Original Title: "IOSG Weekly Brief | Consumer App Track: Insights and Thoughts #283"

Original Author: Max Wong, IOSG Ventures

TL;DR

· Infrastructure is now saturated; consumer apps are the next frontier. After years of funding new L1s, Roll-ups, and development tools, the marginal technology gains have been minimal, and users have not automatically flocked due to "good enough" tech. Creating value now lies in attention, not architecture.

· Liquidity stagnation, retail absent. The total stablecoin market cap is only about 25% higher than the 2021 all-time high, with recent increments mainly from institutions buying BTC/ETH for their balance sheets rather than speculative capital circulating within the ecosystem.

· Key Takeaways

-Regulation-friendly policies will unlock the "second wave" of development. Clearer U.S. policies (Trump administration, stablecoin bill) expand TAM and attract Web2 users who care only about tangible applications, not underlying technical architecture.

-Narrative markets reward real usage. Projects with significant revenue and PMF—such as Hyperliquid (about $9 billion ARR), Pump.fun (about $5 billion ARR), Polymarket (about $12 billion volume)—outperform infrastructure projects with high funding but lack of users (Berachain, SEI, Story Protocol).

-The essence of Web2 is the attention economy (distribution > technology); as Web3 deeply integrates with Web2, the market will also—B2C apps will expand the pie.

· Current Consumer Track with PMF (Crypto-native):

-Trading/Perpetual Contracts (Hyperliquid, Axiom)

-Launchpad/Meme Coin Factory (Pump.fun, BelieveApp)

-InfoFi and Prediction Markets (Polymarket, Kaito)

· Next Emerging Track (Web2 Coding):

-One-Stop Deposit/Withdrawal + DeFi Super App—integrating wallet, banking, yield, and trading in one (Robinhood-like experience but ad-free).

-Entertainment/Social platform, leveraging on-chain monetization (exchange, betting, pools, creator tokens) to replace ads, optimize UX, and enhance creator earnings.

· AI and Gaming are still in the pre-PMF stage. Consumer AI needs a more secure account abstraction and infrastructure; Web3 games are plagued by "freemium" economy issues. A breakthrough will only occur after a chain game emerges that is core gameplay-driven rather than crypto-centric.

· Superchain Theory. Activity is concentrating towards a few chains that are consumer app-friendly (Solana, Hyperliquid, Monad, MegaETH). Killer apps of these ecosystems should be selected, along with the infrastructure directly supporting them.

· Investing from a consumer app perspective:

-Distribution and execution > Pure technology (network effects, viral loops, branding).

-UX, speed, liquidity, and narrative fit determine success.

-Evaluate as "enterprises" rather than "protocols": real revenue, scalable models, clear industry dominance path.

· Bottom Line: Pure infrastructure plays hard to replicate the 2021-style valuation multiples. Excess returns in the next 5 years will come from transforming the underlying crypto into consumer apps that millions of Web2 users incorporate into their daily experiences.

Introduction

In the past, the industry heavily focused on technology/infrastructure, concentrating on building the "rails"—new Layer-1s, scaling layers, developer tools, and security primitives. The belief driving this was the industry's mantra of "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., where funding valuations are off the charts but are touted as the "next big thing."

In this current cycle, as consumer app projects are in the spotlight, the discussion has clearly shifted to "what these rails are actually being used for." When core infrastructure reaches maturity where marginal improvements are diminishing, talent and capital begin to chase consumer-facing applications/products—social, games, creators, business scenarios—showcasing the value of blockchain to retail and everyday users. The consumer app market is fundamentally an attention economy, making the whole crypto market a battlefield of narratives and attention.

This Insight Report will explore:

1. Overall Market Background

2. Consumer Application Types in the Market

a. Tracks with Product/Market Fit (PMF) Already Achieved

b. Tracks Leveraging Crypto for Upgrades, Eventually Reaching PMF

3. Framework and Investment Thesis for Consumer Applications — How do institutions identify winners?

Narrative — Why Now?

This cycle lacks the retail FOMO and NFT/Altcoin hype seen in 2021, coupled with a tightening macro environment limiting VC and institutional capital inflows, causing new liquidity growth to stagnate.

▲ Stablecoin Market Cap Trend

As shown in the chart above, the total stablecoin market cap grew approximately 5x from 2021 to 2022, while in this current cycle (2nd half of 2023 - 2025), it has only doubled. At first glance, it may seem like organic and healthy steady growth, but it is actually misleading: the current market cap is only ~25% higher than the 2021 peak, which is a slow growth rate over a 4-year period for any industry. This is still low despite stablecoins enjoying the most clear regulatory tailwinds and having a strong pro-stablecoin president.

