Original IOSG Ventures IOSG Ventures July 7, 2025, 18:32 Guangdong
This article is for learning and communication purposes only and does not constitute any investment advice. Please cite the source when reproducing and contact the IOSG team for authorization and reprinting guidelines. All projects mentioned in the article are not recommendations or investment advice.
Author | 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 on technology have become minimal, and users do not automatically flock to 'good enough' technology. 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 peak in 2021, with recent increments primarily coming from institutions purchasing BTC/ETH for their balance sheets, rather than speculative capital circulating within the ecosystem.
Core conclusion
Friendly regulatory policies will unlock a 'second wave' of development. Clearer U.S. policies (Trump administration, stablecoin bill) expand TAM and attract Web2 users who only care about tangible applications and not the underlying technology.
The narrative market rewards genuine use. Projects with considerable revenues and PMF—such as Hyperliquid (approx. $900 million ARR), Pump.fun (approx. $500 million ARR), Polymarket (approx. $12 billion in trading volume)—far outperform infrastructure projects that have high financing but lack users (Berachain, SEI, Story Protocol).
Web2 is essentially an attention economy (distribution > technology); as Web3 deeply integrates with Web2, the market will be similar—B2C applications will enlarge the pie.
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 wave of ascending tracks (Web2 coded):
One-stop deposit/withdrawal + DeFi super application—integrating wallet, banking, yield, and trading (Robinhood-style experience but ad-free).
Entertainment/social platforms replacing ads with on-chain monetization (exchange, betting, prize pools, creator tokens) to optimize UX and improve creator earnings.
AI and gaming are still in the pre-PMF stage. Consumer AI requires safer account abstraction and infrastructure; Web3 games are troubled by 'wool-hunting' economies. A breakout will only occur when a game focused on playability, rather than crypto elements, explodes.
Superchain theory. Activity is concentrating towards a few chains that are friendly to consumer applications (Solana, Hyperliquid, Monad, MegaETH). Killer applications and the infrastructure that directly supports them should be selected from these ecosystems.
Perspective on investing in consumer applications:
Distribution and execution > pure technology (network effects, viral loops, branding).
UX, speed, liquidity, and narrative fit determine success or failure.
Evaluate as 'business' rather than 'protocol': real revenue, scalable model, clear industry dominance path.
Bottom line: pure infrastructure trading is difficult to replicate the valuation multiples of 2021. The excess returns in the next five years will come from transforming the crypto base layer into consumer applications that integrate millions of Web2 users' daily experiences.
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 enough and innovative, users will naturally come. However, this is not the case. Look at projects like Berachain, SEI, Story Protocol, which have absurd funding valuations but are touted as 'the next big thing.'
In this cycle, as consumer application projects take the spotlight, discussions have clearly shifted to 'what these tracks are actually for.' When core infrastructure reaches a 'usable' level of maturity and marginal gains begin to dwindle, talent and capital start chasing consumer-facing applications/products—social, games, creators, commercial scenarios—to showcase the value of blockchain to retail and everyday users. The essence of the consumer application market is the attention economy, which also makes the entire crypto market a battleground of narratives and attention.
This insight report will explore:
1. Overall market background
2. Types of consumer applications in the market
a. Tracks that have reached PMF
b. Vertical track that can upgrade through encrypted tracks, ultimately reaching PMF
3. Framework and investment thesis for consumer applications—how can institutions identify winners?
Narrative—Why now?
This cycle lacks the level of retail FOMO and NFT/Alt speculation seen in 2021, coupled with a tightening macro environment that restricts VC and institutional capital investment, causing new liquidity growth to fall into a 'stagnation' phase.
▲ Stablecoin market cap trend chart
As shown in the figure, the total market cap of stablecoins grew about five times from 2021 to 2022, while this round (second half of 2023 to 2025) will only double. At first glance, it seems like organic and healthy steady growth, but it is actually misleading: the current market cap is only about 25% higher than the peak in 2021, which is considered low-speed for any industry over a four-year dimension. This is still under the backdrop of stablecoins receiving the clearest regulatory tailwinds and a strong pro-crypto president emerging.
The speed of capital inflow has significantly slowed, and it primarily started after Trump was elected in January 2025. To date, new capital is neither speculative nor truly 'fresh water,' but rather institutions incorporating BTC/ETH into their balance sheets and government and corporate expansions of stablecoin payments. Liquidity is not driven by market interest in new products/solutions but by favorable regulations; this funding is non-speculative and will not directly inject into the secondary market. This is not free capital, nor is it retail-driven; thus, even if prices set new highs, the industry has not reproduced the 2021 frenzy.
