Abstract: Recently, market sentiment has been relatively weak. With potential policy dividends gradually being realized but falling short of expectations, along with meme coins associated with celebrities such as Trump draining liquidity from the crypto speculative market, the two-year cryptocurrency speculation wave, driven by macroeconomic liquidity easing, seems to have come to an end. Consequently, an increasing number of investors and believers have started contemplating the next value narrative for the Web3 industry. The Web3 consumer application sector has become the focal point of many discussions. Only through mass adoption of more consumer-grade applications can genuine user adoption and sustainable commercial value be brought to this ecosystem, which currently suffers from excessive infrastructure construction. During this period, the author has been reflecting upon issues related to Web3 consumer applications and has gathered some insights to share with readers. In this article, the author reviews the current mainstream paradigms of Web3 consumer applications and explores their respective opportunities and challenges. In subsequent articles, the author will continue sharing specific market insights and ideas, and readers are welcome to discuss these topics together with the author.

What is a Web3 Consumer Application?

A “Consumer Application,” known in Chinese contexts as a “To C application,” refers to software whose primary target audience is ordinary consumers rather than business or enterprise users. If you open your App Store, all the apps you see belong to this category. A Web3 Consumer Application specifically means consumer-focused software that incorporates Web3 characteristics.

Typically, using the categories commonly found in most app stores, the overall consumer application market can be broadly divided into 10 distinct categories, each containing its own unique subcategories. As the market continues to evolve, many new products tend to blend multiple features to differentiate themselves. However, we can still generally classify these applications based on their main, distinctive selling points.

What are the current paradigms of Web3 Consumer Applications, and what opportunities and challenges do they face?

At present, I see three common paradigms for Web3 consumer applications:

1.Leveraging Web3 Infrastructure to Address Problems in Traditional Consumer Apps:

This paradigm is quite common because considerable investment in Web3 focuses on building robust infrastructure. Developers adopting this approach seek to leverage the unique technological features of Web3 infrastructure to strengthen their competitive edge or introduce innovative services. Generally speaking, the advantages of these technological innovations fall into two main areas:

Extreme Privacy Protection and Data Sovereignty:

• Opportunities: Privacy protection has always been a central theme of infrastructure innovation in the Web3 space. From initial identity verification systems using asymmetric encryption algorithms, gradually integrating numerous software and hardware technologies, such as ZK (Zero-Knowledge), FHE (Fully Homomorphic Encryption), and TEE (Trusted Execution Environment). Many tech experts in Web3 appear to adopt an extreme pessimistic view of human nature (assuming malicious intent), aiming to create an environment completely free from dependence on third-party trust, thereby empowering users with the ability to exchange information or value securely. The most direct benefit of this technological characteristic is data sovereignty—users’ personal information can be hosted directly on locally trusted software and hardware devices, thus preventing privacy breaches. Many Web3 consumer applications optimized around this technical characteristic have emerged; any project branding itself as decentralized “something” falls under this paradigm, including decentralized social media platforms, decentralized AI large models, decentralized video websites, etc.
• Challenges: After years of market validation, we can say that relying on this as the core selling point has not shown a significant competitive advantage, primarily for two reasons: First, consumer users’ attention to privacy generally arises following large-scale privacy breaches or infringements. However, in most cases, establishing more comprehensive laws and regulations can effectively alleviate these issues. Thus, if privacy protection is associated with more complicated user experiences or higher costs, it will lack competitiveness. Second, we know that the current business model of most consumer applications depends on extracting value from big data—for example, targeted marketing. Excessively emphasizing privacy protection disrupts this mainstream business model because user data would become fragmented across multiple isolated data silos. This introduces difficulty in designing sustainable business models. If ultimately forced to rely on so-called “Tokenomics,” unnecessary speculative attributes are introduced into the product, diverting team resources and efforts to address related issues, and negatively impacting efforts to achieve Product-Market Fit (PMF). This point will be analyzed further below.