The inflow of capital has significantly slowed down and mainly started after Trump's election in January 2025. So far, the new capital is not speculative or truly "hot money"; it is more about institutions incorporating BTC/ETH into their balance sheets and governments and corporations expanding stablecoin payments. Liquidity is not driven by market interest in new products/solutions, but by regulatory favorability; this funding is non-speculative and does not directly enter the secondary market. This is not free capital, nor is it driven by retail investors, so even with price highs, the industry has not recreated the 2021 frenzy.

Overall, it can be likened to the market seeking the next growth direction after the 2001 .com bubble burst — this time, the direction will be consumer applications. Past growth was also consumer app-driven, but the products were NFTs and meme coins, not applications.

Key Finding

Over the next 5 years, the crypto market will see a second wave of growth, driven by Web2/retail

· The more defined crypto policy of the Trump administration gives founders the green light

· Stablecoin Legislation Significantly Expands All Crypto Applications TAM: The past liquidity bottleneck was due to a lack of a clear framework and a significant market fragmentation; today, with stablecoin regulations clarified, liquidity has benefited

· 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 applications they can interact with directly and products that bring them value — what they want is Web3's "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, real 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; good technology needs to be implemented → the easiest path is through consumer applications

· Approach: Projects with a unified, ultimate UX and value capture mechanism will attract users. Users do not care if the technology is slightly better unless they can "feel" it

· Builders are transitioning from the 2019-2023 "Technology First" era to a "User-First" era. Chains with real demand, rather than just ecosystems subsidized or tool-accessible, attract developers

-In the past, the market made developers write extensions for Firefox for subsidies, rather than acquire real users on Chrome

-Typical counterexample: Cardano

Web2 has always been an attention economy (distribution > technology); after deep integration with Web2, Web3 will also follow this trend — B2C applications will expand the overall market

· Viral spread and attention are the winning moves → consumer applications are the easiest to achieve

· Due to the ease of embedding network effects in consumer applications → such as linking Twitter and receiving protocol rewards for posting (Loudio, Kaito)

· Therefore, consumer application content is highly generative → easily spreads virally, capturing mindshare

· B2C applications can also easily generate buzz through user behavior, incentives, or community (Pump.fun vs Hyperliquid)

· Viral propagation brings attention, attention brings users → Viral applications will attract new retail investors and expand the market

Types of Consumer Applications in the Market

Vertical Tracks with Product-Market Fit (PMF) - Crypto Coded

Trading

· Hyperliquid: Approx. $9 billion ARR; $0 funding

· Axiom: Approx. $1.2 billion ARR; $21 million funding

Launchpad

· Pump.fun: Approx. $5 billion ARR; $0 funding

· BelieveApp: Approx. $60 million annualized fees; $0 funding

InfoFi + Prediction Markets

· Polymarket: Annualized volume of approx. $12 billion (0% fees); $0 funding

· Kaito: Approx. $33 million ARR; $10.8 million funding

Projects in these tracks should be closely monitored.

Comparison:

· Berachain: Fees of only $165,000 since launch; $142 million funding; 85%+ ATH drop

· SEI: Annualized fees of only $68,000; $95 million funding; 75%+ drop

· Story Protocol: Fees of only $24,000 since launch; $134 million funding; 60% drop

Purely technical/infrastructure projects lacking real-world use cases are no longer a way out. Institutions can no longer rely on such assets to replicate 2021-style excess returns.

From these platforms, it is evident that most lean more towards Web3-native, aligning with its focus on encryption capabilities. However, there are also traditional consumer tracks (see below) that have been disrupted by the encrypted track and are moving towards the mainstream.

A Vertical Track That Can Borrow "Encryption Technology" to Upgrade and Eventually Achieve PMF – Web2 Coded

Web2⇄Web3 Onramp / Offramp + DeFi Frontend

As Web2 users continue to flood into Web3, it's time for one or two mainstream solutions that everyone uses to emerge, enabling onramp/offramp and access to DeFi. Currently, the market is highly fragmented, and the user experience is cumbersome.

Current Pain Points

· House-Jumping-style On-chain Activity: 75-80% of first-time coin buyers still purchase coins on centralized exchanges (Binance, Coinbase) before transferring them to self-custody wallets or DeFi protocols, resulting in two KYC processes, two fee structures, and at least one cross-chain bridge.

· Withdrawal Difficulty: Licensed US-based centralized exchanges can freeze fiat for 24-72 hours; EU banks increasingly classify outbound SEPA transfers as "high risk."

· High Fees: 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 Yield Aggregation Solutions: There is still no all-in-one DeFi module that allows users to centrally access yield stacks.

Payment Giants Are Making a Move

· PayPal now allows US users to withdraw PYUSD directly to Ethereum and Solana and return to any debit card within <30 seconds (fees: 0.4-1%).

· Stripe opened up 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 transactions for 14 million users last year, achieving 123% year-on-year growth due to the addition of instant offramp services covering 160+ countries.

