5 critical questions for your consumer crypto app.

So, you’re building a consumer crypto app. Something simple and streamlined… without all the scary complexity, bad UX, and connotations of “crypto”. 

We all want to see mainstream adoption, and we all believe it will happen. But for now - we’re still on the frontier. Growing consumer products in web3 is exciting, it is fascinating, it is… different.

I’ve spent years on projects with this mission. A/B testing, refining, scaling, optimizing, through bear and bull markets. Designing incentives. Fighting the good fight of making “crypto” accessible.

Building here means you’ll have all the same challenges of creating and growing a great web2 product, plus some new ones, in an environment that breaks many of the core assumptions of how you can measure.

To be completely clear - no one has really succeeded yet. There are leaders in consumer web3 today; there are no winners yet. Products have skyrocketed to popularity - few have retained audiences.

Price will not get us there. Designing for where, why, and how web3 products can outcompete incumbent systems, will.

I’ll do more step-by-step guides in following posts. To start, this is an introduction to the most important questions you should be asking at the earliest stages, and why - so that when it does come time to scale, you can.

The five critical questions you should be able to answer about your consumer crypto product:

1. How does web3 improve your solution?

2. How experienced is your target audience?

3. What is the real core value of your product?

4. Who does your product actually compete with?

5. Does this product have an organic growth loop?

These may seem basic on first glance - but each relates to specific, recurring challenges in this space, which I’ll break down below. By considering them from the start, hopefully you can successfully push the boundaries further - for yourself, and those behind you.

And, look: this post is not intended to dissuade you from building something, especially if you’re having fun - we need games, too. It is simply intended to help guide anyone who is setting out to build a venture-scale project, because that’s where my experience comes from. 

If this post is too long, just scroll to the TL;DR summaries at the bottom of each section. I’ve included examples.

Let’s dig in.

1. How does web3 improve your solution? 

Emphasis on “solution”, because your product solves a specific problem. 

Despite what you may read on twitter X, not everything needs to be onchain, today. Infrastructure is improving, there is broader adoption and liquidity of the base assets; both steadily pave the way for better consumer apps. But, web3 will still make many aspects of your product unnecessarily difficult for the average person, if it doesn’t make your product better. 

It’s hard enough to build a successful consumer product without adding transaction costs, hexadecimal addresses, gas currencies, wallet signing, pseudonymity, market volatility, self-custody, and app store restrictions. 

The smartest people in the world have made the internet progressively and continuously easier to use for the last three decades. The web is faster, cheaper, more stimulating and ubiquitous than ever. Payments in the US, and much of the world, are actually quite easy, and cheap.

Yet web3 culture has maintained an ongoing expectation that people will adopt an objectively more difficult experience, in exchange for what much of the public might consider philosophical improvements. We’ve seen over and over again that people like the ideas of privacy, decentralization, and self-custody… just not at the expense of speed, ease, or cost.

Building onchain today will most likely reduce your addressable market, add friction to your conversion funnel, and make it generally far more difficult for you to measure product/market fit.

This doesn’t mean it’s not worth it, but it does mean you need to think critically:

• What aspect(s) of web3 makes your product an authentically superior solution? 

• Why is this a necessary feature from the start?  

• Will it make your product a better enough (10x) solution to justify switching costs? 

If you have a clear answer - you’re far ahead of many projects today. If you don’t have a concrete answer - you might need to reevaluate.

If your answer is: 

• “decentralization”, “self-custody”, “privacy” → you need strong validation your target customers really want, and are actually willing to pay for this.

• “mainstream adoption of web3”, or “access to startup capital” → these are not actually user problems.

Your goal has to be creating a better solution to a specific problem, for a specific set of people. “Mainstream adoption” of web3 will only be achieved through applications that authentically outcompete their web2 competitors. 

What types of applications can actually benefit from being onchain? A full blog post on this is coming soon™ - but I’ve included a quick example below.

2. How experienced is your target audience?

More accurately, how “crypto-initiated” is your target audience? 

This should impact every other aspect of your product, GTM, and brand strategy. You can always expand… you must start narrow.

Many consumer apps end up spending a massive amount of time and resources on educational materials to help people feel safe, motivated, and knowledgeable enough to actually use their product. Newsletters, push notifications, podcasts, social content, videos… you name it.  

Converting new users is significantly more difficult in web3. And for many products, the only thing worse than their conversion rates, are their retention rates.

