The Future of Crypto Native Consumer Products, Part 3: Utility
What are Web3, NFTs, and crypto actually good for? Quite a lot, actually.
People who know of my interest in NFTs in the arts and crypto in general often ask me, “Okay, but are these things *actually* useful in the real world?”
It’s a reasonable question. Real-world applicability is essential for crypto to be a true success. Today, the public is confused or dislikes crypto. That’s not great for new consumer products. Crypto is at a crossroad. It is essential the industry shows real utility.
And there are already many examples where consumers are putting these products to practical use. In this article I’ll dive into the top 9 areas where crypto offers real value, beyond speculation and flipping.
As I described in part I of this series, successful consumer products tend to hit on a number of core user needs, not just speculative upside:
So which products are the most viable examples of utility today?
Today, the most real-world use case for crypto remains as an alternative to fiat currency, especially when used for international payments. The separation of “state and money” argument. DeFi apps like Pancake Swap boast more than 2 million monthly active users across multiple countries.
Crypto use in countries as geographically dispersed as Argentina, South Africa, and Thailand is approaching 20 percent. (Worldwide the average is 10 percent; the US is just under 13 percent.)
The second most viable category IMHO is all about corporate engagement = brands enabling access/loyalty perks, physicalization of NFTs, and advertising. A combination of #2–4 below.
Here are the nine most promising areas of real world crypto utility.
1) Currency alternative & international payment system
In many countries around the world, government policies limit their citizens’ access to and use of their money. In Argentina, for example, people can only exchange $200 USD of pesos into dollars per month.
If you want to attend university abroad, buy a house, or emigrate to another country, this is a huge challenge.
Also if you’ve tried to pay a business or individual in another country, you know that international payment systems are pretty broken. Sending funds abroad often comes with exorbitant fees.
Some of the international players making this possible include:
- LemonCash. LemonCash has reached over a million users in Argentina and offers debit, brokerage, and cash back services for its customers, all crypto backed.
- Pintu*. This Indonesian crypto exchange allows people to buy and sell cryptocurrencies and has over 4 million registered users.
- Chipper Cash. This virtual bank has attracted more than 5 million registered users in Nigeria, and now allows users to buy and sell Bitcoin across other African nations.
- Tribal Credit. Tribal offers small businesses in Latin America corporate credit cards, crypto-backed loans, and payment mechanisms.
In addition, UkraineDAO made headlines earlier this year when it raised tens of millions of dollars by encouraging supporters around the world to donate directly to Ukraine’s military efforts using crypto. This enabled users to avoid international wire fees, government blocks, and circumnavigate the international banking payment system SWIFT.
While time will tell how governments eventually regulate crypto, in the meantime citizens are accessing new opportunities with it. The opportunity is for founders in emerging markets to leapfrog financial technology and take their populations into the 22nd century.
2) Community and brand engagement tools
At their most basic level, NFTs and tokens are simply a way to use the blockchain to verify ownership. Brands have begun using them as part of their loyalty programs, offering verified members of their community access to unique perks. Here are a few examples.
- Percs. This startup encourages brands to mint NFTs for loyal customers and to activate new audiences through exclusive access to experiences. Users link their wallets to find out what rewards they’re eligible for. Major brands experimenting with Percs include Budweiser, Playboy, Shopify, and Steve Aoki.
- Cal — A calendar app that only allows people who own the same token as you (validated by blockchain) to book meetings with you.
- Fan Controlled Football*. FCF uses tokens and NFTs to gate access to team ownership in their fan-driven sports league.
- POAP. Proof of Attendance Protocol (POAP) is one of the top web3 protocols issuing attestations or credentials that verify a user attended a particular event.
In addition, many top brands have embraced NFTs as a way of boosting engagement, including the NFL (Super Bowl tickets as collectible tokens), Gucci (a digital line of fantasy fashion clothing), and Nike (virtual NFT sneakers called CryptoKicks). Agencies specializing in NFTs (like Recur, Unblocked, and ThirdWeb) are helping other big brands develop and monetize their NFT and crypto strategies via licensing deals, brand showcases, loyalty programs, and more.
3) Physicalization of NFTs or the Tokenization of Existing Merchandise
Several companies believe that every physical object will have an NFT twin in the future. The digital tag will share information about the product, track the supply chain, enable the original brand to recoup a percentage of secondary sales, and allow owners to prove they actually own that item — in other words, that they’re not just posting a Finsta with a Lamborghini.
