The UK is getting fat. Despite the government introducing measures like a sugar tax and forcing restaurants to print out how many calories dishes have on menus, its efforts to tackle the obesity pandemic have had little effect. The growing plethora of fitness trackers, workout apps and virtual reality startups’ ability to shrink the waistline of the average Brit has thus far also been negligible. Big Tech apparently can’t shrink big guts. However, cryptocurrency startup Sweatcoin believes it can nudge things in the right direction.
“Our thesis is that we can harness behavioural science to get people moving more by incentivising steps with an instantaneous reward mechanism,” Oleg Fomenko, co-founder of Sweatcoin, tells Verdict.
So what is Sweatcoin? At it’s core the London-based company is two things: a fitness app and a cryptocurrency. The Sweatcoin app tracks how many steps users take. The app then converts these steps into Sweatcoin’s digital currency, SWEAT. Users can then spend the rewards from walking on goods and services or donate them to charities.
And, of course, you can trade SWEAT for other cryptocurrencies like bitcoin. However, even though Sweatcoin’s digital dosh also runs on blockchain, the co-founder is adamant that it is different from memecoins and other online monies.
“We are not a crypto for crypto’s sake, but see this evolution as the natural economic extension of the Sweatcoin rewards-for-steps app business,” Fomenko says. “We have very successful business creds in health-tech and understand the behavioural science of what we’re doing.”
Greener than bitcoin?
The Sweatcoin co-founder also argues that the company differs from other cryptocurrencies in another way: it is more sustainable. That is a bold claim.
The fight over how bad bitcoin really is for the environment has raged for years. On the one hand you have researchers criticising cryptocurrencies in general and bitcoin in particular for burning more electricity than some smaller countries. They also argue that cryptos create tons of electronic waste each year.
Crypto bros have lamented that the criticism is unjustified. They alternate between claiming that the numbers are wrong or, even if they aren’t, that the energy consumption used is worth it to make the cryptocurrencies safer.
“Not all blockchains are environmentally unfriendly, but to maintain the accuracy of a blockchain, computers must run a consensus mechanism; this mechanism requires a vast amount of computing power, utilising a considerable amount of electricity,” Fomenko says.
He echoes the sentiment of the researchers that bitcoin is particularly bad for the environment. This is due to bitcoin using a proof-of-work consensus model to mint new tokens. That is not what Sweatcoin does, Fomenko says.
“[SWEAT] is built on Near Protocol, a carbon-neutral blockchain and the token itself if generated by ‘proof of movement’, not proof of work – using our proprietary step-counting technology, which cannot be hacked,” Fomenko claims. “This is arguably the greenest and cleanest form of crypto-generation.”
Will Sweatcoin survive the crypto crash?
The differences between Sweatcoin and other cryptocurrencies are also a reason why Fomenko claims he’s not too worried about the current crypto crash. In fact, he believes it can shock the industry into shape in the long run.
“Hopefully, the recent crash signifies the end of a bursting bubble; it will inevitably flush away a lot of projects with no foundations, and scare away investors who don’t believe, or understand, what they’re buying into,” Fomenko says.
Crypto wonks had a great time during the pandemic. People flocked to invest in digital currencies. Part of the reason was simply due to the fact that they had little else to do during lockdown. The other is that the buzz around the industry turned into a tornado.
This is evident when you look at venture capital investment raised by the industry over the past decade. Investors injected as little as $56m across 14 deals in 2013, according to data from research firm GlobalData. By 2019, that figure had jumped to $4.3bn across 655 deals.
In 2021, that figure reached record heights when the industry raise north of $26.4bn across 1,010 deals. So far this year, the industry has enjoyed a total top-up of VC cash to the tune of $12.6bn across 671 deals.
However, that doesn't mean things are absolutely stellar. In fact, the crypto market is looking rather grim right now.
Bitcoin has fallen from its record peak of trading at $68,000 in November to be trading at below $16,000 in June. Other online monies have suffered similar fates. Some, like supposedly stable stablecoin TerraUSD, dramatically imploded in front of a global audience during the start of the year.
In June, crypto hedge fund Three Arrows Capital was been lined up for liquidation just days after it was accused of defaulting on a multimillion dollar loan to the crypto bank Voyager. To top it off, exchanges like Binance and Celsius halted withdrawals in June.
Despite the bloodbath on the market, Fomenko conveys an air of confidence about the survival of Sweatcoin.
"At a time where inflation is seemingly harming the crypto market, a token like SWEAT is needed as it urges audiences to rethink the value they attach to their assets," he says.
The Sweathcoin founder argues that SWEAT's real value isn't in how much its tokens are worth, but in how it can boost people's fitness.
"Physical activity has already empirically shown that it can contribute to improved happiness," Fomenko argues. "What is now needed is a societal shift in the way we prioritise it."
How much is Sweatcoin worth?
Fomenko founded Sweatcoin in 2015 together with CEO Anton Derlyatka and CTO Egor Khmelev. The idea came to them after seeing how modern solutions had made people more sedentary.
"Modern technology has virtually eliminated the need for exercise, with companies like Uber, Amazon and Deliveroo designed to get us consuming more, in less time, with virtually no physical effort," Fomenko said. "We realised that one of the solutions was perhaps the simplest of all: incentivise people to move more."
The idea electrified others as well. In 2018 it raised $5.7m from Goodwater Capital, Seedcamp and Greylock Partners. It also raised an undisclosed round led by Runa Capital in 2019. Sweatcoin didn't disclose its valuation when asked. Fomenko does, however, hint that a new funding round may be coming soon.
"We do and hope to be announcing more regarding this in the coming months," he says.
Will SWEAT solve the obesity crisis?
A range of different factors contribute to obesity. Chief among them is class. Socioeconomic status has been linked with likelihood of being overweight and suffering from the associated health issues. A NHS England report from 2019 showed that the risk of being obese doubled for children living in the most deprived areas. It's unlikely that Sweatcoin will solve the inequalities of modern society.
It is also not the first company to provide financial incitements to get people into shape. Fintech and fitness startup Pact, for instance, made users set up targets for how much they moved. If they missed the target, they would have to pay a fee. Users who reached their goal were rewarded with cash prizes drawn from that money. However, the model seemingly failed. Pact shut down in 2017.
That being said, with over 100 million app downloads, Fomenko believes the company is doing its part to at least whip some people into shape.
"The key is to get people moving," he says. "We see no distinction between a flourishing token and movement; the higher the price, the higher the incentive to move. So our goal is to bring as much utility to the new token as possible. That includes staking mechanisms, new marketplaces, access to a world of decentralised finance services, NFTs, products, rewards and more. The key, alongside this, is to consistently improve upon our already outstanding numbers. We want to get one billion people earning for their movement."