Low-cost, Global, and 24/7 Trusted Execution Environment:

• Opportunities: The rise of numerous Layer 1 and Layer 2 blockchains has created a completely new type of execution environment for developers—one that is global, always available, and trusted by multiple independent parties simultaneously. Traditionally, software providers run applications independently, typically relying on their own servers or cloud infrastructure. This approach inevitably increases trust-related costs, particularly in services that require collaboration between multiple independent entities, especially when these entities hold similar power or size, or when the data involved is highly sensitive or critical. Such trust-related overhead typically results in significantly higher development and operational costs, ultimately passed onto users—for instance, in cross-border payment scenarios. Web3 infrastructure provides execution environments capable of drastically reducing these costs. Stablecoins exemplify how this model successfully reduces cost and complexity.
• Challenges: Although this approach clearly offers advantages in terms of cost efficiency, discovering suitable use-cases remains challenging. As outlined earlier, these Web3 execution environments are particularly beneficial only in scenarios involving independent multi-party collaboration, equal power or scale among participants, and highly sensitive data. These criteria are quite restrictive. At present, such conditions are predominantly found in financial services.

2.Leveraging Crypto Assets to Innovate Marketing Strategies, Loyalty Programs, and Business Models:

Similar to the first point, developers adopting this paradigm also hope to incorporate Web3 attributes into relatively mature and market-validated scenarios, thereby enhancing their competitive advantage. However, these developers place more emphasis on introducing crypto assets, leveraging the significant financial properties of such assets, to design better marketing strategies, user loyalty programs, and business models.

We know that any investment asset has two types of value: commodity attributes and financial attributes. The former relates to the asset’s practical utility in real-world scenarios, such as the livability attribute of real estate. The latter relates to the asset’s trading value in financial markets, usually stemming from tradability and volatility, which create speculative opportunities—especially prominent in crypto assets. Crypto assets notably have financial properties significantly higher than their commodity properties.

In the eyes of most developers adopting this paradigm, introducing crypto assets typically brings benefits in three areas:

Reducing Customer Acquisition Costs through Token-based Marketing Activities such as Airdrops:

• Opportunities: For most consumer applications, how to achieve low-cost user acquisition in the early stage is a critical issue. Due to their strong financial characteristics, tokens—assets created essentially out of thin air—can significantly lower early-stage risks for projects. After all, compared to spending real money on traffic acquisition and exposure, capturing users through zero-cost token creation is indeed a more cost-effective option. To some extent, such tokens function similarly to “advertising tokens.” There are many projects adopting this paradigm, such as most projects within the TON ecosystem or various mini-games.
• Challenges: This customer acquisition method faces two main issues. Firstly, the cost of converting seed users acquired through this method is extremely high. We know most users attracted by token incentives are crypto speculators who have limited genuine interest in the product itself; they primarily participate for potential financial rewards. Additionally, there’s a large number of professional “airdrop hunters” and exploitative “farm studios,” posing significant difficulties in converting these users into genuine product users later. This may also result in teams misjudging their Product-Market Fit (PMF), causing excessive investment in the wrong direction. Secondly, with widespread adoption of such methods, the marginal returns from token-based user acquisition, such as airdrops, continue to diminish. This implies that if one wishes to maintain sufficient attraction within the crypto-speculator community, the associated costs will steadily rise.

User Loyalty Programs Based on “X to Earn”:

• Opportunities: Retention and activation are other significant concerns for consumer applications. Ensuring users continue using your product demands considerable effort and resources. Similar to marketing, many projects use tokens’ financial attributes to reduce costs associated with user retention and engagement. A representative example is the “X to Earn” model, in which predefined key user behaviors are rewarded with tokens, forming the foundation for user loyalty programs.
• Challenges: Relying on users’ motivation to earn income to promote activity shifts their focus away from the product itself toward earning yields. Consequently, if potential earnings decrease, user interest declines rapidly. This scenario severely harms consumer applications, especially those heavily reliant on user-generated content (UGC). Furthermore, if yields depend on the price of tokens issued by the project itself, teams face significant market-cap management pressure. During bearish market conditions, this inevitably incurs high operational costs.

