The Mainstream Paradigms, Opportunities, and Challenges of Web3 Consumer Applications

Recently, the sentiment in the cryptocurrency market has been sluggish. As the policy dividends fall short of expectations and a series of Memecoins launched by well-known figures are harvesting market liquidity, the two-year wave of cryptocurrency speculation seems to be coming to an end. More and more industry insiders are beginning to contemplate the next value narrative for the Web3 industry, with Web3 consumer applications becoming a hot topic. Only with the emergence of more applications aimed at the general public can real user adoption and sustainable business value be brought to this overbuilt infrastructure ecosystem. This article will provide an overview of the mainstream paradigms of current Web3 consumer applications and explore the opportunities and challenges they face.

Definition of Web3 Consumer Applications

Web3 consumer applications refer to software applications that have Web3 characteristics and are aimed at ordinary consumers. The target users of these applications are mostly ordinary consumers rather than enterprise-level users. Most applications in the App Store fall under the category of consumer applications.

According to the common categories of the App Store, consumer applications can generally be divided into 10 major categories, each of which has different subdivisions. As the market matures, many new products will integrate multiple features to highlight their differences, but we can still simply categorize them based on their core selling points.

Mainstream Paradigms of Web3 Consumer Applications and Their Opportunities and Challenges

Currently, there are three common paradigms of Web3 consumer applications:

1. Optimize the issues of traditional consumer applications by leveraging the technical characteristics of Web3 infrastructure.

This is a common paradigm where creators aim to leverage the technical characteristics of Web3 infrastructure to enhance product competitiveness or provide new services. These technological innovations primarily bring two main benefits:

Ultimate privacy protection and data sovereignty

Opportunities: Privacy protection has always been the main theme of innovation in Web3 infrastructure, from asymmetric encryption to the integration of technologies such as ZK, FHE, TEE, etc. This brings data sovereignty to users, allowing personal privacy information to be directly hosted on local trusted devices, avoiding leaks. Many projects that claim to be "decentralized" belong to this category, such as decentralized social media, AI large models, video websites, etc.

Challenge: Market validation shows that privacy protection as a core selling point has not demonstrated significant advantages. On one hand, consumers' emphasis on privacy is based on large-scale privacy breach incidents, and improved regulations can effectively alleviate this issue. On the other hand, overemphasizing privacy protection may undermine mainstream business models, creating difficulties for designing sustainable business models. Relying on "token economics" may introduce unnecessary speculative properties, which is detrimental to finding product-market fit.

Low-cost global all-weather trusted execution environment

Opportunities: Numerous L1 and L2 provide developers with a new, global, and always-on multi-party trustable program execution environment. This can effectively lower the trust costs of multi-party collaborative business, especially in scenarios involving scale equilibrium or sensitive data. Stablecoins are a typical example of such applications.

Challenge: Despite being competitive in terms of cost reduction and efficiency improvement, it is relatively difficult to explore application scenarios. The use of this execution environment can only bring significant benefits in services involving independent collaboration among multiple parties, balanced scale, and sensitive data, which are quite demanding conditions. Currently, such application scenarios are mainly concentrated in the financial services sector.

2. Design new marketing strategies, user loyalty programs, or business models using encrypted assets.

Developers of such applications value the introduction of crypto assets to design better marketing strategies, user loyalty programs, and business models by leveraging their high financial attributes. This is mainly reflected in three aspects:

Reduce customer acquisition costs through token-based marketing campaigns

Opportunity: For early-stage projects, low-cost customer acquisition is a key issue. Tokens, with their high financial attributes and the ability to be created from nothing, can significantly reduce the risks for early projects. Compared to directly purchasing traffic with funds, using tokens created at zero cost for user acquisition is more cost-effective. Many TON ecosystem projects and mini-games adopt this paradigm.

Challenges: There are two main issues: First, the customer acquisition cost for seed users obtained through this method is extremely high, as most are cryptocurrency speculators with low interest in the project itself; second, as this type of model is widely applied, the marginal returns from acquiring customers through airdrops diminish. If we want to establish sufficient attraction within the speculator group, the costs will gradually increase.

User Loyalty Program Based on "X to Earn"

Opportunities: Retention and activation are another issue of concern for consumer applications. Utilizing the financial attributes of tokens can reduce related costs. The "X to Earn" model is based on token rewards for predefined key user behaviors, thereby establishing a user loyalty program.

Challenge: Relying on users' motivation to earn profits for activation will shift users' focus from product functionality to yield rates. If potential yield rates decline, user attention will quickly dissipate, which is especially detrimental for products that rely heavily on UGC. If the yield rate is based on the spontaneous token price, it will bring market value management pressure to the project party, especially during a bear market phase where high maintenance costs must be borne.

Directly monetize the financial attributes of tokens

Opportunities: Compared to the advertising monetization or paid usage models of traditional consumer applications, tokens have introduced a new business model, which is to monetize directly using their financial attributes, allowing projects to cash out directly by selling tokens.

Challenge: This is an unsustainable business model. After the project develops through the early high-growth phase, the lack of incremental capital inflow in this zero-sum game model will inevitably put the interests of the project party in opposition to the interests of users, accelerating user attrition. If cashing out is not actively pursued, due to the lack of robust cash flow, the project party can only rely on financing to obtain funds to maintain the team or expand the business, falling into a predicament of dependence on the market environment.

3. Fully serve Web3 native users and address their unique pain points.

These applications are fully designed for Web3 native users and can be divided into two categories:

Construct new narratives, focusing on the monetization design of the untapped value elements of Web3 native users, creating new asset classes.

Opportunity: Provide new speculative targets for Web3 native users, such as the SocialFi track (, which has the pricing power over a certain asset from the early stages of the project, obtaining monopoly profits. This requires intense market competition and the establishment of strong competitive barriers in traditional industries.

Challenge: It is heavily reliant on team resources, specifically whether it can gain recognition and support from individuals or institutions with strong appeal or "pricing power" in crypto assets among Web3 native users. This brings two difficulties: first, the pricing power of crypto assets dynamically shifts among different groups, requiring the team to have a high sensitivity to the market; second, establishing a partnership with "price setters" usually incurs significant costs, as it requires competing for the preferences of all crypto asset creators.

)# By providing new tool-based products, we serve the unmet needs of Web3 native users participating in the market process, or offer better and more convenient products from the user experience perspective.

Opportunity Point: This could be the most promising paradigm in the future. With the popularization of cryptocurrencies, the overall user base of this demographic will expand, bringing possibilities for user segmentation. By focusing on the real needs of a specific user group, such products are easier to achieve product-market fit and establish a more robust business model, such as trading-related data analysis platforms, trading bots, information platforms, etc.

Challenge: Due to a return to genuine user needs, the product development path is more robust but the construction cycle is longer. Such projects are driven by demand rather than narrative, making product-market fit easier to verify, but it is usually difficult to secure large amounts of financing in the early stages. Maintaining patience and staying true to one's original intention amidst the wealth myths brought about by complicated "token issuance" or high valuation financing is a significant challenge.

These three paradigms are not completely independent; their shadows can be seen in many projects simultaneously. For practitioners intending to start a business in the Web3 consumer application track, it is crucial to comprehensively assess their own advantages and demands to choose the most suitable paradigm.