Overview of Mainstream Paradigms, Opportunities, and Challenges for Web3 Consumer Applications

Recently, market sentiment has been sluggish, as the expected benefits of policies have not met expectations, and a series of popular Memecoins have drained liquidity from the cryptocurrency speculation market. This two-year-long wave of cryptocurrency speculation, driven by macroeconomic positives, seems to be nearing its end. More and more investors and industry participants are beginning to contemplate the next value narrative for the Web3 industry. Among various discussions, the consumer application track of Web3 has become the focus. Only with more consumer-grade applications achieving mass adoption can this overbuilt infrastructure ecosystem bring about a real user base and sustainable business value.

This article will provide an overview of the mainstream paradigms of current Web3 consumer applications and discuss the opportunities and challenges each faces.

Definition of Web3 Consumer Applications

Web3 consumer applications refer to software applications that possess Web3 characteristics and are aimed at ordinary consumers. The target users of these applications are the general public, rather than enterprise users. The vast majority of applications in the App Store fall under the category of consumer applications.

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 combine multiple characteristics to reflect differentiated selling points, but we can still categorize them simply according to their core selling points.

Main 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 paradigm aims to leverage the technological characteristics of Web3 infrastructure to enhance product competitive advantages or provide new services. This is mainly reflected in two aspects:

Ultimate privacy protection and data sovereignty

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

Challenge: Market validation shows that privacy protection, as a core selling point, does not demonstrate clear advantages. There are two reasons for this: First, consumers' emphasis on privacy is based on large-scale privacy breaches, but comprehensive regulations can effectively alleviate such issues. If privacy protection comes at the cost of user experience or increased costs, its competitiveness will significantly diminish. Second, the business models most consumers currently use are based on the extraction of value from big data. Overemphasizing privacy protection may undermine mainstream business models, making it difficult to design sustainable profit models. If it ultimately relies on "Tokenomics", it may introduce unnecessary speculative attributes, which is detrimental to finding product-market fit.

Low-cost global all-weather trusted execution environment

Opportunities: The emergence of numerous L1 and L2 solutions provides developers with a brand new, global, and always-on multiparty trusted program execution environment. This can effectively reduce trust costs in business scenarios involving multiparty collaboration, especially when multiple parties are equally powerful or when sensitive key data is involved. Stablecoins are a typical example of such applications.

Challenge: From the perspective of cost reduction and efficiency improvement, this is indeed a competitive advantage, but it is relatively difficult to explore application scenarios. Only in services involving multi-party collaboration, where the relevant entities are independent and of equal scale, and where the data is particularly sensitive, can using this execution environment bring significant benefits. These are quite stringent conditions. Currently, it seems that such application scenarios are mainly concentrated in the financial services sector.

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

This paradigm aims to enhance the competitive advantage of products in mature market validation scenarios by introducing Web3 attributes. It mainly focuses on leveraging the high financial attributes of crypto assets to design better marketing strategies, user loyalty programs, and business models.

Reduce customer acquisition costs through token-based marketing campaigns

Opportunity: For most consumer applications, how to acquire customers at low cost in the early stages is a key issue. Tokens, with their high financial attributes and ability to be created out of thin air, can significantly reduce the risks of early projects. Compared to directly purchasing traffic for exposure, using zero-cost created tokens for user acquisition offers a better cost-performance ratio. Most TON ecosystem projects and mini-games adopt this paradigm.

Challenges: This customer acquisition method faces two major issues: first, the conversion cost for the seed users attracted by this scheme is extremely high. Most participants are cryptocurrency speculators who pay little attention to the project itself and focus more on the potential financial value of the rewards. Additionally, there are many professional airdrop hunters or "fur pulling" studios, which creates significant difficulties in converting them into genuine product users later on, potentially leading to a misjudgment of the product's market fit. Second, as this model is widely applied, the marginal returns from acquiring customers through airdrops diminish, meaning that to establish sufficient appeal within the cryptocurrency speculator community, costs will gradually increase.

