Author｜Max Wong @IOSG
TL;DR
Infrastructure is saturated; consumer applications are the next frontier. After years of pouring funds into new L1s, Roll-ups, and development tools, the marginal returns of technology are negligible, and users have not automatically poured in because 'the technology is good enough'. Now, it's attention that creates value, not architecture.
Liquidity stagnation, retail investors absent. The total market value of stablecoins is only about 25% higher than the historical high in 2021, and the recent increase mainly comes from institutions purchasing BTC/ETH for their balance sheets, rather than speculative capital circulating within the ecosystem.
Core argument
Friendly regulatory policies will unlock a 'second wave' of development. Clearer US policies (Trump administration, stablecoin bill) expand the TAM and attract Web2 users who only care about tangible applications, not the underlying technological architecture.
The narrative market rewards real usage. Projects with substantial revenue and PMF - such as Hyperliquid (approximately $900 million ARR), Pump.fun (approximately $500 million ARR), Polymarket (approximately $12 billion in transaction volume) - are far superior to 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 be the same - B2C applications will expand the pie.
Consumer verticals with existing PMF (crypto-native):
Trading/Perpetual Contracts (Hyperliquid, Axiom)
Launchpad/Meme Coin Factory (Pump.fun, BelieveApp)
InfoFi and prediction markets (Polymarket, Kaito)
Next rising verticals (Web2 Coded):
One-stop deposit/withdrawal + DeFi super app – integrating wallets, banks, yields, and trading (Robinhood-style experience but without ads).
Entertainment/social platforms use on-chain monetization (exchange, betting, prize pools, creator tokens) to replace advertising, optimize UX and improve creator revenue.
AI and games are still in the pre-PMF stage. Consumer AI needs more secure account abstraction and infrastructure; Web3 games are plagued by 'Sybil' economic problems. It will only break through after a chain game with gameplay as the core, rather than crypto elements, explodes.
Superchain Theory. Activity is concentrating on a few chains that are friendly to consumer applications (Solana, Hyperliquid, Monad, MegaETH). You should pick the killer applications in 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 winner.
Evaluate as a 'business' rather than a 'protocol': real revenue, scalable model, clear path to industry dominance.
Bottom line: Pure infrastructure plays are unlikely to replicate the 2021 multiple expansion in valuation. Excess returns in the next 5 years will come from consumer applications that translate the underlying crypto into the daily experiences of millions of Web2 users.
Introduction
In the past, the industry paid close attention to technology/infrastructure, focusing on building 'rails' - new Layer-1s, scaling layers, developer tools, and security primitives. The driving force was the industry's belief in 'technology is king': as long as the technology is good enough and innovative enough, users will naturally come. However, this is not the case. Look at projects like Berachain, SEI, Story Protocol, etc., with outrageous financing valuations, but hyped as the 'next big thing'.
In this cycle, as consumer application projects take the spotlight, the discussion has clearly shifted to 'What exactly are these rails used for?'. As the core infrastructure reaches a 'good enough' maturity and marginal improvements diminish, talent and capital are chasing consumer-facing applications/products - social, gaming, creators, business scenarios - to showcase the value of blockchain to retail and everyday users. The consumer application market is essentially an attention economy, which also makes the entire crypto market a battlefield for narratives and attention.
This insight report will explore:
1. Overall market background
2. Types of consumer applications in the market
a. Tracks with existing PMF
b. Vertical tracks that can be upgraded with crypto rails and eventually reach PMF
3. Propose a framework and investment theory for consumer applications – how can institutions identify winners?
Narrative - Why now?
This cycle lacks the level of retail FOMO and NFT/Alt hype of 2021, coupled with tighter macro environment limiting capital investment from VCs and institutions, resulting in a 'stagflation' situation for new liquidity growth.
▲ Stablecoin Market Value Trend Chart
As shown in the figure above, the total market value of stablecoins increased by approximately 5x from 2021-2022, while this round (second half of 2023-2025) only increased by 2x. At first glance, this seems to be organic and healthy steady growth, but it is actually misleading: the current market value is only ~25% higher than the 2021 high, which is slow for any industry in a 4-year dimension. This is also against the backdrop of stablecoins ushering in the clearest regulatory tailwinds and the emergence of a strong pro-crypto president.