For now, let’s focus on why crypto-initiation level will affect A) your conversion funnel, and then B) the priorities of the audience you reach. 

A) Conversion funnel: Specifically, funding the wallet. 

The difference between even a mildly-experienced audience, and brand-new users, will be their ability to get funds into your app.

Historically, this step will prevent 90% of “normal” people from ever using what you’ve actually made. This means your real CAC is 10x higher than your cost per install.

Before we go deeper, a quick, too-simple breakdown of audiences you’ll reach:

If you’re building a product yourself, you probably completed KYC years ago. You might now underestimate how much effort that is for the average person. 

KYC isn’t that difficult, but it’s still typically 40% - 50% of total taps/clicks in the onboarding process of most apps (if you’re designing well). You will lose a few people with every required tap, and it’s mildly intrusive: they’re going to have to submit personal information and a photo ID. That means they need to be in a place and situation where they have their ID, feel comfortable pulling it out, trust both your app and the third party KYC provider, and are willing to spend 30 seconds to a few minutes doing it. 

I’ve typically lost 20% - 50% of new users at the KYC step, depending on market conditions.

From there, your user now still has to make an actual, up-front purchase. The price and fees of that transaction will be a function of expedience, your monthly volume, exchange rates for their national currency, liquidity of the asset they’re swapping into, and the amount they want. Lower amounts will have a higher percentage fee (i.e. $2 for a $20 cash-in → a 10% fee; twice the interest those funds will yield in a year as stablecoins). The good news: if they passed KYC, they’re probably motivated enough to complete this; the bad news is you’re still going to lose another 10-50% of people who made it this far.

You will also need to plan for the other direction - withdrawing funds. If you think new users are intolerant while getting money into your app, I assure you, they are far less forgiving of issues in getting money out. 

B. Audience Characteristics

A crypto-initiated audience will have an easier time accessing your product for the first time. 

But this audience is also likely to be primarily financially motivated. Early-stage crypto projects are risky, so potential returns have to be high enough to justify the risk. High single-digit returns might be enough, depending on the asset - low single digits are probably not. 

If incentives you add are not a core aspect of your offering, it will be much harder to differentiate whether people are actually interested in your solution, or simply taking advantage of the promo (but to be clear, it’s probably the promo).  

Otherwise, a crypto audience will generally have more:  

My advice, with this in mind: 

• Collect contact information: You don’t have to require this, but it will help you in actually reaching your audience to understand usage, validate hypotheses, and improve your core offering. Having even limited contact information will allow you to warn people about bugs, nurture new users, introduce product updates, send announcements, and maybe even reactivate people later if they churn. If you require it, you’ll have a more accurate count of unique users - if that matters to you.

• Target for more than just crypto-initiation: If you target for only a general interest in crypto, you will reach a lowest-common-denominator segment of people only looking for quick money. Target based on your competitors, AND relevant topics, accounts, or influencers. Include demographic requirements, your geographic focus, and anything else relevant to the core value (see next section) of what you’re building. 

Who is doing this well today?

Rodeo is doing for instagram, what Farcaster did for Twitter. And they’ve taken one of the more clever approaches to onramping I’ve seen recently. Not only are they using Privy to simplify onboarding/wallet creation, and offering faster onramping with Apple Pay - but their use of “credits” also conceals the fees and exchange rate that users would see and find frustrating, if this value was presented in stablecoins or tokens with a clear exchange rate.

I’ll be dropping my next print series on Rodeo; join me there if you’re curious to follow along.

3. What is the real core value of your product?

This may seem like an easy question, but take a second to really consider it again. 

A store of value, a medium of exchange... Most crypto products theoretically do both, and realistically do neither.

Store of value wallets end up encouraging swaps because it’s an easy monetization strategy. Medium-of-exchange products fail because the real costs of gas and on/off ramp fees make the product a worse solution than web2 alternatives.

Culturally, the term “crypto” is so tightly associated with asymmetric returns now, that there is an inevitable gravity toward speculation that permeates everything.

At some point, a new memecoin is going to mint millionaires while whatever you intended to build isn’t quite working yet. It becomes very easy to lean into, “well, speculation is what the people want.”

If you’re embracing this from the start, fine - but if you’re not, consider how that implicit association will affect how you need to design and communicate what you offer.

