Author: Parker Jay-Pachirat Source: medium Translation: Shan Ouba, Golden Finance
The development of consumer crypto applications, driven by advances in L2, alternative L1, infrastructure, and UX/UI, marks a transformative era for blockchain technology. In recent months, it has become clear that for consumer crypto to succeed, we must leverage familiar consumer behaviors and create better incentives for them, rather than trying to port existing web2 applications to the blockchain or reinvent the wheel.
Most users are reluctant to give up platforms like Instagram or TikTok for decentralized alternatives, caring more about convenience and familiarity than novelty. However, cryptocurrencies and blockchains can enhance existing user behaviors, making them more engaging, rewarding, and attractive.
In this article, I’ll explore how projects like PuffPaw, BlackBird, TYB, and SkyTrade embody this potential, combining real-world activities with decentralized technologies in various ecosystems. As these applications mature, they can seamlessly integrate cryptocurrency into everyday life, blending digital and real-world experiences.
Consumer cryptocurrency has entered the conversation. The emergence of L2 solutions like Base and alternative L1 solutions like Solana have made transactions faster and cheaper. Additionally, innovations in UX/UI like account abstraction, chain abstraction, embedded wallets, and intents have made it easier than ever to access and use cryptocurrency. These design and infrastructure advances are paving the way for a new era of consumer cryptocurrency applications.
SocialFi apps such as Friend.Tech, Farcaster, and Fantasy.Top have become the standout consumer apps launched over the past year, garnering widespread industry attention. These platforms have brought the “consumer crypto” narrative to the forefront of the industry, with Fantasy.Top, Friend.Tech, and Pump.Fun briefly entering the top 15 protocols by 24-hour fees in late May (DeFiLlama). Each of these apps offers unique innovations in on-chain interactions, gamification, or value creation.
However, breakout apps still struggle
However, these breakout apps have struggled to achieve long-term stickiness, retention, and growth. In July, I discussed the rise and fall of Friend.Tech. Data suggests that the majority of users driving activity and transactions on the platform are primarily motivated by short-term yield and farming opportunities. This suggests that Friend.Tech’s core product and value proposition have yet to resonate with a broad audience, as evidenced by high churn rates.
“Friend.Tech had a breakout year in 2023. 1 week after launch, the protocol surpassed Uniswap and Bitcoin in 24h fee generation, and within a month was ranked among the top 5 fee generating protocols. Since then, activity has dropped dramatically. Daily fees fell -99% month-over-month, from $345k in May 2024 to $3k in June 2024. Platform volume and daily active traders fell 99% and 98% respectively over the same period.” —Parker Jay-Pachirat, ON–242: Onchain Social
Similarly, after a large number of bots left the platform in July 2024, Farcaster's daily delivery volume fell 50% from its historical high:
style="text-align: left;">“ The drop in Farcaster activity can largely be attributed to bots and airdrop farmers leaving the platform… Changes to the $DEGEN tip distribution and Warpcast algorithm may be one of the reasons. ” — Gaby Goldberg, ON–242: Onchain Social
Fantasy.Top has also experienced a decline in net transaction volume. While the platform saw strong activity between April and May 2024, there are only minimal signs of activity today.
Why didn’t these applications take off after their initial success?
In recent months, it has become clear that for consumer cryptocurrencies to succeed we must leverage familiar consumer behaviors and create better incentives for them, rather than trying to 1) port existing web2 applications onto a blockchain, or 2) Try to reinvent the wheel.
Most users are not willing to give up Instagram or TikTok for decentralized alternatives. Users care about convenience and familiarity. Users are also unlikely to adopt new technology simply for its novelty or experimental value. However, cryptocurrencies and blockchains can enhance familiar and existing user behaviors, making them more attractive, rewarding, and engaging. This is where consumer cryptocurrencies come in handy.
Over the next five years, successful consumer crypto apps will not need to completely change user habits. Instead, they will leverage the gamification, incentives, and utility that crypto and blockchain technology bring to enhance familiar behaviors.
A particularly promising group in this space will focus on real-life user behaviors and experiences. These apps will be connected to real-world activities, rather than existing solely as isolated online experiences. I call this category “Consumer x DePin” (“decentralized, physical infrastructure”) or “Consumer x IRL.”