The growth rate of capital inflows has slowed significantly, and has only started mainly after Trump's election in January 2025. To date, new capital is not speculative or truly 'fresh money', but more institutional inclusion of BTC/ETH on balance sheets, and government and corporate expansion of stablecoin payments. Liquidity is not due to market interest in new products/solutions, but regulatory benefits; these funds are 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 highs, the industry has not replicated the frenzy of 2021.
Overall, it can be compared to the .com bubble in 2001, after which the market looked for the next direction of growth - this time the direction will be consumer applications. Past growth was also driven by consumer applications, except the products were NFTs and altcoins, not applications.
Core argument
In the next 5 years, the crypto market will usher in a second wave of growth driven by Web2/retail users
The Trump administration's clearer crypto policies give the green light to founders
Stablecoin legislation significantly expands the TAM of all crypto applications
In the past, the liquidity bottleneck was the lack of a clear framework and obvious market island effects; now it is beneficial to liquidity due to clear 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 the application layer they can directly interact with and the products that bring value to themselves - they want Web3's 'Robinhood', not '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, 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; making good technology a reality is the key → the easiest path is consumer applications
Method: Unified and extreme UX + value capture mechanisms will attract users. Users don't care if the technology is slightly better unless they can 'feel' it
Builders are shifting from 'technology is king' in 2019-2023 to 'user first'. Only chains that have actual needs, rather than subsidies or easily available tools, 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); Web3 will be the same after deep integration with Web2 - B2C applications will expand the overall market
Viral spread and attention are the keys to success → Consumer applications are the easiest to achieve
Because network effects are very easy to embed in consumer applications → such as binding to Twitter and receiving protocol rewards for posting (Loudio, Kaito)
Therefore, consumer application content is very easy to generate → easy to spread virally and capture mindshare
B2C applications can also easily create topics through user behavior, incentives, or communities (Pump.fun vs Hyperliquid)
Viral spread brings attention, and 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: Approximately $900 million ARR; $0 raised
Axiom: Approximately $120 million ARR; $21 million raised
Launchpad
Pump.fun: Approximately $500 million ARR; $0 raised
BelieveApp: Approximately $60 million in annualized fees; $0 raised
InfoFi + Prediction Markets
Polymarket: Approximately $12 billion in annual transaction volume (0% fee rate); $0 raised
Kaito: Approximately $33 million ARR; $10.8 million raised
Projects in this track should be given priority.
Comparison :
Berachain: Only $165,000 in fees since launch; $142 million raised; 85%+ drop from ATH
SEI: Only $68,000 in annualized fees; $95 million raised; 75%+ drop
Story Protocol: Only $24,000 in fees since launch; $134 million raised; 60% drop
Pure technology/infrastructure without practical use cases is no longer the way forward. Institutions can no longer rely on such targets to replicate the excess returns of 2021.
From these platforms, most are more Web3 native, in line with their crypto functionality positioning. However, there are also traditional consumer tracks (see below) that have been disrupted by crypto rails and are moving towards the masses.
Vertical tracks that can be upgraded with 'crypto technology' and eventually reach PMF – Web2 Coded
Web2⇄Web3 deposit/withdrawal + DeFi front-end
As Web2 users continue to flood into Web3, it is time for one or two mainstream solutions that everyone uses to achieve deposit/withdrawal and access DeFi. At present, the market is highly fragmented and the user process is clumsy.
Current pain points
Leapfrog chain: 75-80% of first-time coin buyers still buy coins on centralized exchanges (Binance, Coinbase) first, and then transfer them to self-custodial wallets or DeFi protocols, resulting in 2 KYC, 2 sets of fees, and at least 1 cross-chain bridge.
Difficult withdrawals: Licensed CEXs in the United States can freeze fiat currency for 24-72 hours; EU banks are increasingly marking outbound SEPA transfers as 'high risk'.
High fee rates: Deposit spread ~0.8% (ACH) to 4-5% (credit card); stablecoin withdrawal fees fluctuate between 0.1-7% depending on the region and volume.
Lack of aggregated revenue solutions: There is no one-stop DeFi module for users to centrally obtain revenue stacks.
Payment giants are seizing the beach
PayPal now allows US users to withdraw PYUSD directly to Ethereum and Solana and return it to any debit card in <30 seconds (fee rate 0.4-1%).
Stripe will open the 'Crypto Withdrawal' API to all platforms in April 2025, enabling instant withdrawal of USDC to local channels in 45 countries.
MoonPay processed $18.6 billion in transaction volume for 14 million users last year, achieving a 123% year-on-year increase due to the addition of instant withdrawal services covering 160+ countries.
