This is the first part in a series, find Part 2 on Messaging here, Part 3 on Utility, Part 4 on Digital Identities.

Every major technology shift has eventually brought forth a new wave of consumer tech companies. The emergence of the Internet led to messaging apps like AOL and Yahoo, marketplaces like Amazon and eBay, and entertainment services like Netflix and Pandora. The move to mobile led to the rise of Twitter, Uber, Facebook, and Snap*, among others.

We’re now on the cusp of a third major tectonic shift to blockchain-based apps and services (web3). The potential for blockchain is enormous because it solves many of the problems currently plaguing the Internet around identity, transparency, and trust.

Today’s crypto consumer companies are being driven by applications in art, music, and sports. Despite reaching pop culture status, there aren’t very many mass market breakout brands that have become household names, outside of perhaps Coinbase, OpenSea, Yuga Labs/BAYC, Metamask.

Why?

One of the reasons is that Blockchain apps are early in their appeal to mainstream audiences. In crypto, users are arguably motivated primarily by financial incentives and ownership. Successful consumer products, on the other hand, tap into a plethora of core drivers of human behavior: The need for meaning, for self expression and creativity, for connection and influence, a need to own, a need to belong, for safety & security, a need to influence and relate to others socially, a need for thrill & dopamine hits, a need to accomplish and build.

This is what makes consumer products so unique and difficult to build — you have a few fleeting seconds to capture a user’s attention, and after a successful hook, there’s the even harder problem of driving repeat usage and engagement.

Building an enduring crypto brand that taps into these needs presents a challenge and opportunity. Crypto-native companies will need to contend with how much the average consumer values decentralization and whether it creates a UX tradeoff. While crypto companies are still adopting some consumer product building principles (trust & safety, seamless UX, surprise & delight) — they have excelled at community building and strong communities which drive a sense of belonging.

There are a lot of candidates vying to meet this opportunity. I’ve outlined 9 areas where crypto-native products are already seeing mass adoption (wallets, NFT marketplaces) and several emergent areas that have the potential to achieve mainstream use soon (Look for more detailed discussions of some of these segments in future blog posts).

We are headed into a crypto correction and crises like these create opportunities for new consumer categories to emerge. I imagine one year from now, several categories below will look very different.

Here’s a few areas where we may see crypto-native consumer behemoths emerge, roughly from more established to newer emerging categories:

#1 Commerce / NFT Marketplaces

Whether you’re specializing in NFTs (Non-Fungible Tokens) related to videos, art, gaming, music — there’s a marketplace for it. NFT marketplaces are the town squares, the commerce centers, of crypto. They exert significant influence on the popularity and perceived success of the category.

• Before NFTs can become trusted mass-market brands they’ll need to overcome the distrust the mass market has with crypto & improve the purchasing experience
• There is still a huge opportunity to carve out a new niche of NFTs, and build a platform with world-class trust, safety, and security built in. Utility driven NFTs could appeal to mass markets. We may also see greater embedded & platform commerce opportunities going forward with commerce happening outside of marketplaces
• OpenSea has been dominant but players like Magic Eden have recently begun surpassing them in users & volume. Other notable players working on this today include LooksRare, Hawku*, Fractal, Zora, and Autograph*

#2 CeFi / DeFi, & Wallets’ Next Act

Consumer fintech products have arguably been one of the largest successes to date — just look at Coinbase, Blockchain.com*, Uniswap, Metamask, and the sky high engagement of Zerion*, Zapper. One area within centralized and decentralized finance I’m excited to watch is wallets:

Wallets are to crypto as email was to the first era of the Internet. They’re our connection, our single-sign on service, and authentication method for the crypto-native world. But these products aren’t mass consumer-grade products yet.

• The wallet usability and user experience design is suboptimal. You need to create a wallet, remember an incredibly long seed phrase or risk being locked out, and then transfer in money (good luck Youtubing how to do that)
• Once you’ve done that, you have to pay a bunch of gas fees before you’re able to buy anything. So the whole system is not quite mass market ready yet
• The good news is that there’s a huge market opportunity to improve this process. I’m excited to watch how the big players like Blockchain*, Metamask, WalletConnect, Phantom, and Rainbow respond, as well as how new wallets-as-a-service providers like Triangle and Slaz redefine the market

#3 Gaming / Metaverses

Back in October 2021 I wrote about why, this time around, the metaverse is different. I really hate to use the M word, but you can’t deny the impact crypto-native metaverses like Sandbox and Decentraland have had, or the even bigger impact web2 metaverses — Roblox, Minecraft, VRchat, RecRoom, et al — have had a generation of players who view these platforms as their primary social experiences:

