In recent times, Alliance DAO has gained significant influence due to its successful incubation of Web3 consumer applications such as Pump.fun and Moonshot. This article first outlines Alliance DAO’s investment approach toward the Web3 consumer space, then presents our own observations of the sector to provide a comprehensive overview of current paradigms, challenges, and opportunities in Web3 consumer applications. Finally, we conclude with our reflections on investment theories relevant to this track.

Alliance DAO’s Web3 Consumer Incubation Strategy

Since its inception, Alliance DAO’s accelerator program has incubated or invested in 28 Web3 consumer-facing projects. These span across seven broad categories, with one of them being:

1.Life Style

• Definition: Projects aimed at cultivating novel and healthy lifestyles through Web3 mechanisms.
• Total Projects: 3
• Specific Projects:
• StepN: A Web3 lifestyle app whose core innovation is the Move-to-Earn mechanism. Users can purchase sneaker NFTs, track physical activity data, and receive token rewards.
• Sleepagotchi: A Web3 sleep-tracking and Sleep-to-Earn mobile game app. It’s a card-based gacha progression game where users earn tokens through sleep and use them for card draws.
• GM: A Web3 AI agent for health management, using AI to improve health while enabling users to earn rewards.

2.Games

• Definition: Web3 games or GameFi
• Total Projects: 10
• Specific Projects:
• Axie Infinity: A card game developed by Sky Mavis, where players can breed, raise, battle, and trade Axie creatures.
• Genopets: A Move-to-Earn NFT mobile game built on Solana that makes an active lifestyle fun and rewarding. The Genopet is the player’s digital pet, whose evolution is closely tied to the player’s own real-world activity. As players explore, battle, and evolve, their daily steps fuel their journey in the Genoverse—earning crypto along the way.
• Nine Chronicles: A decentralized card-based combat RPG game.
• Chibi Clash: A Web3 game universe centered around its flagship auto-battler. Inspired by Hearthstone Battlegrounds and styled like MapleStory, Chibi Clash Auto Battler is an asynchronous PvP game where players recruit, upgrade, and deploy troops.
• Primodium: A fully on-chain, open-source, and composable game where players compete for map control, research technologies, and expand their factories.
• Starbots: A robot battle NFT game where players build fantasy robots to fight others, collecting NFT parts and tokens.
• Legends of Venari: A blockchain gaming startup developing an exploratory creature-collection RPG. In the sandbox world of Legends of Venari, players lure, tame, and collect Venari creatures while competing for territory and rare resources.
• Force Prime: A fully on-chain Web3 strategy game platform offering multiplayer hero battles. Players train and customize heroes and compete globally.
• Amihan: The first casual farming mini-game on Telegram by game studio FARM FRENS.
• Wildcard: A Web3 card collection game built for gamers, fans, and collectors.

3.Crypto Speculation

• Definition: Products focused on fulfilling users’ crypto speculation needs
• Total Projects: 3
• Specific Projects:
• Pump Fun: A meme coin launch platform where users can create tokens that are instantly tradable without needing to provide liquidity.
• Moonshot: A platform for discovering, buying, and selling meme coins. It allows users to deposit funds using credit or debit cards and cash out anytime via bank transfer.
• Candlestick: A crypto opportunity radar powered by actionable trading signals and predictions. It provides large datasets on top gainers, top losers, and the most traded tokens.

4.SocialFi

• Definition: Projects that tokenize users’ influence on social media platforms, turning it into a new form of speculation
• Total Projects: 6
• Specific Projects:
• fantasy.top: A SocialFi trading card game (TCG) where players use influencer trading cards—based on crypto personalities on Twitter—to compete and monetize social capital and research insights.
• 0xPPL: A decentralized social network built for crypto-native users, aggregating content from Lens, Farcaster, and Twitter, while integrating crypto features.
• time.fun: A time-tokenization platform that lets “time holders” connect with fans. As time holders provide more value to fans, their time becomes more valuable due to market demand. They earn ETH from trading fees and redemptions whenever someone trades their time.
• fam.: A Web3-native community hub for discovering, organizing, and enjoying activities with Web3 families. It uses on-chain identity to help users find and gather with fellow holders anytime, anywhere.
• Tribe.run: A Solana-based crypto social protocol. It’s a SocialFi app featuring private groups gated by tokens, with speculation features and support for live video/voice chat.
• EarlyFans: A SocialFi project on Blast L2 where creators can make public promises and auction them. Fans can also initiate bribes and bid for bribe rights. If the creator fails to fulfill the promise or lets it expire, all funds are refunded.

