January 9, 2024
Consumer Crypto Report 2023: Where the Wild Things Are
The year 2023 was a wild ride in the capital market, and the crypto space surfed the waves with exhilarating twists and turns. Funding got a bit dry, projects faced their fair share of challenges, and we all witnessed some drama, from legal issues to unexpected arrests. The crypto community decided to tighten its belt, trading freebies for a 4-dollar coke and a 30% tip at exclusive events. No more lavish parties; the community embraced a leaner lifestyle.
Despite bear market hardships, innovation thrived. While getting grants and VC money became a bit like finding a needle in a haystack, a big shoutout to Base’s Onchain Summer movement for seamlessly bringing everything onchain. Also, hats off to friend.tech for bringing crypto gamblers together successfully. Engaging and discussing on Farcaster became a highlight, and we've found joy in collecting drops on platforms like Sound.xyz and Zora. Blackbird's user-friendly app makes table bookings a breeze. And let's not forget the delightful and goofy pet videos on Furrend that brightened our days.
2023 marked a pivotal year for consumer crypto. This report is your ticket to a quick rundown of major events shaping the landscape. Get ready as we explore where the consumer crypto industry might be headed in 2024, all with a touch of our not-so-humble opinion.
Note: Our focus is solely on consumer crypto, excluding DeFi, metaverse, or games. They're their own complex worlds and deserve a dedicated report. We're excited to dive into games more when we have the time!
- • Crypto App Development Focus
- - Developers prioritized composability, scalability, cheap fees, and integration ease.
- - Scalable blockchains and low fees were key drivers of user adoption.
- • Innovation in 2023
- - Layer 2 (L2) solutions shone, with Arbitrum, Optimism, and Base leading the pack.
- - Progressive Web Apps (PWAs) emerged as the new cool kids on the blockchain.
- - NFTs gained superpowers with the introduction of ERC-6551.
- • AI + UGC: Crafting Tomorrow's Stories
- - AI and User-Generated Content (UGC) help creators with dynamic, interactive storytelling.
- - Viewers become co-authors, shaping narratives through reactions and choices.
- • Cultural and Artistic Renaissance
- - 2023 witnessed a crypto-fueled cultural and artistic renaissance.
- - The focus shifted from new tokens to fresh narratives.
- • Notable Funding Rounds in 2023
- - Significant funding for consumer-related apps and protocols.
- - Story Protocol secured the highest amount, raising $54 million.
The State of Consumer Crypto 2023
Infrastructure—L2s Shaping the Future
Building consumer crypto apps isn't just about inviting users; it's about creating a magical experience—how do they find out about us? How do they use it? And why would they come back? We think composability, scalability, cheap fees, and integration ease, and we know scalable blockchains and low fees drive user adoption. In the Layer 2 realm of 2023, innovation was the name of the game.
Remember Polygon? It gained fame for cheap gas fees and easy Ethereum integration in 2019. This was before DeFi summer. In 2023, deploying everywhere comes with a cost. The question looms: when will users stop worrying about blockchain specifics?
The L2 Kings
Arbitrum and Optimism rule the Optimistic rollups, leading in TVL and transactions. Arbitrum One boasted a hefty $2.51 billion in TVL as of December 27, 2023, according to DeFi Llama.
zkSync Era: Reaching Heights
zkSync Era, launched in March 2023, soared to a TVL ATH of $196.55 million 4 months later, in July.
Linea: The zkRollup Buzz
Consensys' zkEVM powers Linea, a zkRollup launched in July. According to Linea, they had over 150k weekly active users back in September. Are they all airdrop speculators? We don’t think so, but controversies linger about scams and rugpulls.
Coinbase Enters the Game
Coinbase introduced Base Network, its L2, during the Onchain Summer. A colossal 700k mints from 268k wallets marked a vibrant launch featuring partners like Coca-Cola, Iskra, FWB, Zora, and anotherblock, with the most prolific creator mints coming from Base itself.
Onchain Summer: A Digital Fiesta
Unity and collaboration defined Onchain Summer, bringing together 24 campaigns and 700k mints last August. The event featured a month-long daily livestream by Jesse Pollak, the creator of Base, and generated $3.4 million in revenue over time. The event has concluded, but its impact foreshadows an exciting onchain future.