• Open-world social gaming is how young people want to spend their time. Full stop. It’s the fastest growing category of media
• Crypto allows these platforms to have a real-world currency connection for the first time, massively expanding the potential and utility for players
• Crypto-native metaverses still suffer from the problem play-to-earn and other blockchain gaming companies do, which is that the gameplay is just not that good
• I’m excited to watch companies like Faraway*, Star Atlas, Defi Kingdoms, Harvest, and a host of other blockchain gaming startups make crypto gaming actually fun

#4 Digital IP / PFPs: Crypto Native Disney

Perhaps the most visible crypto product success to date has been NFT profile pictures such as BAYC, Cryptopunks, World of Women, Azuki, and so much more. The top 3 NFT collections alone drove 40% of OpenSea’s volume in 2021. These projects created communities and shared identity around art, and brought characters to life much like Disney and Pixar have.

• Digital-first IP brands have a number of advantages over traditional media IP development — they can iterate quickly through social media, monetize through tokens as their community engagement strengthens, and emerge before their story develops
• That said, these companies understand that a compelling storyline is key to engagement — just look at Crypto Coven or Invisible Universe — and in web3, projects aren’t just for passive consumption but rather for interaction and collaboration among community holders — active stories that live through your audience
• The best digital IP players are monetizing with a sustainable portfolio approach, partnering with games and other recurring royalty pools, and are not dependent on one-off custom licensing deals. Companies I’m watching in this space include Recur, Yuga Labs (BAYC), Invisible Universe and more

#5 Creator / Media-Entertainment / Collectibles

Entertainment and sports specifically has been one of the greatest bridges for crypto to mass market audiences. Everyone knows the Staples Center is now the Crypto.com Arena. Some are reinventing music or television, others are monetizing experiences and creating income for creators/influencers tokens. Back in October 2021, I wrote about creator coins and the future of income, a category that is still early, but underscores how game changing crypto could be for creatives

• Creator coins allow fans to invest in an individual, turning their community of fans into financial backers, and someone’s personal brand into a form of currency
• Tokens, NFTs, and crypto assets work really well for creatives with income volatility who need to constantly produce new content or increase their visibility in order to keep generating revenue. It helps by turning their fans into a monetizable community. Fans know they own a unique, rare piece of that creator’s history
• There are also creator tooling companies giving creators giving creators means to publish articles, create music, etc on crypto native platforms like Mirror and Mayk
• Sports has always been closely tied with collectibles. The entertainment collectible companies are taking an existing web2 behavior and implementing it in a web3 way — trusted, verifiable, and scalable
• Players in this space include HumanIPO, Mad Realities, Dapper/NBA TopShot, Audius*, Rally, Fan Controlled Football*, Royal* and Autograph*

#6 Search / Discovery & the Aggregation of Interest-driven DAOs

Web1’s biggest innovation was solving search and global information access. Web3 has added an identity layer, making search even more exciting as we can now search ownership records easily for the first time via block explorers. Search leads to discovering new interests and hobbies, but today it’s difficult to discover crypto interests before people start transacting — new NFT collections, DAOs, or people you share affinities with. The default is Twitter.

One area within discovery I’m excited to watch is DAO discovery and aggregation. DAOs (decentralized autonomous organizations) enable communities to form around interests and act collectively without the need for hierarchies or bureaucracy. And because they rely on smart contracts (code), they are arguably more transparent and trustworthy. These will become one of the dominant consumer apps for the following reasons:

• A DAO can be created for virtually any purpose — from supporting Ukraine (UkraineDAO) to research around aging & longevity (VitaDAO), and from social clubs (Friends With Benefits) to owning sports leagues (Fan Controlled Football)
• Whoever aggregates all of these DAOs and enables discovery across social groups will be able to replace Facebook groups with an embedded financial system rewarding people for their contributions to each community
• Some candidates for enabling this aggregation might be DAO tooling companies that add discovery like CollabLand, Superdao, Syndicate, or analytics companies like DeepDAO. DAO Tooling companies are interesting candidates since they already support a network of DAOs

#7 Connecting / Crypto-native messaging

Every new technology shift has created a new messaging giant. In Web1 it was email companies like AOL, Yahoo, Hotmail, and Gmail. Web2 saw mobile explosions of SMS, Whatsapp, and others. Why?