5.Creator Economy

• Definition: Web3 content distribution platforms that offer new economic models for content creators (writers, video producers, artists, etc.)
• Total Projects: 2
• Specific Projects:
• Koop: Koop enables any creator, collector, or community to organize and fundraise through NFT art or collector passes. Funds from collector passes form the treasury (or bank) of each community, supporting on-chain initiatives and missions. Communities can then manage their finances directly, leverage members’ unique skills, and govern their organization in fun and social ways.
• CreatorDAO: CreatorDAO is a decentralized autonomous organization (DAO) focused on accelerating creators’ careers and providing shared access to capital, technology, and community. CreatorDAO offers mentorship, professional tools for brand development, and a collaborative community that invests in each other’s success.

6.Finance

• Definition: Products aimed at lowering the cost and friction of crypto usage and management (e.g., fiat on/off ramps)
• Total Projects: 3
• Specific Projects:
• Hana Network: A hyper-casual financial system with social network effects. It has launched Hana Gateway, a fiat on/off-ramp solution. Hana Network aims to drive user-based distribution through open social networks.
• P2P.me: A decentralized on/off-ramp platform in India. It enhances off-chain security through a reputation system and improves privacy with zero-knowledge proofs.
• Offramp: A decentralized fiat gateway protocol that allows anyone in the world to quickly enter/exit crypto while maintaining self-custody, no KYC, and low fees.

7.Tools

• Definition: Products that solve users’ real-life problems, such as Web3 maps.
• Total Projects: 1
• Specific Projects:
• Proto: Known as the Google Maps of India, Proto is a user-generated, token-incentivized mapping platform aimed at transforming the geospatial data industry. Through decentralized data collection, Proto can provide high-quality, real-time map data at a fraction of the cost of traditional methods. Proto’s unique approach allows it to easily penetrate dense and complex areas, providing businesses with accurate and up-to-date data that meets their needs.

From the perspective of investment preference trends, Alliance DAO began investing in and incubating consumer-facing projects in 2021. From 2021 to the first half of 2023, its main focus was on games and creator economy projects. From the second half of 2023 through 2024, its preference shifted toward crypto speculation, SocialFi, and finance-related projects.

The author has followed publicly available content such as articles and podcasts released by Alliance DAO and summarized its investment philosophy regarding the Web3 consumer sector as follows:

1. First, Alliance DAO believes that foundational infrastructure in the ecosystem is now largely mature, and that more application-layer projects are needed to bring real value and monetization capabilities to the ecosystem.

2. Second, founding teams should prioritize Product-Market Fit (PMF). During the market validation phase, two types of risk usually emerge: product-side risk and market-side risk. For consumer-facing projects, market-side risk is greater. Therefore, introducing a token too early can distort PMF results and should be avoided.

3. Third, the target users of Web3 consumer apps can be segmented based on their familiarity with Web3. On the left end of the spectrum are general non-Web3 users; on the right are Web3-native users. For the left group, Web3 elements in product design mainly serve to lower user acquisition costs (e.g., through “ad tokens”) and capture market share. For the right group, products should focus on introducing new asset-based targets, tapping into investment/speculation demand, or solving the unique needs of Web3-native users. Based on outcomes so far, Alliance DAO shows a stronger preference for the latter.

4. Fourth, Alliance DAO clearly distinguishes between user profiles in the Solana ecosystem and the EVM ecosystem and believes that Solana is more conducive to the success of consumer applications, for four key reasons:

• A more vibrant community: Solana users are highly enthusiastic about participating in new projects, especially those with speculative potential—possibly due to stronger wealth effect dynamics.
• Stronger and more efficient ecosystem support: Core contributors in Solana are more community-driven and responsive to new project launches.
• Faster and lower-cost infrastructure: Solana aims to be the Nasdaq of on-chain trading—offering low transaction fees and fast confirmations. Its unified, user-friendly base layer reduces the learning curve for new users.
• Higher product defensibility: Because Solana is non-EVM-based, it’s harder to replicate Solana DApps, raising the barrier to entry for copycats.