Beyond those L2s, Zora and SuperRare made waves with their own L2 chains—Zora Network and RARE Protocol. Blur's team introduced Blast, gaining substantial DeFi traction with a TVL exceeding $1.1 billion at the end of last year. Challenges, including withdrawal restrictions until February 24, 2024, and concerns about transparency and security, are on the horizon. Regulatory uncertainties surrounding Blast reflect broader challenges in crypto. Despite these obstacles, Blast's unique yield model and $20 million investments signal promising progress in the L2 space.
2023 paints a vibrant picture of L2s advancements, with each project adding its unique color to the canvas of consumer crypto.
There's a simple game plan to follow in the world of crypto apps. First, create an app that people will love. Learn from it, figuring out what works and what doesn't. Then, take those lessons, build a protocol, and reward everyone for playing by the rules, ensuring it's a win-win. Lastly, grow a fantastic ecosystem around these rules, making the crypto world even more exciting and friendly for everyone involved.
Now, developers are leveling up with protocols. Enter Rollup-as-a-Service (RaaS), causing a stir in the crypto space. Why the buzz? Because it lets crypto projects easily build rollup chains with faster transactions and lower costs. And as always, scalable blockchains and low fees drive user adoption.
What's the Fuss About RaaS?
RaaS empowers developers to focus on building apps, turning complex engineering into a quick, no-code deployment. App rollups built with rollup SDKs offer customizability and flexibility like dedicated appchains but with the security and scalability of general-purpose rollups. Bonus is it can generate extra revenue from transaction costs.
The RaaS Providers
Companies like Caldera, Ankr, or Dymension assist developers in tailoring app rollups to their needs. Think of custom data layers, settlement processes, fee payments, and native gas tokens. It's like having a personal crypto tailor.
Why Choose RaaS?
Compared to L1 blockchains, RaaS provides better performance, lower costs, and more customizability. Developers get the security of Ethereum with the flexibility of a dedicated appchain—no need to bootstrap your own validator network.
How RaaS Stands Out
RaaS offers more customizability, compared to L2s and L1 app chains like Cosmos. It's like getting a tailored suit instead of an off-the-rack one. RaaS shines in onchain gaming, DeFi, and various consumer and enterprise protocols.
The Catch with RaaS
The tradeoff? Initial lack of liquidity compared to chains like Ethereum. But hey, the enhanced performance, customizations, and bridge interfaces of RaaS make that a minor hiccup for most successful projects. RaaS is the go-to infrastructure for projects planning to scale big, whether in onchain gaming, DeFi, or consumer and enterprise protocols. It's like having a turbo boost for your app.
We've all wished for that app-like experience for crypto apps minus the “download from App Store drama” for years. While more crypto projects are moving their desktop app experience to mobile and building their own native mobile app, we saw a trend in 2023—enter Progressive Web Apps (PWAs), the crypto apps’ superheroes—looking and acting like mobile apps but living right in your browser. It's like magic but a whole lot better.
PWAs are tailored for a mobile-first experience because, let's be real, our phones are practically an extension of ourselves, even in the crypto world. These digital marvels play harmoniously with the big players—your browsers and platforms—enhanced with fancy APIs. Now, here's why PWAs are stealing the show:
- • Cross-platform: It works seamlessly on any device.
- • Searchable: Google and friends easily find and recommend them.
- • No App Store drama: Skip the publishing chaos.
- • Budget-friendly and wallet-friendly.
While Apple might not be fully embracing the crypto app party yet, friend.tech cracked the code using PWA, with a little help from Privy, an API builder, giving these unsung heroes the spotlight they truly deserve. Suddenly, everyone's catching on to the PWA magic. Watch out, App Store—PWAs are the new cool kids on the block(chain) in 2023.
Unlocking NFT Superpowers with ERC-6551
Ever wondered, "Why can't my NFTs have their own special powers?" Jayden Windle and Benny Giang from FUTURE PRIMITIVE had the same thought and brought us the game-changer—ERC-6551.
The new proposal, ERC-6551, was submitted to Ethereum.org on February 23, 2023, by Jayden. It introduces Token Bound Accounts (TBAs), which are like giving each ERC-721 token its own smart contract account—imagine magical wallets tailored just for your NFTs. Now, your NFT is not just a digital art piece; it's a powerhouse that can store its own assets. Your wallet might even get a bit envious!