Why is IRL so important? (1) Many consumer behaviors still have a face-to-face component, even if they are conducted online. Examples include shopping, apartment hunting, job hunting, and booking flights. (2) Millennials and Gen Z are increasingly seeking authentic, direct experiences, as evidenced by the rise of running clubs, singles meets, and in-person speed dating events (especially in cosmopolitan cities like New York).
A group of emerging consumer cryptocurrency projects are entering the market that embody these best practices. These projects innovatively use blockchain and cryptocurrency to introduce new financial incentives, gamification elements, and engagement methods to mass-market consumer behavior. Below, I highlight four early projects as examples.
PuffPaw is pioneering the introduction of e-cigarettes on-chain by launching the first decentralized physical infrastructure network (dePIN) on Berachain. Their main mission is to motivate people to quit smoking. To begin with, they will offer a variety of cartridges with different nicotine levels to suit a variety of preferences.
The global e-cigarette market was valued at $28.17 billion in 2023 and is expected to grow to $183 billion by 2030, with a compound annual growth rate (CAGR) of 30.6%. The number of e-cigarette users has increased dramatically, with the number of e-cigarette users increasing by 280% between 2012 and 2022. However, the industry faces significant challenges and inefficiencies for both distributors and consumers. These include an overly long supply chain, which results in high costs for e-cigarette companies and manufacturers, and high margins for distributors, which results in high prices for consumers.
How does it work? Each physical e-cigarette in the PuffPaw ecosystem is considered a node. To participate in PuffPaw games, users must own a node license, which is represented by an e-cigarette. These nodes have different levels of mining efficiency determined by a rarity system. Physical cartridges come in a variety of flavors and nicotine concentrations, and each user has a unique daily smoking limit that affects their gaming results. Rewards are verifiable on-chain, and each cartridge is a token miner.
PuffPaw borrows elements from GameFi, SocialFi, and DePin. They will be launching a node presale soon. Stay up to date on their website and Twitter.
Blackbird is a loyalty and rewards platform on Base that facilitates direct connections between restaurants and customers.
In 2023, total sales in the U.S. restaurant industry exceeded $1 trillion, up 11% year-over-year, exceeding 2019 levels and outpacing the growth of the S&P 500. Restaurants account for 5% of U.S. GDP and 45% of household food budgets. However, 80% of independent restaurants close in their first year, and 80% fail within five years. In 2023, 43% of U.S. restaurants are still burdened with COVID-19-related debt, and profit margins have fallen from 20% to just 4% in 20 years. Technology is having a growing impact, with digital sales increasing from 9% to 21% of total sales between 2019 and 2024.
The traditional model of operational excellence and best practices is no longer sufficient to achieve financial sustainability and growth. Restaurants must now adapt to new models that focus on customer segmentation, engagement, and retention.
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How it works: Blackbird is revolutionizing the hospitality industry by facilitating direct connections between restaurants and guests through the decentralized Blackbird Platform, enhancing engagement, loyalty, and payment capabilities. Blackbird allows users to check in at partnered locations IRL and earn rewards at dining locations. Powered by the $FLY token, Blackbird provides restaurants with comprehensive insights into customer behavior while delivering significant value to patrons through discounts, rewards, and exclusive offers. The platform’s recent innovations include Flynet, L3 on Base, and Blackbird Pay for seamless bill settlement.
A key advantage of Blackbird is its founder, Ben Leventhal, who previously co-founded Eater and Resy (sold to American Express for $200M in 2019). Leventhal’s experience and connections give Blackbird a strong foothold in its partner brands (restaurants) and its target market for its clients. Blackbird has integrated with many of New York City’s top restaurants and popular eateries, such as Nami Nori, Rule of Thirds, Upside, Canal Street Market, and Sweet Rose Creamery.
TYB is an engagement earning platform that allows D2C e-commerce brands to directly engage and reward consumers who perform valuable actions.
Direct-to-consumer (D2C) brands are often not as “direct” as they seem. In recent years, customer acquisition costs for these brands have skyrocketed. The channels they have relied on for growth over the past 5-10 years, such as Facebook and Instagram, have become oversaturated and expensive, with CPMs (cost per thousand impressions) increasing at 20-25% per year. This inflation means that acquiring a new customer can cost 5 to 25 times more than retaining an existing one, resulting in customer acquisition costs (CAC) exceeding customer lifetime value (LTV) and fewer loyal customers.