What Are Web3 Consumer Applications

So-called consumer applications refer to what is known in the Chinese context as “To-C” (to-consumer) apps. This means your target users are the general public, rather than enterprise clients. Simply open your App Store—every app you see there falls into this category. Web3 consumer applications, then, are consumer-facing software products that incorporate Web3 characteristics.

Typically, based on the common categories found in most app stores, we can roughly divide the consumer application track into the following 10 categories. Each category may also contain different subtypes. As the market matures, many new products will combine features from multiple categories in order to create differentiated value propositions. However, we can still classify them according to their core value offering.

Paradigms, Opportunities & Challenges in Web3 Consumer Apps

Based on an analysis of Alliance DAO’s investment thesis and the author’s own observations, there are three common paradigms of Web3 consumer applications:

1.Leveraging Web3 Infrastructure to Optimize Problems Found in Traditional Consumer Apps:

This is a relatively common model. As we know, a large portion of investment in the Web3 space has been focused on infrastructure. Builders adopting this approach seek to capitalize on Web3 infrastructure’s technical traits to strengthen their product competitiveness or introduce new services. These innovations typically provide benefits in two key areas:

• a. Extreme Privacy Protection and Data Sovereignty
• Opportunities: Privacy has always been a central theme of Web3 infrastructure innovation. From early asymmetric encryption-based identity systems to the integration of ZK, FHE, and TEE technologies, Web3 has seen continuous evolution. Many top technologists in Web3 appear to adopt a deeply distrustful view of centralized systems, aiming to create a trustless environment where users can freely exchange information and value. The most direct benefit is user data sovereignty—users can store private data locally in trusted software/hardware, reducing the risk of data leaks. Many consumer apps using this approach focus on decentralization as their core selling point, including decentralized social platforms, AI models, video platforms, and more.
• Challenges: However, years of market testing suggest this model doesn’t deliver a clear competitive edge. Two reasons explain this: First, consumer concern about privacy typically arises only after large-scale breaches or violations. In most cases, regulatory frameworks can sufficiently mitigate these risks. So if privacy protection comes at the cost of higher complexity or cost, it becomes less attractive. Second, most current consumer app business models rely on data extraction—e.g., for targeted advertising. Emphasizing privacy can break these models, as user data gets fragmented into isolated silos. This makes it hard to design sustainable monetization strategies. If the product has to fall back on tokenomics, it introduces unnecessary speculation, distracting the team and complicating PMF discovery—this issue will be analyzed in detail later.
• b. Low-Cost, Global, 24/7 Trusted Execution Environments
• Opportunities: The emergence of various L1 and L2 networks offers developers a new type of global, always-available, multi-party trusted execution environment. Traditionally, software services are maintained by each provider—on their own servers or in the cloud. But in scenarios involving multiple parties with equal power or especially sensitive data, trust becomes costly. These trust costs translate into high development and usage costs, such as in cross-border payment use cases. Web3’s decentralized execution environments can significantly reduce such costs. Stablecoins are a prime example of this benefit.
• Challenges: While this is indeed a competitive advantage in terms of cost and efficiency, finding the right use cases is difficult. As mentioned earlier, the benefits only appear when multiple independent parties are involved, with balanced power and sensitive data needs—a narrow set of conditions. So far, most successful applications of this model remain in financial services.

2.Leveraging Crypto Assets to Design New Marketing Strategies, Loyalty Programs, or Business Models

Similar to the first paradigm, developers adopting this model also aim to introduce Web3 elements into proven and mature markets to gain a competitive edge. However, in this case, the focus is more on utilizing the strong financial properties of crypto assets to create better marketing strategies, loyalty systems, or even entirely new business models.

It is known that any asset has two forms of value: utility (commodity) value and financial value. The former refers to an asset’s practical use in a real-world scenario—for example, a property’s residential value. The latter relates to its value in financial markets, which in the case of crypto is often derived from high liquidity and volatility that create speculative opportunities. Crypto assets are a type of asset where the financial value far outweighs the utility value.