ERC-6551 didn't stop there; it sparked a summer movement. The goal? Making NFTs more than collectibles—making them super useful and user-friendly onchain. Now, every NFT can flaunt its mini-wallet, own tokens, and other NFTs, control an ENS name, and even deploy contracts. NFTs have officially become superheroes in the digital world.
And there's more magic! When you transfer the NFT, you pass on all those newfound superpowers. It's like a digital torch of awesomeness. ERC-6551 is turning NFTs from cool to super cool—because who said collectibles can't be superheroes?
AI + UGC—Crafting Tomorrow's Stories
In her book “Extremely Online,” published last year, tech journalist Taylor Lorenz spills the beans: “A creator's goal is to maximize engagement. The platform's goal is to monetize.” And “content creators are the new media.”
Social media and creative tools made content creation a breeze. Now, with AI, it's a content showdown. AI merges User-Generated Content (UGC) with AI-Generated Content (AIGC), forming a dynamic duo. Get ready for interactive storytelling—where viewers become co-authors. AI analyzes UGC, deciphering patterns and emotions and crafting personalized storylines. Imagine a plot influenced by your reactions and choices.
Picture this: a video where viewers shape the plot with reaction videos, votes, and story bits. AI seamlessly weaves it in, creating a dynamic, community-driven narrative.
In live-streamed events, AI adapts based on viewer reactions—creating an interactive and responsive storytelling experience. It's like live TV, but cooler.
The blend of UGC and AIGC marks a new era. Multi-platform creators and viewers co-author stories, sparking endless possibilities. Brace for the content revolution. And here's the kicker—engagement will go through the roof. When viewers actively shape the story, the connection deepens.
” Allowing viewers to be a part of your content/story with the help of AI not only enhances the experience for both creators and viewers but also fosters an inclusive narrative, creating a perfect environment for engagement and community, which aligns with the creators’ ultimate goal. It’s a win for everyone!” says Furrend creator Claudia Diaz (@scout_the_mini_unicorn on Instagram with 128k+ followers)
We believe generative AI media, like videos with less than 1-second response times, will unlock a wave of consumer opportunities, fostering more creators and deeper engagement. The future of interactive storytelling is now.
Quests and Points Unleashed—The Gaming Side of Crypto
Have you noticed how top consumer apps play like games? Consumer crypto apps are the same. They have a clear purpose, rules, and rewards—tokens for status or money. In crypto, token rewards and incentives aren't going anywhere, and they’re still the vehicle for communities to coordinate across borders.
Points and quests hit the scene last year, making crypto as thrilling as your favorite game. XP and points are your pals if you're into Discord, Reddit, or games. Projects like Farcaster and Rainbow are dropping points like it's hot.
And for quests: Imagine earning tokens for onchain tasks. Quests make it happen. Smart contracts assign tasks to specific addresses. Any onchain action can earn you tokens. It's like leveling up in a game.
Builders like Layer3, Galxe, and Link3 are crafting quest-like protocols. Rabbit Hole also launched Quest Protocol—your next adventure awaits.
Will points eventually become tokens—like onchain incentives? We'll see. However, we believe that the way users interact with crypto apps will change in the next six months. Low fees, ERC-6551, AI and AIGC, and L2 scalability are a recipe for crypto excitement. Now, with points and quests, the new language of rewards, users are already getting ready to level up!
Crypto Goes Hollywood—Consumer Crypto Apps in Pop Culture
In May, The Evening Standard and digital artist Trevor Jones offered a chance to snag a free Ethereum-based NFT for King Charles' Coronation. Claiming your piece was as simple as scanning QR codes along Oxford Street, unveiling Queen Elizabeth II's iconic Saint Edward's Crown.
Staying ahead in the game as always, Nike dropped the "Swoosh NFT digital sneaker" in the "Our Force 1" collection, potentially featuring countless virtual pairs of the legendary Air Force 1. potentially featuring countless virtual pairs of the legendary Air Force 1.
Luxury fashion brands like Gucci, Moncler, Ferragamo, Burberry, Louis Vuitton, Dolce and Gabbana, Balmain, Jimmy Choo, and more have all jumped on the NFT train with exclusive collections.
