State of Crypto Consumer Apps
“The real measure of an app’s success is how indispensable it becomes to its users.”
This principle should be at the forefront when envisioning the future of crypto consumer apps.
That’s the vision that should guide the development of crypto consumer apps, ensuring they meet the scalability demands and deliver the user experience that users desire — because who wouldn’t want an app that doesn’t crash during a market surge or one that doesn’t require a PhD to navigate? After all, nothing says ‘user-friendly’ like a 20-step verification process just to send a few coins!
Consumer apps are designed for everyday use by people, helping them with tasks like communication, finances, shopping, or entertainment. For any consumer app to succeed, it should prioritize three main features:
Before we explore the current state of Web 3.0 consumer apps, it’s important to look back at the explosive growth of Web 2.0 apps and draw some parallels. Understanding what metrics drove the success of Web 2.0 apps can provide valuable insights into the potential trajectory of Web 3.0 consumer apps.
What led to the growth of web2 consumer apps?
Looking back at the rapid growth of Web 2.0, it’s hard not to be impressed. Platforms like Facebook have gathered an incredible 2.09 billion daily users, while YouTube attracts about 1 billion users each day.
The growth boom of Web 2.0 apps primarily occurred in the mid-2000s to early 2010s, driven mostly by Widespread Internet Adoption, Smartphone Revolution, social apps surge and improved UX
1. The Internet Speed Revolution
A key factor in this evolution is the improvement of internet speeds.
The rise of platforms like Netflix, Hulu, and YouTube has been directly linked to faster internet speeds.
In 2000, the average internet speed was around 0.5 Mbps, while by 2021, it surged to approximately 100 Mbps globally. This dramatic rise has enabled applications like streaming services, social media, and online gaming to flourish. For example, Netflix reported over 200 million subscribers in 2021, largely attributed to faster internet allowing for seamless streaming of high-definition content.
User Experience: Making Complexity Invisible
The UX of Web 2.0 consumer apps excelled at making complex processes invisible to users. For instance, when you stream a movie on Netflix, it’s powered by Amazon Web Services (AWS), which operates a vast network of over 100,000 servers worldwide. You simply hit play without needing to know which server is delivering your content.
These apps emphasize clean designs, clear navigation, and seamless interactions, allowing users to easily find what they need without frustration.
The Current State of Blockchain Consumer Apps
When we look at the explosive growth of Web 2.0 apps, two key factors stand out: faster internet speeds and increased user experience.
Crypto consumer apps need to be built to handle large-scale demands, from high-frequency traders to massive gaming communities and low cost even if the network is like as Vitalik Buterin said, “The internet of money should not cost 5 cents per transaction.”
Users shouldn’t face constant sign-ins or have to juggle multiple wallets across different networks.
The future of crypto consumer apps requires internet-level scalability and seamless user experiences. Period.
Let’s discuss the main barriers that have made it tough to attract a large user base and how recent developments in the past few years are tearing those down, making now the perfect moment to build consumer apps that are primed to soar.
Barriers to Entry in Blockchain
- Low TPS: When Ethereum launched, it could handle only about 10–15 transactions per second (TPS). This was fine for early users, but as more people joined, it quickly became a bottleneck, slowing everything down.
- High Gas Costs: Ethereum also struggles with high transaction fees. When the network gets busy, fees can jump to $20 or even as high as $200. This makes it expensive for users to make transactions especially if it involves a smaller amount.
- Fragmented User Experience: Users often face a confusing experience when dealing with multiple blockchains. Each one usually requires its own wallet, gas tokens, and transaction processes. This makes it hard for users to keep track of their assets across different networks, leading to frustration and confusion.
These three issues have been major barriers to blockchain adoption, but developments in infrastructure over the past few years are tearing those down, making now the perfect moment to build consumer apps that are primed to soar
1. Rollup-centric Roadmap:
The first infra solves scalability issues and cuts down high gas costs and giving you the flexibility to customize as needed.
In 2020, Vitalik Buterin introduced a rollup-centric roadmap for Ethereum, which focuses on processing transactions off-chain using rollups. This means that only the final results are sent to the main Ethereum chain, helping to reduce congestion and increase transaction speed.
Key Developments
- Rise of Rollups:
- This roadmap has led to the development of various rollups, including zk-rollups and optimistic rollups.
- The total value locked (TVL) in rollups is now approaching that of Ethereum itself and is expected to surpass it in the coming years. Currently, the number of daily active users in Ethereum’s Layer 2 ecosystem has reached 8.6 million, marking a significant increase.
Advancements in zk-Rollups:
- Projects like zk-rollups, including Polygon zkEVM, zkSync, Scroll, and Linea, are advancing rapidly, with a combined total value locked (TVL) of $4.62 billion. The additional prover costs linked with zk-rollups are expected to drop further due to ongoing hardware improvements, and they already offer near-instant transaction finality on the blockchain.