Portrait of PMF
A global super application where users can seamlessly deposit/withdraw funds, with a simple interface, and access all DeFi functions on the same platform.
A single platform account holds funds and can seamlessly connect bank accounts and crypto wallets
KYC only required for large amounts
No high fees or withdrawal delays
Similar to savings accounts but denominated in crypto
Yield aggregators, integrated with mainstream lending protocols (Aave, Kamino, Morpho) and staking
Covers mainstream spot/perpetual trading interfaces
The closest to this North Star currently is Robinhood: minimalist UI/UX, coupled with bank and wallet integration; it may be the leader in this space.
Entertainment / Media / Social
Currently, content platforms (YouTube, Twitch, Facebook) mainly benefit by 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 importantly, display ads 'forcefully insert' content, naturally disrupting UX.
The crypto paradigm can completely rewrite and optimize the traditional Web2 entertainment platform structure.
Platform layer unlocks:
Introducing and monetizing new avenues
DEX integration – exchange fees
Creator-linked tokens
Live event betting
Prize Pools
Airdrop to users
Remove ads to increase user retention
No longer reliant on external stakeholders
New profit sharing model with creators
Exchange fee sharing
Event fee sharing
Under this new paradigm, the platform itself is a distribution channel rather than a monetization product. Web2 already has precedents: Twitch → Amazon, Kick → Stake, Twitter → Membership subscription + GrokAI; Web3 is also taking shape, such as Parti and Pump.fun live streaming.
User Layer Unlock
Ad-free brings better UX
Earn benefits through prize pools and airdrops for supporting/watching your favorite creators
Token dividends
Creator Layer Unlocks
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-free experience enhances user retention
Platform model comes with user growth, benefiting creators
Why not AI or Games?
Current AI consumer applications are still too early. It will not usher in an explosion until applications that can truly achieve 'one-click DeFi/account management' appear; the safety and feasibility infrastructure is currently insufficient.
In terms of games, chain games are difficult to break out because the core users are mostly 'farmers', chasing money rather than the fun of the game, resulting in low retention. However, in the future, games may implicitly use crypto paradigms at the bottom layer (such as economic, item systems), while players/developers still focus on playability - if CSGO had used an on-chain economy, it might have been very successful.
In this regard, mini-games using crypto mechanisms have had some success stories (Freysa, DFK, Axie).
Arguments and framework
Overall view: Market matures → Reduced fragmentation between chains → A few 'superchains' win out → Institutions should bet on the next generation of consumer applications on these superchains and their supporting infrastructure.
This trend is already happening, and activity is concentrating on a few chains rather than being scattered across 100+ L2s.
Here, 'superchain' refers to chains that are consumer-centric and optimize for speed and experience, such as Solana, Hyperliquid, Monad, MegaETH.
Analogy:
Superchain: iOS, Android
Application: Instagram, Cash App, Robinhood
Support stack: AWS, Azure, Google Cloud
As mentioned earlier, consumer applications can be broken down into two key categories:
Web2 Native: An application that first attracts Web2 users and uses crypto paradigms to unlock new behaviors - pay attention to products that seamlessly integrate crypto in the back end but do not call themselves 'crypto applications' (such as Polymarket).
Web3 Native: The verified determinant is better UX + extreme speed interface + sufficient liquidity + one-stop solutions (breaking fragmentation). The new generation of Web3 users value UX > revenue or technology, and only care about the latter two after exceeding a certain threshold. Teams and applications that understand this should be valued at a premium.
Generally, it also needs to have the following elements:
Conclusion
Consumer investments don't necessarily need to rely entirely on differentiated value propositions (although they can). Snapchat is not a technological revolution, but a recombination of existing technologies (chat module, camera AIO) to create new unlocking methods. Therefore, evaluating consumer targets from a traditional infrastructure perspective is biased; institutions should consider: can the project become a good business and ultimately generate returns for the fund.
For this reason, you should assess:
Distribution ability is more important than the product itself - can they reach users?
Is it effectively reorganizing existing modules to create a brand new experience?
Funds can no longer drive returns with pure infrastructure. This isn't to say infrastructure isn't important, but in a narrative-driven market, they must have real appeal and use cases, rather than value propositions that no one cares about. Overall, for consumer targets, most investors are overly 'right-biased' - adhering too literally to 'first principles', while the real winners often rely on better branding and UX - qualities that are implicit but crucial.