Ralph Lauren joined the NFT party, teaming up with Poolsuite—a once internet music platform turned D2C studio, events company, and now an aesthetic lifestyle brand. They extended an invitation to NFT holders for a Grand Soirée.
Introduced by artist Jack Butcher on January 8, 2023, Opepen took over crypto Twitter during the summer with a collection of 16,000 items and over 78k ETH total trading volume. People collect, trade, and recreate Opepen just "for the culture," says Beeple.
Zora coined the term "free mint" for collecting nearly everything onchain at no cost. Now, minting NFTs won't break the bank, and users set NFT prices at minimal gas costs. Sound.xyz, an onchain music platform, replaces web2 streaming platforms like Spotify for many, helping more than 2,500 musicians and artists make over 6 million since the launch in 2021.
If we talk about pop culture, we have to mention Pinky Doll, the queen of NPC on TikTok. Pinky Doll has become a digital sensation as an NPC streamer this year. Inspired by video game NPCs, Pinky Doll entertains with off-synced, overdubbed humor. Are we expecting Pinky Doll to drop her own NFT? Yes, absolutely, yes.
In 2023, a cultural and artistic renaissance unfolded, driven by crypto, with 1-2 memecoin seasons stealing the spotlight. It's not merely about new tokens anymore; people crave fresh narratives, and we're all aboard for this thrilling ride.
Ethereum and L2s
As of December 2023, according to dapp data aggregator DappRadar, Ethereum and Layer 2 solutions, including Optimism, Arbitrum, zkSync Era, and Base, continue to lead the crypto ecosystem. With approximately 15 NFT and collectibles projects boasting more than 100 unique active wallets (UAW) and 8 social and socialfi apps surpassing the 100 UAW mark, the space is more vibrant year over year. It's no longer confined to just developers and airdrop speculators; the adoption of dapps has expanded.
Electric Capital reports 19.3k monthly active open-source developers as of October 1, 2023—an impressive 66% increase from three years ago.
Breakout project: friend.tech
friend.tech (FT) took the stage in August, quickly capturing attention. Built on top of Base, the platform's investment is led by Paradigm and crypto influencers, including Garry Tan and NBA player Grayson Allen. The product's buzz on crypto Twitter attracted more users despite its initial glitches.
The bonding curve of FT, relying on the Dunbar number and a simple formula (n square divided by 1,600), drove speculation. Early adopters, mainly influencers, monetized their clout, promoting FT and attracting users.
However, skeptics questioned the intrinsic value of FT's keys, calling it a house of cards. Despite concerns, users enjoyed the app, contributing to its success.
Some criticized FT for short-term games, hoping for a more expansive vision. Yet, it remains a significant player in the crypto space.
Solana—The Sizzling Ecosystem
The Solana ecosystem has been on fire, not just momentarily but consistently, attracting users with its wallets, NFTs, and vibrant social platforms. Solana's appeal lies in its seamless user experience, robust community, and cost-effective transactions.
Even with the introduction of EIP-4844, where most L2 apps on Ethereum come with a cost ranging from $0.10 to $0.40 at current gas and ETH prices, Solana stands out as the cost-effective alternative. Its fees are approximately 100 times cheaper, paving the way for the development of new, highly utilized apps that offer a lucrative and engaging user experience.
Breakout project: Hivemapper and Helium
Hivemapper: Offering the freshest map data globally, Hivemapper is trusted by innovators in mapping, automotive, logistics, and more. Notably, it brings a real-world use case to the blockchain, particularly in the decentralized physical infrastructure networks (DePIN).
Helium: It signifies a paradigm shift in decentralized wireless infrastructure. Highlighting its real-world impact, the City of Valencia has invested in an IoT project powered by the Helium Network to combat energy poverty.
Ecosystem Marvels—Lens Protocol, Farcaster, and Bitcoin/Stacks Ordinals
Built on the Polygon blockchain, Lens Protocol has redefined decentralized social graphs. Leveraging NFTs and smart contracts, it pioneers a permissionless framework for web3 social media platforms.
Lens Protocol V2 has features like Open Actions, Collective Value Share, and an enhanced Profile Manager—making it as a preferred choice for developers crafting innovative consumer crypto apps.