Overall, this can be compared to the period after the 2001 .com bubble, as the market looks for the next growth direction—this time, the direction will be consumer applications. Past growth was also driven by consumer applications, but the products were NFTs and altcoins rather than applications.
Core conclusion
In the next five years, the crypto market will usher in a second wave of growth driven by Web2/retail.
Clearer crypto policies from the Trump administration have opened the green light for founders.
Stablecoin legislation significantly expands the TAM of all crypto applications.
In the past, liquidity bottlenecks were due to a lack of a clear framework, with significant market island effects; now, due to the clarity of stablecoin regulations, liquidity is benefiting.
The strong positive sentiment on the political level has a greater impact on consumer applications than on infrastructure, as consumer applications can attract a large number of Web2 users.
Web2 users only care about application layers they can directly interact with, products that bring them value—they want a Web3 '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 genuine PMF, and the vast majority are consumer applications because they have real users.
Hyperliquid
Pump.fun
Polymarket
Significance: Technology is important, but having good technology alone does not attract users; it must be implemented → the easiest path is consumer applications.
Method: Projects with a unified ultimate UX + 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 'technology is king' from 2019-2023 to 'user first.' Only chains that meet actual needs, rather than relying solely on subsidizing ecosystems or tools, will attract developers.
In the past, the market incentivized developers to write extensions for Firefox instead of acquiring real users on Chrome.
Typical counterexample: Cardano
Web2 has always been an attention economy (distribution > technology); after the deep integration of Web3 and Web2, it will also be so—B2C applications will expand the overall market.
Viral spread and attention are the critical winning factors → consumer applications can achieve this most easily.
Because network effects can be easily embedded in consumer applications → such as binding to Twitter and earning protocol rewards for posting (Loudio, Kaito).
Thus, content for consumer applications can easily be generated → easy viral spread, occupying mental space.
B2C applications can also easily create topics through user behavior, incentives, or community (Pump.fun vs Hyperliquid).
Viral spread brings attention, and attention brings users → viral applications will attract new retail users and expand the market.
Types of consumer applications in the market
Vertical tracks that have reached PMF – Crypto Coded
Transactions
Hyperliquid: approximately $900 million ARR; raised $0
Axiom: approximately $120 million ARR; raised $21 million
Launchpad
Pump.fun: approximately $500 million ARR; raised $0
BelieveApp: annual fees of about $60 million; raised $0
InfoFi + prediction market
Polymarket: annual trading volume of about $12 billion (0% fee rate); raised $0
Kaito: approximately $33 million ARR; raised $10.8 million
Such track projects should be given special attention.
Comparison:
Berachain: only $165,000 in fees since launching; raised $142 million; down over 85% from ATH
SEI: only $68,000 in annual fees; raised $95 million; down over 75%
Story Protocol: only $24,000 in fees since launching; raised $134 million; down over 60%
Pure technology/infrastructure lacking real use cases is no longer a viable path. Institutions can no longer rely on such targets to replicate 2021-style excess returns.
From these platforms, most are more Web3 native, aligning with their crypto functionality. However, there are also traditional consumer tracks (as detailed below) that have been disrupted by crypto tracks and are heading towards the masses.
A vertical track that can upgrade using 'crypto technology' and ultimately reach PMF – Web2 Coded
Web2⇄Web3 deposit/withdrawal + DeFi frontend
As Web2 users continue to flow into Web3, it is time for one or two mainstream solutions that everyone uses to emerge, enabling deposits/withdrawals and access to DeFi. Currently, the market is highly fragmented, and user processes are cumbersome.
Current pain points
Hopscotch 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 difficulty: U.S. licensed CEXs can freeze fiat for 24-72 hours; EU banks increasingly mark outbound SEPA transfers as 'high risk.'
High fee rates: deposit price differences range from ~0.8% (ACH) to 4-5% (credit card); stablecoin withdrawal fees fluctuate between 0.1-7% depending on the region and amount.
Lack of aggregated yield solutions: there is no one-stop DeFi module allowing users to concentrate yield generation stacks.
Payment giants are rushing in.
PayPal now allows U.S. users to withdraw PYUSD directly to Ethereum and Solana, returning 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 USDC withdrawals to local channels in 45 countries.
MoonPay handled $18.6 billion in transactions for 14 million users last year, achieving 123% year-on-year growth due to the addition of instant withdrawal services covering over 160 countries.
