Mainstream Models of Web3 Consumer Applications and Their Opportunities and Challenges

Recently, market sentiment has been low. As policy dividends gradually materialize but fall short of expectations, coupled with a series of celebrity Memecoins depleting liquidity in the crypto speculation market, this wave of cryptocurrency speculation driven by macroeconomic benefits seems to be nearing its end. More and more investors and industry insiders are beginning to ponder the next value narrative in the Web3 sector, with consumer applications in Web3 becoming the focal point of discussion. Only with the emergence of more mass-oriented applications achieving widespread adoption can a true user base and sustainable business value be brought to this overbuilt infrastructure ecosystem.

This article will review 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, rather than enterprise users. These applications can typically be roughly categorized into 10 categories according to the App Store's classification, with each category having different subdivisions. As the market matures, many new products will combine multiple features to find differentiated selling points, but we can still simply classify them based on their core selling points.

Main Paradigms of Web3 Consumer Applications and Their Opportunities and Challenges

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

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

This paradigm aims to enhance product competitiveness or provide new services by leveraging the technical characteristics of Web3 infrastructure. This is mainly reflected in two aspects:

Ultimate privacy protection and data sovereignty

Opportunity Point:

• Utilize technologies such as ZK, FHE, TEE to provide users with data sovereignty
• Personal privacy information can be directly hosted on trusted local devices to avoid leakage.

Challenge:

• Consumers have limited concern for privacy unless a large-scale data breach occurs.
• Overemphasizing privacy protection may undermine mainstream business models, increasing the difficulty of sustainable profitability.

Low-cost global all-weather trusted execution environment

Opportunities:

• Provide a trusted program execution environment for multi-party collaborative business, reducing trust costs.

Challenge:

• The applicable scenarios are relatively limited, mainly focused on the financial services sector.

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

This paradigm aims to enhance product competitiveness by introducing crypto assets and leveraging their high financial attributes. This is mainly reflected in three aspects:

Reduce customer acquisition costs through Token-based marketing activities such as Airdrop.

Opportunities:

• Capture users using zero-cost created Tokens to reduce early project risks.

Challenge:

• The cost of acquiring seed users is high, mostly consisting of speculators.
• The marginal benefits of this type of model decrease, and the customer acquisition cost gradually increases.

User Loyalty Program Based on X to Earn

Opportunity Point:

• Use Token rewards to reduce user retention and activation costs.

Challenge:

• User concerns may shift from product features to return rates.
• If the yield depends on the Token price, the project party will face market value management pressure.

Directly monetize using the financial attributes of tokens

Opportunity Point:

• Provides a new fast monetization business model

Challenge:

• In the long term, it is unsustainable and may lead to a conflict of interests between the project party and users.

3. Fully serve Web3 native users, addressing their unique pain points

This paradigm focuses on serving the Web3 native user group, which is mainly divided into two categories:

Constructing a new narrative, monetizing certain value elements of Web3 users, creating a new asset class.

Opportunity Point:

• Having the pricing power of a certain asset at the early stage of the project, obtaining monopoly profits.

Challenge:

• Rely on team resources to obtain support from institutions or individuals with "pricing power".
• The pricing power of crypto assets dynamically shifts among different groups, requiring continuous strategy adjustments.

Provide new tools or optimize user experience to meet the needs of Web3 users participating in the market.

Opportunity Point:

• As the user base expands, it brings possibilities for user segmentation.
• Focus on real needs, making it easier to achieve product-market fit.

Challenge:

• The product development cycle is relatively long, and it may be difficult to obtain large amounts of financing in the early stages.
• You need to be patient in the myth of wealth and stay true to your 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 strengths and demands and choose the most suitable paradigm.