Mainstream Paradigms, Opportunities, and Challenges of Web3 Consumer Applications

Recently, market sentiment has been weak. As the policy dividends gradually materialize but fall short of expectations, and a series of celebrity Memecoins have nearly depleted the liquidity of the crypto speculation market, this two-year-long cryptocurrency speculation wave seems to be coming to an end. More and more investors and believers are starting to contemplate the next value narrative for the Web3 industry, with the Web3 consumer application track becoming the focus of discussion. Only with the emergence of more consumer-grade applications achieving mass adoption can true user adoption and sustainable business value be brought to this overbuilt infrastructure ecosystem. This article will provide an overview of the current mainstream paradigms of Web3 consumer applications and explore their respective opportunities and challenges.

What are Web3 Consumer Applications

Consumer Application refers to applications aimed at consumers, targeting ordinary consumers rather than enterprise users. All applications in the App Store fall into this category. Web3 consumer applications refer to software applications aimed at consumers that have Web3 characteristics.

The entire Consumer Application track can generally be divided into 10 major categories, each of which has different subdivisions. As the market matures, many new products will combine multiple features to find differentiated selling points to some extent, but we can still make simple classifications based on their core selling points.

Current Mainstream Paradigms of Web3 Consumer Applications and Their Opportunities and Challenges

There are currently three common paradigms of Web3 consumer applications:

1. Optimize the problems of traditional consumer applications by utilizing the technical characteristics of Web3 infrastructure.

This is a relatively common paradigm where creators hope to leverage the technological characteristics of Web3 infrastructure to enhance product competitive advantages or provide new services. The benefits brought by these technological innovations can usually be categorized into two types:

Ultimate privacy protection and data sovereignty

Opportunity point:

• The privacy track has always been the main theme of innovation in Web3 infrastructure, integrating numerous software and hardware technologies such as ZK, FHE, TEE, etc.
• Provides users with data sovereignty, allowing personal privacy information to be directly hosted on local trusted devices to prevent leakage.
• Many projects claim to be decentralized XX, such as decentralized social media, AI large models, video websites, etc.

Difficulties:

• Using this as a core selling point does not provide a significant advantage in market competition.
• Consumers' emphasis on privacy is based on the occurrence of large-scale privacy breaches, and can be effectively alleviated through improved regulations.
• If privacy protection is built on a more complex product experience or higher usage costs, it lacks competitiveness.
• Overemphasizing privacy protection can undermine mainstream business models and create difficulties in designing sustainable business models.

Low-cost global all-weather trusted execution environment

Opportunity point:

• Numerous L1 and L2 provide developers with a new, global, and round-the-clock operable multi-party trusted program execution environment.
• Can effectively reduce the service-related costs involving multi-party collaboration and sensitive data, such as in scenarios like cross-border payments.
• Stablecoins are a typical example of such applications.

Difficulties:

• The exploration of application scenarios is relatively difficult.
• Advantages only exist in services that involve multi-party collaboration, where all parties are independent and of equal scale, and where data sensitivity is a concern.
• Currently, most of these application scenarios are concentrated in the financial services sector.

2. Utilize encrypted assets to design new marketing strategies, user loyalty programs, or business models.

Developers of this type of application hope to enhance the competitive advantage of their products by introducing the high financial attributes of crypto assets. This typically brings three main benefits:

Reduce customer acquisition costs through token-based marketing campaigns

Opportunity point:

• Tokens, with their high financial attributes and low costs, can significantly reduce the risks of early-stage projects.
• Compared to directly using funds to buy traffic, using Tokens for user acquisition is more cost-effective.
• Many TON ecosystem projects and mini-games adopt this paradigm.

Difficulties:

• The cost of acquiring seed users through this method is extremely high, mostly consisting of speculators rather than genuine users.
• It may lead to a misjudgment of PMF, resulting in excessive investment in the wrong direction.
• With a large number of applications, marginal returns are decreasing, and customer acquisition costs are gradually rising.

User Loyalty Program Based on X to Earn

Opportunity Point:

• Use the financial attributes of tokens to reduce retention and activation costs.
• Establish a loyalty program based on Token rewards for predefined key user behaviors.
• The X to Earn model is relatively typical.

Difficulties:

• Relying on profit-driven incentives to promote activity will shift users' focus from functionality to yield.
• A decline in returns will lead to a rapid loss of users, which is particularly damaging for products that rely on UGC.
• If the revenue is based on the Token price, it will put pressure on the project party for market capitalization management.

Directly monetizing through the financial attributes of tokens

Opportunities:

• Provide new business models for traditional applications, directly cash out by selling coins.
• Compared to free + traffic monetization or paid usage, the cycle is shorter and the difficulty is lower.

Difficulty:

• Unsustainable business model
• After early high growth, interests conflict with users, accelerating user loss.
• Lack of healthy cash flow, excessive reliance on financing to maintain operations

3. Fully serves native Web3 users, addressing their unique pain points.

This type of application is fully aimed at Web3 native users and can be divided into two categories:

Construct new narratives and design monetization around the untapped value elements of Web3 users.

Opportunity Point:

• Provide new speculative targets for Web3 users ( such as SocialFi )
• The project initially possesses the pricing power of certain assets, gaining monopoly profits.

Difficult point:

• Relies more on team resources and requires support from individuals or institutions with "pricing power".
• The pricing power of crypto assets dynamically shifts among different groups, requiring timely identification of trends.
• The cost of establishing partnerships with "price makers" is high, and competition is fierce.

Provide new tools or optimize user experience to meet the unmet needs of Web3 users.

Opportunity Point:

• With the popularization of cryptocurrency, the user base is expanding, and niche markets are emerging.
• Focus on real needs, easily achieve PMF, establish a healthy business model.
• Such as transaction data analysis platforms, Trading Bot, information platforms, etc.

Difficulty:

• The product development path is healthy but has a longer cycle.
• Non-narrative driven, early stage difficult to obtain large financing
• It is difficult to remain patient in the wealth myth of "token issuance" or high valuation financing.

These three paradigms are not completely independent; many projects will simultaneously exhibit multiple characteristics. Teams looking to start a business in the Web3 consumer application track need to comprehensively assess their own advantages and demands to choose the most suitable paradigm.