Written by: Max Wong @IOSG
TL;DR
Infrastructure has become saturated; consumer applications are the next frontier. After years of pouring funds into new L1s, Roll-ups, and developer tools, the marginal returns of technology have become negligible, and users do not automatically flock in because 'the technology is good enough'. What creates value now is attention, not architecture.
Liquidity stagnation, retail absence. The total market cap of stablecoins is only about 25% higher than the historical high in 2021, with recent increments mainly from institutions purchasing BTC/ETH for balance sheets, rather than speculative capital circulating within the ecosystem.
Core Assertion
Regulatory-friendly policies will unlock a 'second wave' of development. Clearer U.S. policies (Trump administration, stablecoin bill) will expand TAM and attract Web2 users who care only about tangible applications, not underlying technological frameworks.
The narrative market rewards real usage. Projects with significant revenue and PMF—such as Hyperliquid (around $900 million ARR), Pump.fun (around $500 million ARR), Polymarket (around $12 billion in trading volume)—far exceed high-funding but user-lacking infrastructure projects (Berachain, SEI, Story Protocol).
Web2 is essentially an attention economy (Distribution > Technology); as Web3 deeply integrates with Web2, the market will reflect this—B2C applications will expand the overall pie.
Current consumer tracks that have reached PMF (crypto native):
Trading / Perpetual Contracts (Hyperliquid, Axiom)
Launchpad / Meme Coin Factory (Pump.fun, BelieveApp)
InfoFi and Prediction Markets (Polymarket, Kaito)
The Next Rising Tracks (Web2 Coded):
One-stop deposit/withdrawal + DeFi super application—integrating wallet, bank, yield, and trading into one (Robinhood-like experience but without ads).
Entertainment/Social Platforms, replacing ads with on-chain monetization (exchange, betting, prize pool, creator tokens) to optimize UX and improve creator earnings.
AI and gaming are still in the pre-PMF stage. Consumer AI needs safer account abstractions and infrastructure; Web3 games are troubled by 'wool-hunting' economies. Only after a game that centers on playability rather than crypto elements breaks out will we see a breakthrough.
The Super Chain theory. Activity is concentrating positively on a few chains friendly to consumer applications (Solana, Hyperliquid, Monad, MegaETH). We should select killer applications from these ecosystems and the infrastructure that directly supports them.
Perspective on Investing in Consumer Applications:
Distribution and Execution > Pure Technology (Network Effects, Viral Loops, Branding).
UX, speed, liquidity, and narrative fit determine the outcome.
Evaluate as 'businesses' rather than 'protocols': real revenue, scalable models, clear industry dominance paths.
Bottom Line: Pure infrastructure transactions are difficult to replicate the valuation multiples of 2021. In the next 5 years, excess returns will come from transforming crypto underpinnings into consumer applications that integrate the daily experiences of millions of Web2 users.
Introduction
In the past, the industry highly focused on technology/infrastructure, concentrating on building 'tracks'—new Layer-1s, scaling layers, developer tools, and security primitives. The driving force was the industry creed of 'technology is king': as long as the technology is good and innovative enough, users will naturally come. However, this has proven to be false. Look at projects like Berachain, SEI, Story Protocol, which have outrageous financing valuations yet are touted as 'the next big thing'.
In this cycle, as consumer application projects take the spotlight, discussions have clearly shifted to 'what exactly are these tracks for'. When core infrastructure reaches a 'sufficient' level of maturity and marginal improvements begin to decrease, talent and capital start chasing consumer-facing applications/products—social, gaming, creators, business scenarios—showing blockchain's value to retail and everyday users. The consumer application market is essentially an attention economy, making the entire crypto market a battlefield of narratives and attention.
This insight report will explore:
1. Overall Market Context
2. Types of Consumer Applications in the Market
a. Tracks that Have Achieved PMF
b. Tracks that can upgrade through crypto tracks and ultimately reach PMF
3. Propose Framework and Investment Thesis for Consumer Applications—How Can Institutions Identify Winners?
Narrative—Why Now?
This cycle lacks the retail FOMO and NFT/Alt speculation seen at the 2021 level, coupled with a tightening macro environment restricting VC and institutional capital investment, causing new liquidity growth to fall into a 'stagflation' situation.
▲ Stablecoin Market Cap Trend
As shown in the chart above, the total market cap of stablecoins grew about 5 times from 2021 to 2022, while this round (second half of 2023 - 2025) is expected to grow only 2 times. At first glance, this seems to be organic and healthy steady growth, but it is actually misleading: the current market cap is only about 25% higher than the 2021 peak, which is low-speed for any industry over a 4-year dimension. This is especially true against the backdrop of stablecoins receiving the clearest regulatory tailwinds and the emergence of a strongly pro-crypto president.