Realistically, most products here end up providing a way to make money. Either through investing, trading, or completing tasks: users come in with the goal of withdrawing more money than they put in. If this is a fundamental part of your offering, consider how market dependent this makes your solution, why it is economically sustainable, and how it is most likely to be gamed.

But even if the function of your app is financial, the core value is likely still more specific: stability (safety), hedging, gambling, entertainment, or even a sense of community in winning together.

Speak to that value, and not about the underlying technology you’re using to achieve it. 

Honest, objective self-reflection on your real core value will allow you to far more accurately separate the valuable features, and acquisition channels, from the trendy distractions.

The best guidance I’ve seen on core value came from Brian Balfour at Reforge. Rather than focusing on your own solution when asking this question, consider what substitute products your audience would use instead.

• Gambling, drinks, or entertainment? You’re providing entertainment. 

• Fashion or luxury goods? Your real value is status. 

• Savings or traditional assets? You’re selling a better future. 

The list goes on - but the lines can get blurry if you’re not careful. Would users still buy that art, if they didn’t believe there was a resale opportunity?

Prioritize features accordingly, and target your audiences accordingly. Bolt-on gamification and incentives will not fix a fundamental misalignment between what you think you offer, and what you actually provide. 

4.  Who does your product actually compete with? 

Sadly, a common mistake I’ve seen is teams assume their product competes only with other web3 apps.

Meanwhile, Reed Hastings famously considered Netflix’s greatest competitor to be sleep.  

Who you’re really competing with depends on your answers to the past two questions: 

1. Who your audience is

2. The core value of your product. 

It has very little to do with what underlying technology accomplishes that goal. 

Your competitor list should include web3 products, web2 solutions, and maybe even physical goods or experiences your audience currently uses, or could use.

Then, compare: 

• What is the actual cost of those solutions?

• How difficult are they to use? (if it’s software, count the number of clicks or actions to accomplish the goal)

• How long do they take to work? 

• How effective are they?

You don’t have to be better at all of these - but it is critical that you are better at one of them, or there is no reason for anyone to use your solution (And please, keep in mind, this includes the cost of onramping and offramping funds).

Then, consider your competitors’ approach - if they’ve been successful, how? Examine their solutions, the costs, the 1 star reviews, the 5 star reviews, the size of their audiences, the type of content they create, and the level of quality they provide. If something about their solution seems strange or surprising, check if there are regulatory or business reasons you hadn’t considered yet - this is an area you might have an edge. 

Focusing only on web3 will give you a very narrow view of the problem, your competition, and your potential audience. Most people don’t really care about the underlying technology of the things they use; they simply want it to accomplish their goal, at the highest quality their price point can afford.   

5. What are your organic growth loops? 

You probably discovered the most famous consumer apps you use, through an organic growth loop: an innate, reinforcing aspect of that product which brought you to their website or app… for free. 

Few discovered facebook, tiktok, or reddit through a paid advertisement. Almost everyone joined these platforms via (non-incentivized) invitation, or through the content created and hosted on them. 

Natural growth like this isn’t just important for getting “big”; it allows you to test faster, so you can improve faster, which in turn drives more growth. The lower the cost of acquiring new users, the more powerful this becomes.

The most common drivers of organic growth are A) network effects, and B) user generated content. 

Success of your application doesn’t require an organic growth loop, but consumer products often have very thin margins that will require significant adoption before they start turning a profit. If you must reach scale to be able to sustain operations, you need a clear way of getting there.

In web3, traction is more often measured by transaction volume or TVL (Total Value Locked), rather than unique users (a deeper blog post on this, coming soon), but the same basic principle stands. If you expect average consumer transaction sizes to be small, well… the smaller the transactions, the more people, and the higher frequency (i.e. higher engagement) you will need in order to build volume (another topic for a later post). 

If you’re focused on consumers and you don’t have an organic growth loop, it may be very difficult to ever reach the levels of growth, and volume you need to sustain operations. 

And while it’s disappointing for a fun web2 game or app to close down, the stakes are higher when people are trusting what you’ve built to hold their money. The more viable your company, the safer people will be using it.

At the end of the day, there isn’t one roadmap for success in web3. It should include, and will include, an incredibly broad variety of solutions, and every project has different needs when it comes to planning go-to-market and beyond.

However, right now, these are questions that will directly affect your ability to grow - and more importantly, your ability to find product/market fit, which you have to reach first.

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