- For instance, Polygon zkEVM is pushing zk-rollup technology forward by introducing AggLayer, which connects any Layer 1 or Layer 2 chain. This creates a Web3 network that operates like a single chain, offering unified liquidity and nearly unlimited scalability.
- Additionally, the Type 1 prover allows existing Ethereum chains to become zk Layer 2s, connecting to the Polygon ecosystem. The cost of transactions using the Polygon zkEVM prover is currently around $0.002 to $0.003 per transaction.
Advancements in Optimistic Rollups:
- Optimistic rollups like Optimism and Arbitrum are performing well, with Arbitrum being the leading Layer 2 chain in terms of TVL and user base. Arbitrum can handle up to 30,000 TPS and can configure block times to be as low as 100 milliseconds
- Optimism is working towards realizing a “superchain” vision. This involves creating a horizontally scalable network of chains that share a unified security layer and communication framework, allowing them to operate together seamlessly.
EIP-4844 and Alt-DA:
- The introduction of EIP-4844 has further reduced transaction costs by implementing blobs for data storage, which makes settling transactions on Layer 1 more efficient.
- Ethereum aims for 3 blobs per block. If a block exceeds this number, the base fee for blobs will increase to manage demand. Currently, the average blob count is trending toward the target of 3, which helps keep costs down.
- But the average blob count is trending toward the target of 3. If this count consistently exceeds 3, users and Layer 2 networks could face higher costs due to increased blob base fees. To manage potential increases in blob fees and offer more flexibility, we have alternative layers like Celestia, Avail, and EigenDA that have reduced data availability costs by 90x to 100x.
Decentralization Concerns:
- Blockchain is designed for decentralization and user ownership, there are concerns about their centralization due to multisig setups and single sequencers.
- To address these solutions shared sequencer models and decentralized sequencing are emerging. Projects like Arbitrum and Optimism reached stage 1 of decentralization and now moving towards stage2 to complete the training wheels.
However, as the number of rollups grows, the challenge of interoperability arises. Synchronous composability within rollup clusters is now feasible, with systems like the Superchain and Arbitrum Orbit sharing the same sequencer.
Yet, coordinating between different clusters may still require chain abstraction or interoperability solutions that utilize intents and other methods for asynchronous communication.
2. Chain Abstraction
Chain abstraction simplifies the user experience by removing the complexities associated with managing multiple blockchains. This approach enhances both usability and interoperability.
Key Features of Chain Abstraction
Unified User Experience:
Chain abstraction enables users to interact with different blockchain networks as if they were a single entity. This means users can manage their assets across multiple chains without needing to switch wallets or understand the technical details of each blockchain.
Wider Liquidity:
Developers can create dApps that are not limited to a specific blockchain, allowing them to tap into resources and liquidity across the ecosystem. This flexibility encourages innovation and broadens the potential user base.
3. EIPs for improved UX:
EIP-3074:
- Gas Sponsorship: Simplifies transactions by allowing a smart contract (invoker) to cover gas fees, removing the need for users to hold ETH specifically for fees.
- Account Abstraction: Users can keep their traditional EOAs while benefiting from smart contract features like bundled transactions and social recovery, enhancing usability without disrupting familiar processes.
EIP-7702:
- Temporary Smart Contract Upgrades: Allows EOAs to temporarily upgrade for a single transaction, providing advanced security and flexibility when needed without permanent changes.
- Forward Compatibility: Avoids new opcodes, ensuring improvements remain compatible with future Ethereum developments.
Combined Impact: These EIPs simplify interactions, increase accessibility, and offer enhanced security, making Ethereum more user-friendly for a broader audience.
The combination of low-cost, high-TPS Layer 2 solutions, chain abstraction, and simplified user experiences — including gas-free social logins — is set to attract a large user base for consumer apps
Top consumers app
Social and gaming applications are currently dominating the blockchain ecosystem in terms of daily active users (DAUs).
According to DappRadar, the SocialFi sector averaged nearly 2 million unique active wallets (UAW) in Q2 2024, growing by 66% over the previous quarter. Gaming applications briefly surpassed 3 million DAUs in early May before pulling back slightly.
Why Social and Gaming Apps are Growing Rapidly
- Familiarity and User-Friendly Experiences: Social and gaming apps often provide experiences that are similar to their Web2 counterparts, making them more accessible and appealing to mainstream users.
- Community and Engagement: These applications foster strong communities and encourage active user engagement, which is a key driver of growth and retention.
- Monetization Opportunities: Social and gaming apps offer unique monetization opportunities through features virtual goods, and play-to-earn mechanics.
Polymarket- A rising consumer App
Decentralized prediction market Polymarket had record growth last month.
Polymarket, a decentralized prediction market, operates by allowing users to bet on the outcomes of real-world events using cryptocurrency. These markets cover a wide range of topics, including politics, sports, and financial predictions. Polymarket has gained significant traction due to its transparent, blockchain-based platform, which offers users a unique way to hedge risks and make speculative bets on future events.