The Portrait of PMF

A global super app where users can seamlessly deposit/withdraw, with a clean interface, and access all DeFi functionalities on the same platform.

· Single platform account holding funds, seamlessly connect bank account and crypto wallet

-Only large amounts require KYC

-No high fees or withdrawal delays

-Similar to a savings account but crypto-denominated

· Yield aggregator, integrated with mainstream lending protocols (Aave, Kamino, Morpho) and staking

· Covers mainstream spot/perpetual trading interfaces

The closest current approximation to this North Star is Robinhood: minimalist UI/UX, combined with bank and wallet integration; it may be the frontrunner in this race.

Entertainment / Media / Social

Current content platforms (YouTube, Twitch, Facebook) mainly rely on capturing user attention and monetizing by displaying ads to advertisers. However, this conversion chain is inherently inefficient, with potential customer loss at multiple stages of the funnel. More importantly, display ads "interrupt" content and naturally disrupt UX.

The crypto paradigm can completely rewrite and optimize the traditional Web2 entertainment platform structure.

Platform-Level Unlock:

· Introduce and monetize new pathways

-DEX Integration—Exchange Fees

-Creator-pegged tokens

-Live event betting

-Jackpot

-User airdrops

· Ad-free, improves user retention

· No longer reliant on external stakeholders

· Novel revenue sharing with creators

-Exchange fee splits

-Event fee splits

In this new paradigm, the platform itself is a distribution channel, not a monetization product. Web2 has precedents: Twitch → Amazon, Kick → Stake, Twitter → Membership + GrokAI; Web3 also shows early signs, such as Parti and Pump.fun live streaming.

User-Level Unlock

-Ad-free leads to better UX

-Benefit from jackpot, airdrop for supporting/watching favorite creators

-Token dividends

Creator Layer Unlock

· Contribution-based Revenue Model; More Transparent and Fair

-Exchange Fee Sharing

-Event Fee Sharing

· Creator Token enables direct value flow from fans to creators

· Ad-Free to improve user retention

· Platform inherently drives user growth, benefiting creators

Why Not AI or Gaming?

Current AI consumer applications are still in the early stages. We need to wait for applications that can truly achieve "one-click DeFi/account management" to unleash their potential; the current security and feasibility infrastructure is still lacking.

As for gaming, blockchain games struggle to break through as their core users are mostly "Farmers" chasing money rather than enjoying the game, resulting in low user retention. However, in the future, games may incorporate the underlying crypto paradigm (such as economic and item systems), while player/developer focus remains on playability—if a game like CSGO had utilized on-chain economy, it might have been very successful.

On this note, there have been successful examples of small games using cryptographic mechanisms (Freysa, DFK, Axie).

Arguments and Framework

Main Viewpoint: Market Maturity → Reduction of Interchain Fragmentation → A few "Super Chains" Will Emerge Victorious → Institutions should bet on the next-gen consumer applications on these super chains and their supporting infrastructure.

This trend is already happening, with activity concentrated on a few chains rather than dispersed across over 100 L2s.

Here, "Super Chains" refer to chains centered around consumers, optimizing speed and experience, such as Solana, Hyperliquid, Monad, MegaETH.

Analogy:

· Super Chains: iOS, Android

· Applications: Instagram, Cash App, Robinhood

· Support Stack: AWS, Azure, Google Cloud

As previously mentioned, consumer applications can be divided into two key focuses:

Web2 Native: Applications that initially attract Web2 users, leveraging the crypto paradigm to unlock new behaviors—should focus on seamless backend integration of encryption without claiming to be a "crypto app" product (such as Polymarket).

Web3 Native: The verified determinant is a better UX + lightning-fast interface + ample liquidity + all-in-one solution (eliminating fragmentation). The next generation of Web3 users values UX more than returns or technology, only caring about the latter two beyond a certain threshold. Teams and applications that understand this should command a valuation premium.

Generally, it also needs to have the following elements:

Conclusion

Consumer investment targets do not need to rely entirely on differentiated value propositions (although they can). Snapchat is not a technological revolution; instead, it recombines existing technologies (chat modules, camera AIO) to create new unlocks. Therefore, evaluating consumer targets from a traditional infrastructure perspective is biased; institutions should consider: Can this project be a good business and ultimately generate returns for the fund?

For this reason, the following should be evaluated:

1. Distribution capability is superior to the product itself—can they reach users?

2. Is there effective recombination of existing modules to create a completely new experience?

Funds can no longer rely on infrastructure alone to drive returns. It is not to say that infrastructure is unimportant, but rather that in a market where narrative is king, they must have real appeal and use cases, rather than value propositions that no one cares about. Overall, regarding consumer targets, most investors tend to be overly "right-leaning"—adhering too literally to "first principles"—while true winners often rely on better branding and UX—traits that are implicit yet crucial.

Original Article Link

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia