IOSG Weekly Brief｜Consumer Application Track: Insights and Thoughts #283

Author | Max Wong @IOSG

---

TL;DR

• Infrastructure is saturated; consumer applications are the next frontier.After years of investing in new L1, Roll-up, and development tools, technical marginal returns are minimal, and users do not automatically flood in just because the technology is good. Now, attention creates value, not architecture.

• Liquidity stagnates, retail investors are absent.The total stablecoin market value is only about 25% higher than the 2021 historical peak, with recent increments mainly from institutions purchasing BTC/ETH for their balance sheets, rather than speculative capital circulating within the ecosystem.

• Core assertion

• Friendly regulatory policies will unlock the "second wave" of development.More clear US policies (Trump administration, stablecoin bill) will expand TAM and attract Web2 users who only care about tangible applications, not underlying technical architectures.

• Narrative market rewards real usage.Projects with significant revenue and PMF—such as Hyperliquid (about $900 million ARR), Pump.fun (about $500 million ARR), Polymarket (about $12 billion trading volume)—far outperform infrastructure projects with high financing but lacking users (Berachain, Sei, Story Protocol).

• Web2 is essentially an attention economy (distribution > technology); as Web3 deeply integrates with Web2, the market will follow—B2C applications will expand the pie.

[The rest of the translation follows the same professional and precise approach, maintaining the original structure and translating all text while preserving HTML tags and specific crypto terminology as instructed.]

• Past liquidity bottlenecks were due to a lack of clear framework and obvious market island effect; now, stablecoin regulations have become clear, which is beneficial to liquidity

• Political-level positive sentiment has a greater impact on consumer applications than on infrastructure, because consumer applications can attract a large number of Web2 users

• Web2 users only care about the application layer that can directly interact with and products that bring value to themselves - they want Web3's "Robinhood", not a "crypto version of AWS"

• Robinhood

• Google/YouTube

• Facebook

• Instagram

• Snapchat

• ChatGPT

Market Maturity → Focus on Real Users + Revenue + PMF > Infrastructure + Technology

• In the narrative market, capital continues to flow to projects with real revenue and real PMF, and the vast majority are consumer applications because they have real users

• Hyperliquid

• Pump.fun

• Polymarket

• Significance: Technology is important, but good technology alone does not attract users; good technology must be implemented → the easiest path is consumer applications

• Method: Projects with unified extreme UX and value capture mechanisms will attract users. Users do not care about slightly better technology unless they can "feel" it

• Builders are shifting from "technology is king" (2019-2023) to "user-first". Chains with actual needs, not just subsidized ecosystems or tools, will attract developers

• In the past, the market made developers write extensions for Firefox for subsidies, rather than acquiring real users on Chrome

• Typical counterexample: Cardano

Web2 has always been an attention economy (distribution > technology); after deep integration with Web3, it will be the same - B2C applications will expand the overall market

• Viral spread and attention are the key to success → Consumer applications are the easiest to achieve

• Because network effects are easily embedded in consumer applications → such as binding Twitter and receiving protocol rewards for posting (Loudio, Kaito)

• Therefore, consumer application content is easily generated → easy to go viral and occupy mindshare

• B2C applications can easily create topics through user behavior, incentives, or community (Pump.fun vs Hyperliquid)

• Viral spread brings attention, attention brings users → Viral applications will attract new retail investors and expand the market

[The rest of the translation follows the same pattern, maintaining the original structure and translating all text while preserving any HTML tags and specific terms as specified in the initial instructions.]

Yield aggregator, integrated with mainstream lending protocols (Aave, Kamino, Morpho) and Stake Covering mainstream spot/perpetual trading interfaces Currently, the closest to this North Star is Robinhood: minimalist UI/UX, combined with bank and wallet integration; it may be the leader in this track. Entertainment / Media / Social Currently, content platforms (YouTube, Twitch, Facebook) mainly profit by capturing user attention and selling it to advertisers through ad displays. However, this conversion chain is inherently inefficient, losing potential customers at multiple funnel stages. More critically, display ads "forcibly insert" content, naturally destroying UX. Crypto paradigm can completely rewrite and optimize traditional Web2 entertainment platform structures. Platform Layer Unlocking: - Introduce and generate new revenue streams - DEX integration - exchange fees - Creator-linked tokens - Live event betting - Prize pools - Airdrop to users - Ad removal, improve user retention - No longer dependent on external stakeholders - New profit-sharing method with creators - Exchange fee sharing - Event fee sharing In this new paradigm, the platform itself is a distribution channel, not a monetization product. Web2 has precedents: Twitch → Amazon, Kick → Stake, Twitter → Membership subscription + GrokAI; Web3 also shows early signs, such as Parti and Pump.fun live streaming. User Layer Unlocking: - Ad removal brings better UX - Benefit through prize pools, airdrops by supporting/watching favorite creators - Token dividends Creator Layer Unlocking: - Contribution-based revenue model; more transparent and fair - Exchange fee sharing - Event fee sharing - Creator tokens enable direct value flow from fans to creators - Ad removal improves user retention - Platform model inherently drives user growth, benefiting creators Why Not AI or Games? Currently, AI consumer applications are still premature. We need to wait for applications that can truly achieve "one-click DeFi/account management", and current infrastructure lacks safety and feasibility. For games, chain games struggle to break through because core users are mostly "Farmers" chasing money rather than game enjoyment, resulting in low retention. However, future games might implicitly use crypto paradigms at the underlying level (such as economic, item systems), with players/developers still focusing on playability - if CSGO had used on-chain economics, it might have been very successful. In this regard, small games utilizing crypto mechanisms have already seen some success (Freysa, DFK, Axie). Thesis and Framework: Overall view: Market maturity → Reduced inter-chain fragmentation → A few "super chains" will prevail → Institutions should bet on next-generation consumer applications and supporting infrastructure on these super chains. This trend is already happening, with activity concentrating on a few chains, not scattered across 100+ L2s. "Super chains" here refer to consumer-centric chains optimizing speed and experience, such as Solana, Hyperliquid, Monad, MegaETH. Analogy: - Super Chains: iOS, Android - Applications: Instagram, Cash App, Robinhood - Supporting Stack: AWS, Azure, Google Cloud As mentioned, consumer applications can be divided into two key categories: - Web2 Native: Applications first attracting Web2 users, unlocking new behaviors using crypto paradigms - focus on products with seamless backend crypto integration, not self-proclaimed "crypto applications" (like Polymarket) - Web3 Native: Verified decisive factors are better UX + ultra-fast interface + sufficient liquidity + one-stop solution (breaking fragmentation)