How Polymarket Acquired Early Users
Polymarket’s early success can be attributed to several key strategies:
- Strategic Funding and Partnerships: The platform was founded in 2020 with a $4 million seed round led by Polychain Capital, followed by substantial Series A and B funding totaling $70 million from prominent figures like Ethereum co-founder Vitalik Buterin and Peter Thiel’s Founders Fund. This backing not only provided the financial resources needed to scale but also lent credibility to the platform, attracting early adopters.
- Capitalizing on Major Events: Polymarket has effectively leveraged significant global events, such as the U.S. presidential elections, to drive user engagement. These high-stakes events generated substantial interest, leading to increased volume and liquidity on the platform. For instance, in July 2024, Polymarket saw $387 million in volume, tripling its previous record, largely driven by political betting markets.
- User-Friendly Integrations: Polymarket’s partnership with Moonpay allowed users to fund their accounts with traditional payment methods, such as PayPal, credit cards, and bank transfers. This ease of use lowered the barrier to entry, making it accessible to a broader audience and further driving user growth.
The Viral Loop Built Into Polymarket
Polymarket’s viral growth is fueled by a powerful feedback loop:
- High-Profile Markets: High-stakes events create buzz, drawing in new users who are eager to place bets. These users, in turn, generate more volume, which improves market liquidity and attracts even more participants.
- Word of Mouth and Social Proof: As traders share their successful bets on social media, it drives curiosity and FOMO (fear of missing out) among their networks, leading to more users signing up and participating.
- Community Engagement: Active discussion on platforms like Twitter helps keep users engaged and coming back for new markets, creating a cycle of continuous user acquisition.
Tokenomics and Economic Model
Polymarket focuses on USD-stablecoin-based markets, which makes it easier for users to understand and engage without worrying about the volatility of a native token. This approach has likely contributed to its broad appeal and sustained user engagement.
Key Metrics of Polymarket
Monthly Trading Volume:
- July 2024: $387 million
- June 2024: $111 million (previous all-time high)
Growth in Active Traders:
- July 2024: 44,523 monthly active traders
- Increase: 51% from the previous month
New Accounts:
- July 2024: 65,013 new accounts
- Increase: 82% from the previous month
Daily Active Traders:
- Peak on July 22, 2024: Nearly 6,900 daily active traders
Web3-Enabled Loyalty Program: A Consumer App That Should Exist
Understand app:
Imagine Sarah shops at a clothing store and earns 100 loyalty points. In a traditional loyalty program, these points would be usable only within that store’s ecosystem. However, in the Web3-Enabled Loyalty Program Hub, these 100 points are immediately converted into 100 tokens on the blockchain. Sarah can now see these tokens in her digital wallet within the app.
Using Points Across Different Brands: Sarah might decide she wants to use her points at a restaurant that is also part of the loyalty ecosystem. In a traditional program, her points would be locked to the clothing store, but with tokenization, Sarah can seamlessly exchange her 100 clothing store tokens for equivalent value tokens at the restaurant, and redeem them there.
Why This Isn’t Possible in Traditional Loyalty Programs:
Lack of Interoperability:
- Traditional Programs: Each brand operates its own isolated system, with points stored in a centralized database that doesn’t communicate with other systems. Points earned at one brand typically can’t be transferred or used at another.
- Web3 Program: Blockchain enables interoperability across different brands by tokenizing points, allowing them to be exchanged and used across various platforms. The decentralized nature of blockchain ensures that each token is recognized across all participating brands, breaking down the silos that traditionally isolate loyalty programs.
Acquiring Early Users:
- Strategic Brand Partnerships: Begin by partnering with popular brands that already have established loyalty programs.
Building a Viral Loop for User Retention:
- Gamification: Introduce challenges that reward users for reaching milestones, such as redeeming points across multiple brands or achieving a specific level of activity. Leaderboards can foster competition and community engagement.
Economic Model:
- Tokenization and Transaction Fees:
Token Conversion Fees: Charge a small fee for converting or redeeming tokenized points across different brands. These fees can be reduced or waived for users who hold a certain amount of the app’s native tokens, encouraging retention and loyalty. - Subscription Services for Brands:
Premium Features: Offer brands subscription services that provide advanced analytics, priority placement, and customized loyalty program management tools. This creates a steady revenue stream while enhancing brand engagement. - Advertising Revenue:
Targeted Ads: Allow brands to promote their loyalty programs or new products within the app, creating an additional revenue stream while offering brands direct access to a highly engaged audience
Conclusion
The barriers that once hindered blockchain adoption, including low transaction throughput, high costs, and complex user experiences, are being dismantled by recent technological advancements. With the rise of rollups, chain abstraction, and user-centric EIPs, the blockchain ecosystem is becoming more scalable, cost-effective, and accessible. Social and gaming apps are already capitalizing on these improvements, setting the stage for a new wave of consumer apps that can reach internet-level scale. As the infrastructure continues to evolve, the opportunity to create and launch consumer apps that meet the needs of a broad user base has never been greater.
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