Some of the players building in this space include:
- Courtyard. This digital twin company is partnering with Brinks security, and others to offer a “tokenization of physical objects” as-a-service platform.
- Slabs. NFT driven merchandise, in partnership with major artists like Beyonce and JayZ.
- Infinite Objects. Making the virtual a little more real by selling video prints of NFTs that are displayed in your home like a photo frame.
The immediate opportunity here seems largest with brands and IP owners who are only able to earn royalties on the primary sale of a physical object.
Disney doesn’t get a second cut when you resell your Elsa Arendelle castle playset to another buyer. If it came attached with an NFT that provided discounted access to the theme parks, the new buyer will want that NFT attached in the sale. But this concept will require a significant amount of consumer education before it becomes widely accepted.
4) Advertising & Affiliate Marketing
Marketers have a hard time reaching blockchain users today because they don’t have the ability to message wallets or even know the identity of wallet holders.
Given the web3 ethos about data sovereignty and data interoperability, several blockchain apps have chosen to selectively create advertising and marketing opportunities for brands, offering tokens to users who’ve opted-in to share their data. This is demonstrably superior to web2, where centralized entities built free business models around monitoring and selling users’ data in a non-transparent manner.
Advertising models will come to crypto — it’s not an if, but when — and it has the potential to bring far benefits to users. Here are some early examples.
- Brave. This privacy-centric browser blocks advertisers and websites from tracking you. It offers a subscription model called Brave Rewards that pays users to view ads anonymously via a token called BAT (basic attention token). BAT has 55M MAU, 16M DAU and 1.5M verified creators, and claims to have access to millions of wallets.
- Layer3. Layer3 users collect bounties by engaging with crypto learning tutorials hosted by Layer3. It’s essentially a type of affiliate marketing where Layer3 keeps a portion of marketing dollars its enterprise clients are offering to acquire users, while also informing said users about their products. Layer 3 is building an ad network with on-chain actions. Layer3 bounties are web3 native ads.
- Coinbase Earn. Tutorials about different crypto products that allow viewers to earn tokens while watching, similar to Layer3.
- Holder — Holder’s CRM and messaging layer helps brands run marketing campaigns.
Another group of players enabling advertising are crypto-native messaging products, which I discussed in more detail in part 2 of this series. That’s because many of these players plan to charge non-verified senders to send a message to a wallet. You can imagine a whole new world of advertising being created where marketers determine what they’re willing to spend to contact a wallet with 10 Bored Apes in it.
This is another huge opportunity: New metrics, methods, and channels for advertising are being developed as I write this. I believe we’ll have a whole new category of digital marketing in a few years time.
5) Alternative individual career financing
If you’re an aspiring musician or an athlete who hopes to turn pro, or simply a freelancer looking to maintain a stable income between gigs, selling tokens to finance your career could be a viable alternative to working an unfulfilling day job just to pay the rent. Token owners would then share in a small percentage of your future income. Here are a few examples.
- Audius*. This blockchain-based streaming service allows musicians to bypass record label gatekeepers, giving them more control over their work. The governance token ($AUDIO — currently valued at $398M fully diluted) can be used to reward both artists and listeners, as well as network node operators. The direct-to-fan music market is now larger than the traditional music industry, thanks in part to Audius’ breakout success (5M+ MAUs).
- Royal*. With Royal, fans buy song rights in the form of NFTs for individual songs, and receive a percentage of the royalties. This helps combat music piracy by incentivizing the purchase of verified songs. Some NFTs include perks like exclusive access to artists and digital art. Like Audius, Royal provides an alternative to traditional record labels.
- Braintrust. A decentralized talent network collectively owned by its freelancers. Members earn Braintrust tokens ($BTRST — $558M fully diluted value) based on the contributions they make to the network, such as referring clients or vetting new members. The tokens can be used for governance, as collateral to protect against non-paying clients, and to redeem exclusive community perks.
- Agrotoken. Agrotoken enables farmers in Argentina to utilize crypto stablecoins by transforming grain into an asset and use it to pay for other financial services. This eliminates the long lag between investing in a new harvest and receiving payment, giving farmers better pricing power.
Other opportunities for applying this model include industries with monopolistic gatekeepers with high capex costs (like telecom and logistics), careers that produce immediate value for consumers with high upside but whose early practitioners are poorly rewarded, and jobs where the path to success is not clear, yet millions aspire to it (such as writing, film making, and other arts).
