Mike
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:
Acquire users through financial incentives: airdrops, points systems, referrals
Capture value from day one: token launches, transaction fees
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:
Category | Value Capture | Investor Confidence | Execution Risk |
---|---|---|---|
L1/L2’s | Native token | High (proven model) | Medium |
DeFi | % of TVL, trading fees, lending margins etc. | High (clear economics) | Medium |
Infrastructure | Saas, B2B models, usage based fees | High (revenue driven) | Low |
Consumer Apps | Token, fees | Low (unproven) | High |
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:
Stage | Objective | Monetization | Example |
| Daily usage | None | Posting, creating, minting, engaging |
| Track value creation | Curation fees, small rev share | Zora |
| Reward contributions | Stablecoins, ETH, nonspeculative tokens | JokeRace |
| Align users with network | Tokens tied to usage, reputation | Degen |
| Liquidity, Markets, Scale | Speculative token models | OpenSea |
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?
What will people do onchain everyday, without being paid to?
What are some alternative monetization models for consumer crypto apps beyond speculation?
How do we build consumer crypto apps that create lasting behaviors instead of relying on financial incentives?
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.
i agree with @kyle that crypto is financial infra, and it is a big miss if we assume financial = speculation OR financial =/= culture. the most popular consumer apps are both social and financial: - flip, whatnot, tiktok: social commerce platforms - roblox, pokemon go, clash of clans: in-app purchases for virtual goods - gas, sendit, ngl: premium features for fun, social boosts - youtube, twitch: tipping, subscriptions, channel memberships all of these apps integrate financial features to monetize (to survive and grow) without turning the user experience into a casino. contrast that with apps where speculation is the core experience: draftkings, online poker, sweepstakes casinos, etc. in those, winning or losing money is the product. different design choice, different user experience. financial infra can power commerce, entertainment, creativity, connection outside of pure speculation. how we communicate and frame the financial part is important, especially when it comes to the purpose of an app.
what is the definition of financial infra?
at most basic level, what enables you to spend / earn $
that's the last mile tho -- least complex or political. india's adhar program along with so many other countries have proved that even that last mile ux can be modern/realtime without any crypto like rails. good, be it dense read
transactions
What's the point of creating new social apps with crypto, like a new youtube, tiktok, or roblox, when existing platforms could just integrate crypto payments button in a week if it actually added value?
PayPal is trying very hard to integrate casino style products into Web3 with $pyusd, undercut the mkt with disruptive free giveaways, get people dopamine addicted, cut out competition, and then jack up prices.
This is my moment to shine. Crypto as financial infra is historically true. From first principles I don’t think it’s true. I’ll give counter examples for brevity. Imagine bald guys wanted to coordinate on the internet. With a level of assurance beyond the honor system. Boom, prove from your DNA test. This can be financialized, and would make it more likely to go viral. Not reqd though ;)
The GME short squeezers may want to provide peer pressure to maintain their position against. If everyone could continuously prove they haven’t sold, then new dynamics in social would be unlocked. Again could be financialized, but not reqd.
disagree. it is not intrinsically financial. it is a set of technologies for trust and value that such technology is largely, or firstly, applied to financial ends does not define the technology
crypto is financial infra, entertainment and social is where that infra is fully realized
really well said, solid post
a wallet and transaction is financial, this here is identity and crypto is about privacy and trustlessness a return to the fundamentals
crypto is financial infra but when it comes to social we need behavior first products that earn the right to add crypto financial infra https://paragraph.com/@pit/behavior-greater-token
wait i just read the entire thing. this is so good. how did i not see it before?!
i have my notis on for mike, he posts i follow
Nice post
This is so well said, "all of these apps integrate financial features to monetize (to survive and grow) without turning the user experience into a casino." @lior what is your take on this topic?
I agree with Ted, I think people tend to put everything in one bulk because it makes it easier to resonate on things, but I try to split the audience and accept that there are different personas with different problems and different needs. Speculators just want to speculate and make money - they are not necessarily the classic web3 social user that you might think of But they're crucial to allow velocity of capital and content that is driven by the speculation That velocity drives those that are attracted by the innovation and are excited by the opportunity to use apps that also come with some financial upside And then come the builders that can benefit from having these two distinct personas - they can deliver experiences that are fun and social with a financial element that serves both speculators and users.