From the perspective of most developers in this space, introducing crypto assets can offer three main benefits:

• a. Token-Based Marketing (e.g., Airdrops) to Lower User Acquisition Cost
• Opportunities: For most consumer apps, acquiring users at low cost in the early stages is a key challenge. Tokens, due to their strong financial appeal and the fact that they can be created at virtually no cost, offer a low-risk way for early-stage projects to attract attention. Compared to spending actual money on advertising, using zero-cost tokens to attract users is a more efficient choice. In this context, tokens function similarly to “advertising credits.” Many projects follow this model—especially in the TON ecosystem and mini-games.
• Challenges: There are two main problems: First, the users acquired this way are often crypto speculators, not real product users. Many are airdrop hunters or part of organized farming groups. Converting these users into engaged participants is extremely difficult and risks misleading the team about true product-market fit, leading to overinvestment in the wrong direction. Second, as this model becomes more widely used, the marginal return from airdrop marketing is declining. To maintain appeal, projects are forced to increase the cost of token rewards to attract attention.
• b. X-to-Earn Loyalty Models
• Opportunities: Retention and user engagement are another major concern for consumer apps. Rewarding certain user behaviors with tokens (X-to-Earn) has become a common way to reduce the cost of maintaining active users. These loyalty systems incentivize users to repeatedly engage with specific features of the product.
• Challenges: When a product’s stickiness depends on financial rewards, users shift their focus from functionality to yield. If potential returns decrease, user attention quickly fades. This is especially damaging to platforms that rely on user-generated content. If the rewards are tied to the token’s market value, the team faces pressure to manage token price (especially in a bear market), which adds financial and operational burdens.
• c. Monetizing Directly Through Token Issuance
• Opportunities: In traditional consumer apps, monetization typically takes one of two forms: 1. Free access with long-term value capture via traffic and platform effects; 2. Paid services or subscription features (e.g., premium tools). The former takes time; the latter is hard to scale. Tokens offer a third path: monetization through direct token sales.
• Challenges: This is clearly unsustainable. Once the project exits its rapid growth phase, inflow of new capital slows. Since the model is zero-sum, project incentives become misaligned with user interests—driving churn. If the project doesn’t actively cash out, it may run into financial trouble due to weak revenue streams and become dependent on fundraising, which leaves it at the mercy of market cycles.

3.Fully Serving Web3-Native Users by Solving Their Unique Pain Points

The third paradigm refers to consumer applications designed specifically for Web3-native users. These apps can be split into two categories based on their innovation direction:

• a. Constructing New Narratives and Monetizing Untapped Value Among Web3 Users to Create New Asset Classes
• Opportunities: By offering Web3-native users new speculative assets (such as in SocialFi), developers can gain pricing power over these assets from the very beginning. This allows them to extract monopoly profits—something that would typically require intense market competition and strong competitive moats in traditional industries.
• Challenges: To be honest, this paradigm heavily relies on team resources—particularly whether they can earn the recognition and support of individuals or institutions that have strong influence or “pricing power” in the Web3 space. This presents two main challenges: First, as the crypto industry evolves, the pricing power of assets shifts dynamically—from early crypto OGs to VCs, then to centralized exchanges (CEXs), later to crypto KOLs, and now even to politicians, celebrities, or traditional entrepreneurs. Teams need to spot these shifts and quickly build alliances with new power players—this requires deep market awareness and strong networking resources. Second, competing for the attention of asset “pricers” is extremely costly. In this paradigm, you’re not just fighting other apps in a specific vertical—you’re competing with all token creators in the space for the attention of a small group of influential figures. It’s a fiercely competitive game.
• b. Providing New Tool-Based Products to Fulfill Unmet Needs of Web3-Native Users or Improve Their Experience
• Opportunities: As crypto adoption grows, the base of Web3-native users is also expanding, making user segmentation more viable. Products focused on real, unmet needs of this user group are often able to reach PMF (product-market fit) more efficiently and build more sustainable business models—examples include data analytics tools, trading bots, and information platforms.
• Challenges: While solving actual user problems leads to more robust product development, the timeline tends to be longer. Since these products are not driven by hype or narrative, but by real use cases, they are often unable to raise large sums of funding early on. Maintaining patience and staying committed to long-term goals amid the hype of token launches and high-valuation fundings can be incredibly difficult.