User Loyalty Program Based on "X to Earn"

Opportunity: Retention and activation are another focus for consumer applications. Utilizing the financial properties of tokens can reduce retention and activation costs. A representative model is "X to Earn", which rewards predefined key user behaviors based on tokens, thereby establishing a user loyalty program.

Challenges: The motivation for users to earn profits can shift their focus from product features to yield rates. If potential yield rates decline, user attention will quickly dissipate, which can cause significant harm to consumer applications (, especially for products ) that rely heavily on a large amount of UGC. If yield rates are based on the price of tokens issued by the project itself, it will put pressure on project teams to manage market capitalization, especially during bear market phases, forcing them to bear high maintenance costs.

Directly monetize the financial attributes of Tokens

Opportunities: For traditional consumer applications, there are two common business models: free use and monetizing platform traffic value, or paid use of premium services. The former has a longer cycle, while the latter is more challenging. Tokens have introduced a new business model, which is to monetize directly by leveraging their financial attributes, that is, projects cashing out directly through token sales.

Challenge: This is an unsustainable business model. After a project has passed the early stage of rapid growth, the lack of incremental capital inflow will inevitably lead to a conflict of interests between the project party and users in this zero-sum game model, accelerating user attrition. If the project party does not actively cash out, they can only rely on financing to obtain funds to maintain the team or expand the business due to a lack of robust cash flow income, which will again trap them in a serious dependence on market conditions.

3. Fully serve native Web3 users, addressing the unique pain points of this group.

This paradigm refers to consumer applications that fully serve Web3 native users. They can be divided into two categories based on the direction of innovation:

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

Opportunities: Provide new speculative targets for Web3 native users (, such as the SocialFi track ). Its advantage lies in having pricing power over a certain asset from the early stages of the project, thus obtaining monopoly profits. This requires fierce market competition and the establishment of strong competitive barriers in traditional industries to achieve.

Challenges: This paradigm relies heavily on team resources, specifically whether it can gain recognition and support from individuals or institutions with strong influence among Web3 native users or "pricing power" in crypto assets. This presents two difficulties: first, as the market evolves, the pricing power of crypto assets dynamically shifts among different groups, such as from early Crypto OGs to crypto VCs, CEXs, crypto KOLs, and then to traditional politicians, entrepreneurs, or celebrities. Being able to identify trends and establish collaborations with new elites during each power transition places extremely high demands on team resources and market sensitivity. Second, establishing partnerships with "price setters" often requires significant costs, because in this market, you are not competing for a larger market share with other opponents in a specific application track, but rather competing with all crypto asset creators for the preferences of the "price setters"; this is an extremely fierce competition.

(# Providing new tool-based products to meet the unmet needs of native Web3 users participating in the market process, or to offer better and more convenient products for this group of users from the perspective of user experience.

Opportunity: This may be the most promising paradigm for the future. As cryptocurrencies gradually become more popular, the overall user base of this demographic will continue to expand, creating conditions for user segmentation. Additionally, due to the focus on the genuine needs of a specific user group, such products often achieve product-market fit more easily, thereby establishing a more robust business model. For example, some trading-related data analysis platforms, trading bots, information platforms, etc.

Challenges: Due to the return to true user needs, although the product development path is more robust, the construction cycle is longer than that of other paradigm projects. Furthermore, since such projects are driven by specific needs rather than narrative, the market fit of the product is easier to verify, making it difficult for projects in their early stages to obtain large-scale financing. Therefore, maintaining patience and staying true to one's original intention amidst the wealth myths brought by the complex "token issuance" or overvalued financing is quite a challenge.

These three paradigms are not completely independent; their shadows can often be seen in many projects. For teams looking to start a business in the Web3 consumer application space, it is crucial to comprehensively assess their own strengths and demands and choose the most suitable paradigm.