The Three Paradigms of Web3 Consumer Applications and Their Opportunities and Challenges

The Next Bull Run Driver: Overview of Mainstream Paradigms, Opportunities, and Challenges in Web3 Consumer Applications

The recent sentiment in the cryptocurrency market is sluggish, with potential policy benefits not meeting expectations. Additionally, a series of celebrity-related Memecoin projects have drained market liquidity. This nearly two-year-long speculative wave in cryptocurrency, driven by macroeconomic positives, seems to have come to an end. More and more investors and industry participants are beginning to think about the next value narrative in the Web3 industry, with the Web3 consumer application track becoming a hot topic. Only by having more applications aimed at the general public achieving widespread adoption can true user value and sustainable business models be brought to this overbuilt infrastructure ecosystem.

This article will provide an overview of the mainstream paradigms of current Web3 consumer applications, exploring their respective opportunities and challenges.

Definition of Web3 consumer applications

Web3 consumer applications refer to software applications that have Web3 characteristics and are aimed at ordinary consumers. Unlike enterprise-level users, the target users of these applications are the vast ordinary consumers. Typically, consumer applications can be roughly divided into 10 categories according to the App Store classifications, each of which has different subdivisions. As the market matures, many new products will combine multiple features to seek differentiation, but they can still be simply categorized based on core selling points.

The main paradigms of Web3 consumer applications and their opportunities and challenges

Currently, there are three common paradigms for 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 competitiveness or provide new services. This is mainly reflected in two aspects:

• Ultimate privacy protection and data sovereignty: Opportunity: Privacy protection has always been a key focus of Web3 infrastructure innovation, from the initial asymmetric encryption to the integration of technologies such as ZK, FHE, and TEE, aiming to create a network environment that does not rely on third-party trust and provides users with data sovereignty. Many projects that claim to be "decentralized" fall into this category. Challenge: As a core selling point, it has not shown a clear advantage in market competition. On one hand, consumers have limited emphasis on privacy; on the other hand, overly emphasizing privacy protection may undermine mainstream business models, increasing the difficulty of designing sustainable profit models.

• Low-cost global 24/7 trusted execution environment: Opportunity: Numerous L1 and L2 provide developers with a new, global, round-the-clock multi-party trusted program execution environment, which can effectively reduce trust costs and usage costs in certain specific scenarios. Challenge: Applicable scenarios are relatively limited, mainly concentrated in specific areas such as financial services.

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

This paradigm aims to enhance the competitive advantage of products by introducing the high financial attributes of crypto assets. This is mainly reflected in three aspects:

• Reduce customer acquisition costs through token-based marketing activities such as Airdrop: Opportunity: Utilizing tokens created at zero cost for user acquisition can significantly reduce the risk of early-stage projects. Challenge: The conversion cost for such users is high, which can easily lead to a misjudgment of the product-market fit. As the model becomes more widespread, marginal benefits decrease.

• User loyalty program based on "X to Earn": Opportunity: Utilize the financial attributes of tokens to reduce user retention and activation costs. Challenge: Over-reliance on profit incentives may lead users to focus away from the product itself, which is detrimental to the long-term development of the product.

• Direct monetization of the financial attributes of tokens: Opportunity: Provided a new fast monetization channel for the project. Challenge: This is an unsustainable business model that will lead to a conflict of interests between the project party and the users in the long run.

3. Fully serve Web3 native users and address the unique pain points of this group of users.

This paradigm focuses on serving the native user base of Web3. It can be divided into two categories:

• Build new narratives and design monetization around the untapped value elements of Web3 native users: Opportunity: At the early stage of the project, you can obtain the pricing power of a certain asset, thereby gaining monopoly profits. Challenge: Relies heavily on team resources and market insights, needs to establish cooperation with key individuals or institutions that have "pricing power."

• Provide new tool-based products to serve the specific needs of Web3 native users: Opportunity: With the popularization of cryptocurrency, the user base continues to expand, bringing possibilities for user segmentation. It becomes easier to achieve product-market fit. Challenge: The product development cycle is long, and it is difficult to obtain large-scale financing in the early stages, requiring the team to maintain patience and original intention.

These three paradigms are not completely independent; many projects may possess multiple characteristics simultaneously. For teams looking to start a business in the Web3 consumer application space, it is crucial to comprehensively assess their own advantages and demands and choose the most suitable paradigm.