This is Part 1 of a series exploring consumer products in crypto. This post examines the space from my perspective as an investor. Future parts will explore the challenges and opportunities from the builder and consumer perspective.

Crypto doesn’t have a consumer product problem. It has a consumer playbook problem. The default playbook is clear:

1. Acquire users through financial incentives: airdrops, points systems, referrals

2. Capture value from day one: token launches, transaction fees

3. Monetize through speculative tokens: retention is an afterthought
   

This works, especially for early investors as tokens can generate massive upside. If timed right, even if that token drops 90% over a few years, it can still produce 10x returns. But these scenarios are few and limited. Because once you start with speculation, it's hard to build anything else. The token becomes the product.

And you can see why the pattern repeats itself:

• User acquisition is expensive and unreliable

• Investors hesitate due to unclear value capture

• Founders struggle to build sustainable business models

But this pressure leads to a landscape optimized for short-term traction over long-term behavior.

In previous eras of consumer products, some of the best investments had no monetization plan for years. In crypto, the first questions are always: “What's the token? What's the fee model? How does this capture value?”

Funding follows familiarity. In 2024, investor money overwhelmingly went to L1s, DeFi, and infrastructure. Consumer products are still massively underfunded [1]. Why? Because other investment opportunities have proven paths to capturing value:

The result: few teams get the time or runway to figure out sustainable behavior-driven models. The ones that do often fall back on early token launches, because that’s the only monetization tool anyone’s willing to fund.

Because of this, teams launch tokens too early in their lifecycle. Hype kicks in, the token pumps and the app fizzles out before product market fit ever arrives. This is well articulated as the “hot start problem [2].”

Another way to break this down:

• Token too early = hot start death

• Airdrop abuse = mercenaries churn

• Fee switch too early = liquidity rug

• No habits = washed retention curve

When should a token be launched? In my opinion once:

• A daily active behavior exists

• Retention curve flattens

• The app has at least one repeatable economic action worth taking a cut on

Sequencing matters. Launching a token too early can create false signals, growth that looks real but disappears once the incentives dry up. Speculation can be a growth accelerant, but it can’t be the foundation.

Speculation has been the defining growth engine of consumer crypto. To be clear, it’s worked. The most successful consumer apps to date were all built around financial upside:

• Coinbase → buying and selling tokens

• OpenSea → buying and selling NFTs

• Polymarket → betting on real-world events

These platforms used speculation as a hook. But they also found a second loop, a behavior or utility that made users stay:

• Coinbase → a crypto bank 

• Opensea → art discovery

• Polymarket → truthseeking

Take Polymarket: most visits don’t result in bets. People come to see how the market is pricing real-world events. The speculative layer brings them in. Information is the retention loop and makes them stay.

Some will argue: “But tokens do more than drive speculation, they align users with the product early.” That’s true. Tokens let users own upside, not just participate. That is powerful. But if there’s no behavior to align around, the token becomes the product. Tokens can amplify behavior but they can’t replace it.

This post isn’t anti-token or anti-speculation. Tokens are powerful. Speculation is a legit form of engagement. It’s not the problem. It's just the only monetization model we’ve actually proven.

The real issue is we’ve put too much emphasis on building the entire stack around financial upside.

We are beginning to see early signs, far from proven but promising:

• Contribution as Ownership

  • Example: Paragraph → rewards contributors and builds long-term ownership

• Curation as Value

  • Example: Zora → turns curation into an onchain reward

• Participation as Earning

  • Example: JokeRace → submit and vote to earn 

Maybe behavior first products never scale. But we don’t know yet, because it's barely been tried. If one breaks out, it will change the way we fund and design products.

They still have a lot to prove but Farcaster is one of the clearest examples. Farcaster had the benefit of time and funding. Most teams don’t get years to experiment before ramping up financialization. Farcaster is more the exception than the rule, and that’s part of the point: today’s system isn’t set up to support teams building behavior-first.

They’ve spent years building without a token or leaning into monetization. They focused on behavior: posting, following, minting. Only after users showed up daily for years have they begun to layer in financialization:

• Frames as distribution and monetization rails

• A native wallet for payments and rewards

• Token incentives from community native tokens, not their own

It reflects another truth: understanding stated vs revealed preferences is a superpower.

Using the Farcaster example, crypto users say they want decentralized social media, but their revealed behavior is they stay on X for the reach, alpha and culture. 

Farcaster seems to get this. It uses revealed preferences to Trojan horse the stated goal of decentralized social.

Sequencing matters. Without a core user base and sticky behavior loop in place, the incentives fall flat. 

It’s easy to see this as a contradiction:

I say: “We need clearer value capture for consumer crypto.”

I also say: “Monetization should come later, after behavior is proven.”

It’s only a contradiction if you assume monetization = token launch. What if value capture is a progression:

Many of these monetization tools such as fees, rewards and tokens can work. But timing matters. Again, they should amplify behavior, not replace it. Deploying them before there’s something worth amplifying is what breaks the loop.

Today, speculation is the hook. That’s not a failure. It’s how crypto has grown. My hope is that the next wave of products will have a different hook, one rooted in behavior, identity and culture.

• Hook: Social, creative, cultural behavior

• Habit: Daily engagement loop

• Capture: Layered in after usage is real

The next great crypto product won’t be built to make people rich. It’ll optimize for behavior. And if it works, the upside will follow.

Here are a few ideas that are cryptonative but rooted in behavior and culture:

Stablecoin powered loops [3]: Polymarket is the first breakout app using stablecoins, there will be more. One idea is to use yield-bearing stablecoins to power reward systems to fund creative or community action. Stake on creators with a stablecoin and some of the yield goes to funding.

Presence as participation with location: Sharing locations is one of the most popular social behaviors (Snapchat, Instagram stories, Foursquare). Example: a geomapped social app built on crypto rails that creates an open framework for tradeable location-based assets and a public ledge of participation.

Taste as behavior with micropayments [4]: It’s been tried, it hasn’t worked at scale but with more users onchain, the emergence of stablecoins and proper infrastructure, it's close. Example: Curation platform for links, videos, tweets. Curators earn a micropayment when others click or save. Taste becomes a monetizable behavior.

These aren’t final answers. They’re starting points. The current playbook has dominated because it’s worked. But it’s worth asking: what else could?

1. What will people do onchain everyday, without being paid to?

2. What are some alternative monetization models for consumer crypto apps beyond speculation?

3. How do we build consumer crypto apps that create lasting behaviors instead of relying on financial incentives?

4. Are there examples of crypto apps today that have successfully onboarded non-financially motivated users?

[1] Galaxy Q3 2024 & Q4 2024

[2] Great piece on “The Hot Start Problem” by Mason Nystrom

[3] Apptoken Thesis laid out by Standard Crypto

[4] Paper by Nick Szabo written in 1999 about the potential problems around micropayments: The Mental Accounting Barrier to Micropayments

thanks to six, cooper and drew for the feedback.