The inflow of capital has significantly slowed down, and it mainly started after Trump was elected in January 2025. To date, new capital is neither speculative nor truly 'liquid', but rather institutions incorporating BTC/ETH into their balance sheets and government/enterprise expansion of stablecoin payments. Liquidity is not due to market interest in new products/solutions but rather regulatory benefits; this funding is non-speculative and will not directly inject into the secondary market. This is not free capital, nor is it retail-driven, so even if prices reach new highs, the industry has not rekindled the 2021 frenzy.
Overall, it can be compared to the search for the next growth direction after the 2001 .com bubble—this time the direction will be consumer applications. Past growth was also driven by consumer applications, only the products were NFTs and altcoins, rather than applications.
Core Assertion
In the next 5 years, the crypto market will see a second wave of growth driven by Web2/retail investors
The Trump administration's clearer crypto policies have opened the green light for founders.
Stablecoin legislation significantly expands the TAM for all crypto applications.
In the past, liquidity bottlenecks were due to a lack of clear frameworks and significant market island effects; now, favorable liquidity is due to the clarity of stablecoin regulations.
Strong positive sentiment at the political level 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 application layers they can directly interact with and products that bring them value—they want the 'Robinhood' of Web3, not 'crypto 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 into projects with real revenue and real PMF, with the vast majority being consumer applications because they have real users.
Hyperliquid
Pump.fun
Polymarket
Significance: Technology is important, but just having good technology does not attract users; it has to be implemented well → the easiest path is through consumer applications.
Method: Projects with a unified, ultimate UX and value capture mechanisms will attract users. Users do not care if the technology is slightly better, unless they can 'feel' it.
Builders are shifting from a 'technology is king' mindset from 2019-2023 to 'user-centric'. Only chains with real demand, not just those relying on subsidies or tooling ecosystems, will attract developers.
In the past, the market forced developers to write extensions for Firefox for subsidies, instead of acquiring real users on Chrome.
Typical Counterexample: Cardano
Web2 has consistently been an attention economy (Distribution > Technology); after deep integration of Web3 and Web2, it will also be so—B2C applications will expand the overall market.
Viral Spread and Attention are the Key to Victory → Consumer Applications are the Easiest to Achieve This.
Because network effects are easily embedded in consumer applications → for example, binding Twitter and receiving protocol rewards for posting (Loudio, Kaito).
Thus, consumer application content is easy to produce → easy to spread virally and occupy mental space.
B2C applications can also 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.
Types of Consumer Applications in the Market
Vertical Tracks that Have Reached PMF – Crypto Coded
Trading
Hyperliquid: about $900 million ARR; funding $0
Axiom: about $120 million ARR; funding $21 million
Launchpad
Pump.fun: About $500 million ARR; financing $0
BelieveApp: Annual fees about $60 million; financing $0
InfoFi + Prediction Market
Polymarket: Annual trading volume about $12 billion (0% fee rate); financing $0
Kaito: About $33 million ARR; financing $10.8 million
Such tracks should be focused on.
Comparison:
Berachain: Only $165,000 in fees since launch; financing $142 million; down 85%+ from ATH
SEI: Annual fees only $68,000; financing $95 million; down 75%+
Story Protocol: Only $24,000 in fees since launch; financing $134 million; down 60%
Pure technology/infrastructure with a lack of practical use cases is no longer a way out. Institutions can no longer rely on such targets to replicate 2021-style excess returns.
From these platforms, it is evident that most lean more towards Web3 native, aligning with their crypto functional positioning. However, some traditional consumer tracks (as mentioned below) have been disrupted by crypto tracks and are moving towards the mainstream.
Vertical tracks can upgrade through 'crypto technology' and ultimately reach PMF – Web2 Coded
Web2⇄Web3 Deposit/Withdrawal + DeFi Frontend
As Web2 users continue to flow into Web3, it’s time for one or two mainstream solutions that everyone uses to realize deposits/withdrawals and access DeFi. Currently, the market is highly fragmented, and user flows are cumbersome.
Pains of the Current Situation
Hopscotch-style On-chain: 75-80% of first-time coin buyers still buy coins on centralized exchanges (Binance, Coinbase) before transferring to self-custody wallets or DeFi protocols, resulting in 2 KYC processes, 2 sets of fees, and at least 1 cross-chain bridge.
Withdrawal Difficulties: US licensed CEX can freeze fiat for 24-72 hours; EU banks increasingly mark outbound SEPA transfers as 'high risk'.
High Fees: Deposit price difference ~0.8% (ACH) to 4-5% (credit card); stablecoin withdrawal fees fluctuate between 0.1-7% depending on region and amount.
Lack of Aggregated Yield Solutions: There is still no one-stop DeFi module allowing users to consolidate yield stacks.
Payment giants are making inroads
PayPal now allows U.S. users to directly withdraw PYUSD to Ethereum and Solana and return to any debit card within <30 seconds (fee rate 0.4-1%).
Stripe will open 'crypto withdrawal' API to all platforms in April 2025, allowing instant withdrawal of USDC to local channels in 45 countries.