Reflections on the Investment Thesis for Web3 Consumer Applications

We now present our thoughts on the investment theory behind the Web3 consumer application sector, which can be summarized into five key perspectives:

1. How to Transcend Speculative Cycles Is the Core Challenge for Web3 Consumer Apps

As one of the most successful Web3 consumer applications from the previous market cycle, Friend.Tech offers us valuable insights. According to Dune data, Friend.Tech has accumulated a total protocol fee of $24,313,188. The total number of users (traders) has reached 918,888. These are impressive performance metrics for any Web3 application.

However, the project is currently facing significant challenges, stemming from several factors. First, in terms of product design, Friend.Tech adopted a bonding curve mechanism, which introduced a strong speculative aspect to what is fundamentally a social application. While this attracted a large number of users in the short term by leveraging wealth effects, it also raised the entry barrier for new users in the long term. This runs counter to how most Web3 projects and KOLs currently rely on open public traffic to grow their influence. Additionally, Friend.Tech excessively tied its token mechanics to the product’s core utility. As a result, the user base became dominated by speculative participants, shifting attention away from the app’s functional value. This ultimately contributed to its stagnation.

Therefore, for most Web3 consumer applications, after acquiring a large user base, teams must carefully consider how to identify product-market fit (PMF), maintain user engagement, and transition beyond the speculative phase in order to build a sustainable business model. Only by solving these challenges can Web3 consumer apps achieve true mass adoption.

2. How to Evaluate Web3 Consumer Applications During the Investment Process

In general, evaluating investments in Web3 consumer applications can be broken down into two main dimensions: First, analyze the product’s operational data to assess its market potential. This can be further divided into two areas:

• User Data: For most consumer applications, user metrics are always the most important, since a sizable user base is the prerequisite for exploring sustainable business models. Similar to how Web2 apps are assessed, we can use traditional metrics like DAU (Daily Active Users), user growth rate, and user retention rate to determine whether the product has achieved Product-Market Fit (PMF). Additionally, the emphasis may vary depending on the category and stage of the Web3 application. For example, in Web3 Social apps, user retention is especially critical. Investors often start by observing niche markets—if an app shows strong retention within a uniquely defined user segment, that’s a good indicator of investment potential. Of course, care must be taken to validate the authenticity of the data and avoid false PMF signals caused by bot activity.
• Conversion Data: Beyond user metrics, conversion-related data such as AUM (Assets Under Management) and user spending is also crucial for evaluating commercial potential. If an app has a large user base but low AUM or low average user spend, it may indicate limited monetization potential. Additionally, not all revenue is equal—revenue quality matters. If income is based on genuine product usage (users paying for real utility), rather than speculative token incentives, then the business model is more likely to be sustainable.

Second, evaluate the founding team. This includes three key factors: 1. Technical Strength: The team’s ability to build defensible technology is the foundation for long-term competitive advantage. 2. Market Sensitivity & Adaptability: The team needs to be agile, open-minded, and highly attuned to identifying unmet needs in the market—and willing to pivot quickly when opportunities arise. 3. Strategic Resources: This includes partnerships with other apps, relationships with KOLs, and distribution networks—all of which affect the project’s success during growth or token launch.

3. How to Define a Successful Web3 Consumer Application

From an investor’s perspective, defining a successful Web3 consumer application is an interesting question. Is success driven by revenue or by token price? Generally speaking, the two are interconnected. If a project cannot generate sustainable revenue, then ultimately its token will not have much long-term value. However, the answer also depends on your investment horizon. If the investment period is short, then token price matters more, and the focus shifts to evaluating the tokenomics. If the investment is long-term, then the emphasis is on revenue performance and whether the revenue model is sustainable.