Direct Monetization Using Tokens’ Financial Attributes:

• Opportunities: For traditional consumer applications, the two most common business models are: First, free usage, where monetization occurs via platform traffic after mass adoption. Second, paid usage, where users pay fees for certain premium or “Pro” services. However, the first model involves lengthy cycles, and the second is difficult to implement effectively. Tokens introduce a new business model—direct monetization leveraging their financial attributes, meaning the project team directly sells tokens to generate cash.
• Challenges: This approach is clearly unsustainable. After the project’s early high-growth phase, the absence of continuous external funding inevitably positions project owners’ interests against those of users in a zero-sum game, accelerating user attrition. If project teams do not proactively cash out tokens, they must rely on external financing to sustain team operations or business expansions due to a lack of healthy cash-flow revenue. Ultimately, this leads to a precarious dependence on market conditions.

3.Applications Completely Serving Web3-Native Users, Addressing Their Unique Pain Points:

The final paradigm refers to consumer applications that fully target Web3-native users. In terms of innovation direction, this can be roughly divided into two types:

Creating New Narratives: Designing Monetization Strategies Around Unexplored Value Elements of Web3-Native Users, Thereby Creating New Asset Classes:

• Opportunities: By providing Web3-native users with new speculative assets (e.g., the SocialFi segment), projects can achieve pricing power over certain assets from the early stages, thus gaining monopoly-like profits. Traditionally, in other industries, obtaining such profits requires fierce market competition and establishing strong competitive barriers first.
• Challenges: Frankly speaking, this paradigm heavily relies on team resources—specifically, whether the team can obtain the endorsement and support of influential individuals or institutions that possess strong appeal among Web3-native users, or, more precisely, those who hold pricing power over crypto assets. This leads to two major challenges: First, as the market evolves, the pricing power of crypto assets dynamically transfers between different groups—for example, initially held by Crypto OGs, then shifting to crypto venture capitalists (VCs), centralized exchanges (CEXs), crypto key opinion leaders (KOLs), and eventually to traditional politicians, entrepreneurs, or celebrities. During this transition process, teams must consistently identify these power shifts early and establish relationships with newly influential groups, placing substantial demands on both the team’s resources and market sensitivity. Second, forming partnerships with those holding pricing power usually comes at significant cost, because in this market you’re not merely competing for market share within a certain application niche but rather competing against all other crypto-asset creators for the favor of those pricing influencers. This creates a highly competitive game.

By offering new tools and products, serving unmet demands of Web3-native users during their market participation, or providing these users with better and more convenient products from a user-experience perspective:

• Opportunities: The author believes this paradigm holds the greatest potential for future growth. As cryptocurrency adoption continues to expand, the user base of Web3-native consumers will grow accordingly, allowing more precise user segmentation. Furthermore, because these products directly address authentic user needs, they tend to reach Product-Market Fit (PMF) more easily, establishing stronger and more sustainable business models. Examples include trading data analysis platforms, trading bots, and information/news platforms.
• Challenges: Since this paradigm is grounded in genuine user demands, although the product development path is robust, the development cycles are typically longer compared to other paradigms. Additionally, as these projects are not narrative-driven but rather driven by concrete user needs, verifying PMF is relatively straightforward. Consequently, substantial funding in the early stages is uncommon. Thus, maintaining patience and remaining true to the original intention becomes challenging amidst widespread hype around tokens or the wealth legends created by highly valued fundraising events.

Of course, these three paradigms are not completely independent. You might observe multiple paradigms coexisting within a single project. This classification is merely for easier analysis. Therefore, for entrepreneurs hoping to enter the Web3 Consumer Application market, it is essential to comprehensively evaluate personal strengths and goals, ultimately choosing the paradigm most suited to their circumstances.

Disclaimer:

1. This article is reposted from [X]. The copyright belongs to the original author [@web3_mario]. If you have any objections regarding the repost, please contact the Gate Learn team, who will handle it promptly according to relevant procedures.
2. Disclaimer: The views and opinions expressed in this article represent only the author’s personal views and do not constitute any investment advice.
3. Other language versions of this article are translated by the Gate Learn team. In the absence of explicit mention of Gate.io, these translated articles may not be copied, disseminated, or plagiarized.