Currently, customer relationships are mediated by ad-centric discovery platforms, with brands heavily reliant on third-party platforms such as Instagram and TikTok for marketing, communication, and engagement. Not only is this reliance economically inefficient, it also impedes brands’ ability to effectively target and connect with key customer segments.
Working principle: TYB TYB is a platform that earns money by participating, providing solutions by providing direct sales and marketing channels for D2C skincare, fashion and lifestyle brands. TYB reduces reliance on advertising platforms and allows customers to earn rewards from their favorite brands by participating in challenges such as product testing and content creation. This approach allows brands to gain deep insights into user behavior and segmentation, thereby increasing LTV, retention, sales and engagement. TYB also allows brands to manage all aspects of communication, engagement, marketing and social channels while tracking user information on the chain. For consumers, TYB provides a more engaging and rewarding brand experience, providing tangible rewards such as discounts, special offers and exclusive items in exchange for feedback and content creation. This model is particularly effective in the beauty and skincare sectors, where customers are loyal due to continuous repeat purchases.
TYB has attracted a wide range of partners, many of which are popular brands. It is one of the few blockchain-based loyalty platforms that offers "no code" integration, which simplifies technical integration and reduces costs. TYB focuses on a niche market, targeting D2C e-commerce brands in the skincare, health and lifestyle, fashion, and food and beverage sectors. This specific positioning sets TYB apart from its competitors, which tend to take a vertically agnostic approach. Founded and led by former Outdoor Voices CEO Ty Haney, TYB also benefits from Haney’s deep understanding of the D2C space. Her extensive network and experience have attracted well-known brands such as Topicals, one of Sephora’s fastest-growing skincare brands.
Last week, TYB launched a community in partnership with Glossier, the largest community since the platform’s first day of launch.
SkyTrade is an air rights tokenization platform and trading marketplace for owners, real estate companies, and traders. It provides an on-chain marketplace for low-altitude airspace.
Air rights are the rights to buy and sell the airspace above a development property under zoning laws. The air rights market has historically been opaque and difficult to access, limiting economic efficiency. In common law jurisdictions, landowners own the rights to the airspace above their property. The total addressable market (TAM) for this market is as high as $30 trillion, with locked air rights over Manhattan alone valued at over $500 billion and central London at £52 billion. In addition, the drone industry, which requires air rights for delivery, is estimated to be worth $450 billion.
Air rights are also critical to the expansion of commercial drone deliveries. Drones cannot legally fly without permission to use private airspace. Over time, drone deliveries could reduce the cost of traditional deliveries by approximately 90%. Large retailers such as Walmart and Amazon are rapidly expanding drone delivery services. Walmart, for example, currently serves more than 2 million households and plans to use its extensive real estate portfolio to reach 90% of the U.S. population with drone deliveries. To achieve this goal, it is necessary to obtain the right to use low-altitude airspace from the airspace owners.
How it works: Through the SkyTrade platform, users can register their property, claim airspace, and participate in the buying and selling of tokenized air rights. Drone operators can lease airspace for specific time periods, forming a dynamic and easily accessible market for airspace utilization. Although still in its early stages, SkyTrade has already built a strong pipeline for its airspace marketplace, with over $30 million worth of air rights traded on its platform to date.
In summary, the evolution of consumer crypto apps, driven by L2 solutions, L1 alternatives, and innovative UX/UI features, marks a transformative era for blockchain technology. While early success stories such as the SocialFi app have struggled with long-term retention, the future lies in building unique, blockchain-based experiences that reinforce familiar behaviors.
Notably, we are beginning to see this trend emerge across a variety of ecosystems and platforms, highlighting the cross-chain potential of these applications. Projects such as PuffPaw, BlackBird, TYB, and SkyTrade embody the potential of combining real-world activities with decentralized technology, providing novel incentives and opportunities for engagement. As these applications mature, they have the potential to play a key role in integrating cryptocurrency into everyday life, creating a seamless blend of digital and real-world experiences across different blockchain ecosystems.
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