4. The “Application Factory” Model May Be a More Reliable Strategy for Web3 Consumer Apps

Looking at the development of China’s Web2 industry, ByteDance launched many successful consumer-facing applications. Their strategy was to continuously experiment by launching various types of products, letting the market decide which ones succeed, and then doubling down on the winners. What made this model work was their massive user base, which significantly lowered their cost of trial and error. This experience is transferable to Web3.

From this perspective, projects like Friend.Tech still have room for opportunity in this cycle. At the very least, they managed to show early traction by attracting a large user base and generating solid revenue. These advantages may enable them to evolve into a Web3 application factory—making their future development worth watching.

5. What Characteristics Will Define the Next Successful Web3 Consumer Application?

We believe that in the next market cycle, successful Web3 consumer applications will emerge under the following three paradigms:

First Paradigm: Products that first attract crypto KOLs through their fun or engaging design, then leverage these influencers to bring their followers onto the platform—effectively solving the cold start problem. A representative example is Kaito, whose team has strong technical capabilities and an innovative incentive model. These strengths helped them secure significant mindshare in the crypto community, enabling deep penetration across different communities. At the same time, Kaito addresses a key pain point in Web3: how projects can acquire users more effectively during marketing. By accumulating a large base of retail users and building accurate user profiles based on mindshare, Kaito enables targeted marketing for Web3 businesses—giving it a more sustainable business model and helping it move beyond short-term speculation.

Second Paradigm: Products that focus on real needs from Web3-native users and rely on product strength alone to gain traction. By not introducing a token too early, these apps can avoid attracting speculative users during their PMF phase, leading to higher user retention. Examples include Polymarket and Chomp.

Third Paradigm: Business model innovation. One strong example is Grass, which helps users monetize idle computing power—particularly in AI-related use cases—and converts that value via tokens. Although Grass leans more toward a B2B model, this kind of “sharing economy” thinking could inspire future Web3 consumer app design as well.

6. What Categories Are Most Likely to Be Among the First Web3 Consumer Apps to Find PMF in Crypto?

Based on current market trends and investor preferences, the Web3 consumer apps most likely to achieve product-market fit (PMF) in the near future are expected to come from the following categories:

First, Web3 Social applications remain highly favored by the market. Most Web3 projects rely heavily on social media for marketing, and compared to traditional investors, crypto investors also prefer to use social platforms to acquire information and form value-based networks. This highlights the importance of Web3-native social apps. By tokenizing social interactions or tapping into niche user needs—and by learning from the experience of Friend.Tech—future social apps can adopt more sustainable business models and improve user retention, which will help them move beyond speculative hype and discover true PMF.

Second, on-chain trading tools show significant potential. As MEME coin activity continues to grow, investors are increasingly paying attention to on-chain trading. The explosive rise of tools like OKX Wallet and GMGN proves there’s strong demand. However, as these mainstream tools become widely adopted, returns from popular strategies will diminish due to crowding. This will increase demand for customized trading solutions. Products that offer differentiated strategies or trading tools for advanced users could tap into a valuable market opportunity.

Third, payment applications are also worth watching. Following the passage of recent legislation on stablecoins designed for payments, much of the regulatory pressure previously burdening payment apps has been lifted. This sets the stage for growth. Thanks to blockchain’s low cost and high settlement efficiency, Web3 payment apps have a real shot at building a moat in use cases like cross-border payments and yield on idle capital.

Lastly, DeFi remains a key category to monitor. As one of the few categories to have already achieved PMF, DeFi is foundational to the Web3 space. The success of platforms like Hyperliquid shows that users still value decentralization. As infrastructure improves, former limitations around performance and latency will disappear. In high-frequency financial scenarios where performance matters, DeFi will increasingly match or even exceed CeFi performance—opening the door for more products like Hyperliquid to challenge centralized exchanges.

Disclaimer:

1. This article was originally published by [MarsBit]. All rights remain with the original author [IOSG]. If you have any concerns about this reprint, please contact the Gate Learn team for resolution.

2. Disclaimer: The views and opinions expressed in this article represent only the author’s personal views and do not constitute any investment advice.

3. The Gate Learn team is responsible for the translation into other languages. Unless explicitly authorized, no translated version may be copied, shared, or republished without proper credit to Gate.io.