MoonPay handled $18.6 billion in transactions for 14 million users last year due to the introduction of instant withdrawal services covering over 160 countries, achieving 123% year-on-year growth.
PMF Profile
A global super application where users can seamlessly deposit/withdraw, with a simple interface, accessing all DeFi functionalities on the same platform.
Single platform account holders can seamlessly link bank accounts and crypto wallets
Only large amounts require KYC
No high fees or withdrawal delays
Similar to savings accounts but priced in crypto
Yield aggregator, integrated with mainstream lending protocols (Aave, Kamino, Morpho) and staking
Covers mainstream spot/perpetual trading interfaces
Currently, the closest to this guiding star is Robinhood: an ultra-simple UI/UX, along with bank and wallet integration; it may be the leader in this track.
Entertainment / Media / Social
Current content platforms (YouTube, Twitch, Facebook) mainly profit from capturing user attention and selling it to advertisers through display ads. However, this conversion chain is inherently inefficient, losing potential customers at multiple stages of the funnel. More critically, display ads 'force in' content, which naturally damages UX.
The crypto paradigm can completely rewrite and optimize the structure of traditional Web2 entertainment platforms.
Platform Layer Unlocking:
Introducing New Revenue Streams
DEX Integration—Exchange Fees
Creator-linked Tokens
Live Event Betting
Prize Pool
Airdrops to Users
Ad-Free, Enhancing User Retention
No Longer Dependent on External Stakeholders
New Revenue Sharing Models with Creators
Exchange Fee Sharing
Event Fee Sharing
Under this new paradigm, the platform itself is the distribution channel, not the monetization product. Web2 has precedents: Twitch → Amazon, Kick → Stake, Twitter → Membership Subscriptions + GrokAI; Web3 also shows early forms, such as Parti and Pump.fun live broadcasts.
User Layer Unlocking
Ad-Free for Better UX
Earn from prize pools and airdrops by supporting/watching preferred creators.
Token Dividends
Creator Layer Unlocking
Contribution-based revenue model; more transparent and fair
Exchange Fee Sharing
Event Fee Sharing
Creator Token Realization of Fans → Direct Value Flow to Creators
Ad-Free to Enhance User Retention
Platform Model Comes with User Growth, Creators Benefit
Why not AI or gaming?
Currently, AI consumer applications are still in their early stages. We need to wait for applications that can truly achieve 'one-click DeFi/account management' to emerge before an explosion occurs; currently, there is still insufficient security and feasibility at the infrastructure level.
In gaming, blockchain games struggle to break into mainstream due to their core users being predominantly 'Farmers' who chase money rather than gaming enjoyment, leading to low retention. However, in the future, some games may subtly utilize crypto paradigms (like economics, item systems), while players/developers remain focused on playability - if CSGO had used on-chain economics, it might have been very successful.
In this regard, there are already some successful cases of mini-games utilizing crypto mechanisms (Freysa, DFK, Axie).
Arguments and Framework
Overall Perspective: Market Maturity → Reduced Inter-chain Fragmentation → A Few 'Super Chains' Win → Institutions Should Bet on the Next Generation of Consumer Applications and Their Supporting Infrastructure on These Super Chains.
This trend is already happening, with activity concentrating on a few chains rather than being dispersed across more than 100 L2s.
Here, 'Super Chains' refer to chains centered on consumers, optimizing speed and experience, such as Solana, Hyperliquid, Monad, MegaETH.
Analogy:
Super Chain: iOS, Android
Applications: Instagram, Cash App, Robinhood
Supporting Stack: AWS, Azure, Google Cloud
As previously mentioned, consumer applications can be divided into two key categories:
Web2 Native: applications that first attract Web2 users, using crypto paradigms to unlock new behaviors—should focus on products that seamlessly integrate crypto in the backend without claiming to be 'crypto applications' (like Polymarket).
Web3 Native: validated determinants are better UX + fast interfaces + sufficient liquidity + one-stop solutions (breaking fragmentation). The new generation of Web3 users values UX > yield or technology and only cares about the latter two after surpassing a certain threshold. Teams and applications that understand this should be valued at a premium.
Generally, the following elements are still required:
Conclusion
Consumer investment targets do not have to rely entirely on differentiated value propositions (although they can). Snapchat is not a technological revolution, but rather a recombination of existing technologies (chat modules, camera AIO) that unlocks new solutions. Therefore, evaluating consumer targets from a traditional infrastructure perspective is biased; institutions should consider whether the project can become a good business and ultimately create returns for the fund.
Therefore, it should be evaluated:
Distribution ability outweighs the product itself—can they reach users?
Do they effectively restructure existing modules to create a completely new experience?
Funds can no longer rely solely on pure infrastructure to drive returns. This is not to say that infrastructure is unimportant, but rather that they must possess real appeal and use cases in a narrative-driven market, rather than value propositions that no one cares about. Overall, for consumer targets, most investors are overly 'right-leaning'—too literally adhering to 'first principles', while true winners often succeed through better branding and UX—these traits are implicit yet critical.