Farcaster, the wunderkind of decentralized protocols, made waves by gracefully migrating to Optimism. In 2023, it threw open its digital doors wide, inviting users of all shades into its vibrant community. The price of admission? A mere $5 annual fee—less than your daily caffeine fix but way more stimulating.
Once inside Farcaster's realm, users revel in the freedom to pick their preferred client. It's like choosing your favorite flavor at the ice cream parlor, only cooler. Meanwhile, developers get the VIP treatment—complete access to the platform's data and APIs. It's like handing them the keys to the crypto kingdom, but with a touch of finesse. The number of apps that were built on Farcasters doubled at the end of 2023, including Searchcaster, Launchcaster, Purple, Paragraph, Unlonely, and so many more.
Farcaster is not just a social media platform and not a web3 protocol; it's a playground for a place where brilliant minds converge.
Bitcoin Ordinals, launched on January 21, 2023, marks a significant milestone. Crafted by programmer and artist Casey Rodarmor, it's a revolutionary protocol for inscribing digital content onto the Bitcoin blockchain. In a realm where bringing NFTs to Bitcoin has been a decade-long endeavor, Ordinals Inscriptions have ignited wild enthusiasm within the Bitcoin community since their launch.
Navigating the Crypto Funding Landscape
Crypto fundraising has been in a bit of a winter chill since Q3 2022, making Q3 2023 the lowest quarter since Q4 2020, according to Messari. Yes, we're still in the bear market, but there's a glimmer of hope—early-stage funding seems to be the hotspot.
In the face of the crypto winter, some consumer crypto projects are defying the odds, securing substantial funding. Here's a snapshot of the notable ones:
- • friend.tech: Rumored to secure a whopping $50 million in a Series A round led by Paradigm, friend.tech isn't just raising funds; they've got "token warrants," hinting at a future token airdrop. Big funds mean liquidity for the airdrop.
- • Blackbird Labs: On October 4, Blackbird Labs announced a $24 million Series A led by a16z, with support from Amex Ventures and Bolt by QED, alongside previous seed investors like Union Square Ventures, Shine, Variant, and key restaurant groups.
- • Privy: NYC-based Privy, an API builder for onboarding users to consumer crypto products, announced an $18 million Series A led by Paradigm.
- • Story Protocol: This open IP collaboration platform secured $54 million in funding on September 5, led by a16z crypto, with contributions from Endeavor and Samsung Ventures.
- • Phaver: A web3 social platform with 250,000 users closed a seed round of $7 million, with backers including Polygon Ventures, Nomad Capital, and SwissBorg.
- • Orb: Built on the Lens Protocol, this web3 social app raised $2.3 million from backers like Stani Kulechov and Sandeep Narwal. Orb boasts 400+ community requests, 5,000+ users, 15,000+ publications, and 150,000+ reactions.
- • Lens Protocol: This web3 project, redefining social apps with open social graphs, closed a round of $15 million led by IDEO CoLab Ventures, with participation from General Catalyst, Variant, Blockchain Capital, and DAOs like Flamingo DAO and DAOJones. Competitor Farcaster raised $30 million from heavyweights like a16z and Coinbase Ventures.
- • Sound.xyz: Making some noise in Series A funding, Sound raised $20 million, led by Andreessen Horowitz.
While the winter persists, these projects show that the crypto landscape is far from frozen. With funding flowing into innovative ideas, the consumer crypto space is poised for a thaw.
2023 was cool. While we might have missed the euphoric highs and breakout apps of web2, like Gas, acquired by Discord in early 2023, things are looking up. We're optimistic that the way users interact with consumer crypto apps will undergo a transformation in the next six months. With low fees and infinite scalability, we're gearing up for an exciting journey into Consumer Crypto Summer in 2024. Get ready for the ride!
Furrend is the next-gen web3 consumer app built for 10 billion pet lovers. Launched in 2023, Furrend enables creators to share a continuous stream of high-quality content with users—fueling their love for pets, inspiring creativity, and providing valuable insights and entertainment. We aim to empower them to pursue their passions, further fuel their creativity, and continue producing exceptional pet-related content that resonates with our global audience.
Be the first one to hear about updates