PMF profile
A global super application where users can seamlessly deposit/withdraw, have a simple interface, and access all DeFi features on the same platform.
Single platform accounts hold funds, seamlessly connecting bank accounts and crypto wallets.
Only large amounts require KYC
No high fees or withdrawal delays
Similar to a savings account but priced in crypto
Yield aggregator, integrated with mainstream lending protocols (Aave, Kamino, Morpho) and staking
Covering mainstream spot/perpetual trading interfaces
The closest to this North Star currently is Robinhood: ultra-simple UI/UX, along with integration of banking and wallets; it may be the leader in this track.
Entertainment / Media / Social
Current content platforms (YouTube, Twitch, Facebook) primarily profit 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 critically, display ads 'intrusively insert' content, naturally disrupting UX.
The crypto paradigm can completely rewrite and optimize the structure of traditional Web2 entertainment platforms.
Platform layer unlock:
Introducing and generating new revenue streams
DEX integration—exchange fees
Creator-linked tokens
Live event betting
Prize pool
Airdrop to users
Ad-free, enhancing user retention
No longer relying on external stakeholders
A new revenue-sharing model with creators
Exchange fee sharing
Event fee sharing
In this new paradigm, the platform itself becomes the distribution channel, not a monetization product. Web2 has precedents: Twitch → Amazon, Kick → Stake, Twitter → member subscriptions + GrokAI; Web3 also shows signs, like Parti and Pump.fun live streams.
User layer unlock
Ad-free brings better UX
Earn rewards through prize pools and airdrops for supporting/watching favored creators.
Token dividends
Creator layer unlock
Contribution-based yield model; more transparent and fair
Exchange fee sharing
Event fee sharing
Creator tokens enable direct value flow from fans to creators
Ad-free enhances user retention
Platform model inherently drives user growth, benefiting creators
Why not AI or games?
Currently, AI consumer applications are still in their early stages. There will only be an explosion when applications that can truly realize 'one-click DeFi/account management' emerge; currently, there is still a lack of safety and feasibility at the infrastructure level.
In gaming, blockchain games struggle to break out, as core users are mostly 'farmers' chasing money rather than gaming enjoyment, resulting in low retention. However, in the future, there may be games that use crypto paradigms subtly at the base layer (such as economics, item systems), while players/developers still focus on playability—if CSGO had used on-chain economics, it might have been very successful.
In this regard, mini-games utilizing crypto mechanisms have already seen some successful cases (Freysa, DFK, Axie).
Arguments and framework
Overall view: market maturity → inter-chain fragmentation decreases → a few 'superchains' emerge victorious → institutions should bet on the next generation of consumer applications and their supporting infrastructure on these superchains.
This trend is already occurring, with activity concentrating on a few chains rather than being dispersed across over 100 L2s.
Here, 'superchain' refers to consumer-centric chains optimized for speed and experience, such as Solana, Hyperliquid, Monad, MegaETH.
Analogy:
Superchain: iOS, Android
Applications: Instagram, Cash App, Robinhood
Supporting stack: AWS, Azure, Google Cloud
As mentioned earlier, consumer applications can be divided into two focus categories:
Web2 native: applications that first attract Web2 users, utilizing crypto paradigms to unlock new behaviors—focus should be on products that seamlessly integrate crypto on the backend without self-identifying as 'crypto applications' (like Polymarket).
Web3 native: verified determinants are better UX + fast interface + sufficient liquidity + one-stop solutions (breaking down fragmentation). The new generation of Web3 users values UX > yield or technology, only caring 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 required:
Conclusion
Consumer investment targets do not have to rely entirely on differentiated value propositions (although they can). Snapchat was not a technological revolution but rather recombined existing technologies (chat modules, camera AIO) to create new unlocks. Thus, evaluating consumer targets from a traditional infrastructure perspective is biased; institutions should consider whether the project can become a good business and ultimately generate returns for the fund.
To this end, an assessment should be made:
Distribution capability outweighs the product itself—can they reach users?
Does it effectively reorganize existing modules to create entirely new experiences?
Funds can no longer drive returns solely through pure infrastructure. This does not mean infrastructure is unimportant, but that they must have real appeal and use cases in a narrative-driven market, rather than value propositions that no one cares about. Overall, regarding consumer targets, most investors are overly 'right-biased'—too literally adhering to 'first principles,' while true winners often rely on better branding and UX—these traits are implicit yet crucial.