come in, we give you an NFT of legs. Because, you know, we're about walking and running. Yeah. And, you know, you get the NFT and you can play with other people, literally walking, I'm not going to go into mechanics, if you're interested, you can sort of go and look at it yourself in Sweat Wallet app. Or if you are in the US and you can't still use all the functionality, then you can just go on YouTube and put Sweat Hero and there are plenty of screenshots and screencasts from users that have been participating in beta testing. So you basically go into battle and the game and I battle you and I put 10 Sweat, you put 10 Sweat, the winner takes 80 % and the 20 % goes into what we call a battle fee, which is effectively a token sync that community votes on later on. And that brings me to your one of the first and earlier questions, you know, about move to earn and sustainability of the business, because we're frequently asked, you know, how are you different from, you know, kind of other projects out there? And we say, well, tens of millions of users is one thing, nine years of history and therefore ability to spend time thinking about building sustainable business and sustainable token economics. And what we are doing right now by scaling and not going into that spiral is evidence that we know how to build sustainable businesses that really function. More than that, as I already mentioned, in July and in August this year, Sweat has already become deflationary. So the sources of demand on a monthly basis are higher than emissions of token by you walking, plus all unlocks, users, team investors, and everything. So the number of tokens that hit the market is lower than the number of tokens that are extracted from the market, which in web two world would basically be definition of profitability. Yeah. Yeah, for sure. Very interesting. Yeah. So much on the go. And, you know, I love this idea as well of the Sweat Hero NFT game. I think that's a really fun way to engage people in a different way and to bring NFTs in the mix as well. You mentioned move to earn in there too. And so I know that obviously Sweat Economy kind of is a great example of that, you know, move to earn ecosystem fits within there. You know, there's, it's a pretty early stage space for sure. You know, fairly nascent, a couple projects for sure, like yours that are really growing at a rapid pace, but still very early. Where do you see things when it comes to move to earn in the future, let's say five to 10 years from now? What do you think? How do you think it'll shape, you know, the overall wellness sector in the coming years? I mean, there are several very interesting things here. One is, whole industries are born when you can break a trade -off that, you know, is considered standard. You know, for example, internet broke this trade -off where you could deliver rich message, but very few people, or you could deliver extremely poor message and extremely narrow message to a lot of people. Reach and richness was a trade -off. Internet broke that and the rest is history. You know, you can talk to individual with extremely rich message and sometimes screw with their heads as well as Cambridge Analytica has proven, right? So it's a double -edged sword, unfortunately. So in our world, the trade -off is, or if you want to be healthy, if you want to be active, you got to pay. You got to buy kit, you got to get job membership, you got to dress, you got to do all of these things. You know, how can you be physically active if you're not paying? Actually, because it's beneficial to you and to a lot of other people, we believe that you should be paid for it because it is incredibly valuable. Like in attention economy, you are given free products in exchange for your attention. Why wouldn't we be doing exactly the same thing in exchange for my physical activity? So move to earn is breaking this trade -off and I believe that it is going to become a more or less standard approach because if physical activity was only valuable to me and me alone, I would need to pay. But given that it drives an incredible amount of value for everybody, including countries, I mean, if you're physically active, you're going to be more economically active for longer. The tax revenues from you are going to be higher. It's good business. You know, even if you're looking at it in the dry light of day, obstructing yourself from taking care of people, making sure that, you know, this country is a good place for them to live. But even just in financial terms, it's good business. So this is the first thing that all the businesses in move to earn are doing, regardless if they're Ponzi or non -Ponzi actually think that it's great because businesses are reminding people that their physical activity has value. Bingo. That moves this whole idea of movement economy forward. The other trend that I see is that we need to get fewer people who are focusing on crypto natives, which is the case with a lot of other products and are focusing on mass market, because the value is not in making very, very narrow field of already reasonably rich and wealthy people more physically active. The real value to humanity is going into the lower social stratas, because that typically is where behavior change is most needed. If you look at dominant in A and B social groups, but it's starting to ramp up as you go lower down the income tail. So we need to start focusing on these people. We need to start developing propositions that are absolutely free, that are extremely simple to engage with, like what's what economy is doing. Because a lot of people are asking me, crypto, web3, what's your advice? And my simple advice is, look, we're so early, I can't even point a finger where to go. But if any of you remember internet of 96 and 97, you would remember that, I mean, there was Yahoo, right? There were very, very early businesses. None of them are really sort of dominating. And the opportunity is still there. And the opportunity number one is we still don't have an email for internet. We don't have an ubiquitous use case for web3. That email became for internet. That's what we're focusing on. Can we develop something that every single person on planet earth would be interested and benefit from if they engage with? And if you have legs, and if you can take steps, you know, you can engage with sweat economy. And I think we're on the right path there. The other thing that I would say is that if you actually look at the overall web3, and all the different tokens that exist, I see right now only three use cases or three classes of tokens that can be explained in a very simple fashion. Why on earth do they have value? Case one, Bitcoin digital gold, inflationary protection. It's capped supply. Everyone is paying attention to it. Everyone is in because of the first mover advantage. Therefore, it is playing the role of digital gold and probably is replacing gold as that inflationary protection asset. Case two, layer ones, computers securing asset ownership on the internet. Like electricity powers computers, like tokens, like ETH, like NEAR, like Avax, like MATIC. You need to have them in order for these computers to work for you and secure ownership of assets. And case three is tokenization. And here there is kind of wide range. The most simple one is tokenizing fiat currency, USDT, USDC. Basically, you are turning an asset that already exists into a token to make it more liquid, easier to transfer, easier to exchange with a lot more censorship resistance and with fewer parties being able to tell you can you or cannot you conduct this particular transaction. And there is a lot of experimentation with other assets like TDELs, for example, kind of tokenizing them. And we are pushing absolutely boundaries of that because we're not tokenizing an asset that already exists, that already has markets that can be exchanged. We're creating new asset class because as I said, everyone agrees that physical activity has value. It should have been an asset, but actually without blockchain, it cannot be turned into an asset. And we are creating new asset, new asset class, and the whole new industry that cannot be created without blockchain participating in this.