• Messaging is one of the highest social activity types and one of the foundational values the internet enabled — a human-to-human connection
• The ability to message a wallet based on what assets are in it — because you want to buy the assets or simply because you want to connect with someone who has similar interests — is difficult to do today
• Messaging wallets directly and paying people for access removes middlemen and allows the premium for contacting them to flow directly to the wallet
• Companies like XMTP, Dialect, Waku, web3mq, and Satellite are developing the core infrastructure that can make this possible while companies like Blockscan, Metalink, and Mailchain are attempting to enable onchain messaging at the application layer

#8 Real World Utility / Experiences

The success of NFTs in the arts is often met with the questions, “What can I use them for? Do they do anything at all?” The answer to those questions is X to earn, NFT ticketing/experiences, & task based rewards, which combine crypto purchases with IRL activities and real-world tasks with crypto rewards. While X to Earn started out with gaming (play-to-earn), it has since expanded to other activities: move-to-earn, learn-to-earn, sleep, eat, mediate, etc.

• The problem with the X to earn category is sustainability. The experiences are overstuffed with speculators looking for a quick return, and thus the tokens shoot up quickly and then lose value over time. Until this is solved, the jury is still out
• NFT ticketing + experiences will help to drive utility by offering gated access to special events, as well as exclusive loyalty programs. Some are for one-time events, others enable you to access ongoing rewards, benefits, and social spaces
• If ticketing + experiences are “pay crypto, get value,” then another interesting segment is “do work, get crypto.” These platforms and apps that give consumers small tasks to do in exchange for crypto-based rewards (NFTs, stablecoins, native coins of projects)
• This broad space is being attacked by a number of players — the big names are Axie Infinity, Stepn, Sweatcoin, and Layer3. Newer entrants like Percs, Afterparty, TokenProof, Mintgate, Rabbithole, Coordinape, Bitsports, and more are coming

#9 Digital Identity Profiles / Social Networks

People’s crypto wallets reveal a ton about who they are and what they do onchain — provided you know their wallet address. But there isn’t a great way to display all of a person’s activity as an onchain digital identity today. There are a handful of startups working on this problem.

• The Proof of Attendance Protocol (POAP) allows you to generate NFT tokens showing what conferences, concerts, or sporting events you’ve attended, and which DAOs you’re a member of. Claiming them presents a bit of an adoption hurdle, but maybe that’s a feature not a bug
• Entre works as a kind of LinkedIn for the blockchain, showing your professional affiliations, while ENS (Ethereum Name Service) provides the equivalent of an easy-to-remember domain name for long, complicated wallet addresses
• Other players that could aggregate and share onchain credentials include crypto consumer finance players like Lemon Cash or Webull*, Socket, NFT marketplaces like Magic Eden or Hawku*, or Social Networks like Bitclout, Farcaster, Showtime, etc
• Players in this space will need to solve selective sharing of elements of your identity while maintaining the privacy that has made crypto so popular

Honorable mention #10 — there are a ton of infrastructure layer / picks & shovels plays supporting these consumer products — some already mentioned above. Too many more to mention but identity protocols, social graphs, wallet security, DAO tooling, and so much more is being worked on.

An evolving category

It’s clear we are still very early in the world of crypto-native consumer startups — it’s too soon to tell exactly where the next huge crypto products will come from.

Many of the later categories (numbers 6–9) are still very early emergent categories and you can rightly argue that there is a ton of overlap between these categories: commerce/marketplaces & utility will likely merge as NFTs become viewed as access vehicles for all types of rewards, creators & utility are already merging with exclusive fan experiences & other loyalty offerings, digital identities & utility will merge as your onchain profile becomes proof of your real world activity, digital identities & discovery as we begin joining identity groups due to discovery, and entertainment, gaming & digital IP are already merging as crypto native IPs extend their reach into the real world, and so on.

This overview doesn’t fully answer some of the most exciting questions — who the crypto consumers of tomorrow will be, who will lead crypto’s next bull, which product areas will be first to take off, how crypto elements enhance consumer experiences, and which areas are truly innovating beyond web2 to create something entirely new.

The space needs many more founders with experience building products that customers love. It needs people who know how to build a consumer company in this space — encouraging positive consumer habits, understanding behavioral psychology, designing delightful user experiences, and so on. I feel confident we’ll get there.

Stay tuned for my next post, where I’ll share a deep dive into one of the emerging areas, crypto native messaging.

* Lightspeed portfolio company

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About Lightspeed

At Lightspeed we’ve been investing in blockchain technology since 2013 and today we have 60+ investments, including Solana, Near, Alchemy, Arbitrum, Ripple, FTX, Blockchain, FalconX, Autograph, Royal, Yuga Labs, Audius, and more.