Yes, I agree. My thought is that channel specific mini apps, can allow building communities of common values to monitize not in a casino style. For example /nature uses @cura . There's still the FC wide apps like @ponder by @cojo.eth to stimulate a variety of values, passions, and political perspectives. I see great news for FC with mini apps.
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Back w/ a new roundup of great writing over the past week or so in the 37th edition of Paragraph Picks — check them out & let us know which is your favorite!
@yekim.eth argues that crypto’s biggest challenge isn’t a lack of consumer products, but a flawed playbook overly reliant on speculation and token-based incentives instead of building long-term, behavior-driven engagement. "Speculation can be a growth accelerant, but it can’t be the foundation." https://paragraph.com/@pit/behavior-greater-token
@jaredhecht.eth reflects on the power of deliberate, coordinated action — both in companies and in building AI — arguing that moving carefully and intentionally is ultimately the fastest path to meaningful progress. "AI is non-deterministic. Nobody really knows what’s going to come out of it when we put something into it." https://jared.xyz/slow-is-smooth,-smooth-is-fast
@sterlacci argues that crypto should embrace its irrational, meme-driven roots rather than conform to traditional financial metrics, as true value often emerges from culture and belief — not fundamentals. "It’s ok to reject fundamentals, because there is something at play that is much more important." https://paragraph.com/@slow-tokens/crypto-needs-less-fundamentals-not-more,-return-to-magic-internet-money
Lit
Thinking through the most successful crypto apps Uniswap - speculate on tokens OpenSea - speculate on NFTs PumpFun - speculate on memecoins (basically tokens) Pretty crazy in 2025 we don't have one breakout app that doesn't revolve around speculation. I'm sure I'm missing a lot here but what stands out as a killer crypto app that doesn't have to do with gambling?
Privy - speculate securely
/blackbird
farcaster - social speculation and crypto?
blackbird is the closest example
is not crazy at all imo blockchains are inherently financial systems that function as decentralized asset ledgers permissionless market creation and asset issuance is basically their only purpose - “non-speculative crypto” is a meme from the past that was born during ZIRP mania but fundamentally detached from reality there is a universe of products to be built on those primitives but they will always be inherently financial/speculative
100% Financialization is a feature, not a bug
AMEN BRO AMEN🥲🖤 Thank you so much for saying this, keep preaching🗣️
this, by @yekim.eth also explains that you're looking for https://paragraph.com/@pit/behavior-greater-token
don't necessarily disagree but framing it as just for speculation is too pessimistic, like saying the stock market is for speculating on stocks or the housing market is for speculating on houses.
hm farcaster has potential to fit that mold. most people aren't here for gambling
Speculation is the hook. Behavior is the habit. most consumer crypto apps never make it past the hook. few reasons: funding issue, tokens launch too soon, retention is an afterthought more thoughts: https://paragraph.com/@pit/behavior-greater-token
great article Mike! curious to see how revenue tokens end up playing here (experimenting myself with it)
Seems like in some apps that are inherently speculative (prediction markets, leaderboard based games/competitions) the token can be introduced early AND drive the behaviour positively. Coinbase and Opensea would be bad examples cause the speculation lies in the assets bought, not the mechanism of the platforms themselves. But Polymarket having a token to drive betting volume could attract incoming funds to those markets and benefit the whole system. Bracky seem like a good example so far, and we're also planning to use a token in our prediction market protocol, @onit
“Hot start” problem is super interesting. This is a fantastic article. Really enjoyed.
thanks! @masonnystrom has a really good article about this: https://www.masonnystrom.com/p/the-hot-start-problem
real
great read!
In the latest blog post, @yekim.eth shares insights into the crypto consumer product landscape, emphasizing the shift from speculatory tactics to behavior-driven strategies. With a focus on user engagement and sustainable monetization, the future lies in prioritizing real user behaviors over short-term gains.