6) Harnessing decentralized networks for energy, memory, storage, & other power
If your business requires a large outlay of capital to set up a network, and dense coverage benefits the business, utilizing a decentralized blockchain based network incentivized by tokens/crypto may be a good alternative.
- Helium. A peer-to-peer wireless network that powers nearby IoT devices like scooters or digital fridges, based on individually owned hotspots. Users earn $HNT ($1.2B fdv) tokens for supporting the ecosystem, such as allowing individual hotspots to transmit data across the network. Helium is doing to telcos what AirBnB did to hotels, creating a compelling alternative to the expensive capital required for a company to set up wireless networks globally. (Mario Gabriele has a great deep dive on Helium’s revenue model here.)
- Flux. Similar to Helium, Flux is a cloud-based network for providing infrastructure services — essentially a decentralized AWS. Its $FLUX token has a fdv market cap of $438M.
- Livepeer. This service compensates users to use their idle GPUs to transcode videos, delivering a higher quality streaming experience. At the same time, users can mine for $LPT ($272M fdv) tokens to generate passive income. As of June 2022, the decentralized video streaming network had processed more than 90 million minutes of video.
- Theta. Another video streaming network whose token $THETA is worth $1.2B fdv. As users watch videos, a portion of their computing power is harnessed to relay those videos to other users; the primary users earn tokens as a reward.
- IFPS. This alternative to HTTP works by distributing site data across a p2p network, accessing content through URIs (Universal Resource Indicators) instead of URLs. Individuals’ devices act as nodes storing website data. Opening IFPS sites stored on other network nodes increases load times and streaming speeds, while also making the network less prone to outages.
There are additional opportunities for any industry or product that requires intensive capital funding for distributed hardware, where proximity of that hardware to customers is an advantage, or where creating the product is resource intensive. This creates lower costs for consumers.
7) Event access and NFT ticketing
NFTs can also convey the right to access exclusive events or spaces. Instead of ID cards or key cards, your crypto wallet dictates whether you can enter. NFTs are also a better form of tickets because they enable artists to capture a commission on ongoing sales.
- Afterparty. The world’s first ticketing platform for artists has hosted token-gated events in Los Angeles and Las Vegas, allowing artists to capture some of the secondary resale value from the NFT. Because Afterparty collects data directly from attendees, it could also create more opportunities for artists to engage directly with their fanbase.
- Tokenproof. Originally launched as a way to let owners prove they own an NFT without exposing their wallets, Tokenproof now uses that capability to power NFT-gated events, including ApeFest and NFT NYC.
- MoviePass. The popular brand has resurfaced with a NFT ticketing angle for movie going.
The opportunities here are somewhat more limited. Because LiveNation/TicketMaster has a monopoly over most events, new entrants will need to build a strong enough following in independent/indie venues and festivals, or convince artists directly to push for this.
8) Decreasing our carbon footprint
Blockchains have attracted a lot of negative attention for being so energy intensive, but they also have led to solutions that are changing the environment for the better. Here are three examples of how the chain can also be green.
- KlimaDAO. This decentralized autonomous organization aims to reduce greenhouse gasses by incentivizing carbon credits. It encourages people to exchange tokenized carbon creddits for $KLIMA ($6M fdv) at discounted prices; tokens can only be minted when users prove tokenized carbon credits are locked away in its treasury. It’s essentially a token backed by carbon credits.
- Veritree. This project’s goal is reforestation, using the blockchain to verify when new trees have been planted. Cardano, the blockchain behind this effort, announced earlier this year that 1M trees had already been planted.
- Terra0.org. This older project fascinated me when I first read about it. Terra is building a self-regulated forest that uses smart contracts to log and sell trees. They use drones to monitor when portions of the forest have regrown enough to be harvested, and then automatically execute a contract letting loggers come into the forest.
The opportunities here are limitless. Other mission-driven fields can take inspiration from what has been done in climate to incentivize actions that benefit all of us in the long term.
9) Incentivizing healthy activities via X to Earn
The premise is simple: Pay people to develop healthy habits. Compensating people to stick with healthier habits makes a lot of sense. Insurance companies already incentivize healthy behaviors, which help them avoid big payouts in the future. Why not crypto?
This category is still in its relative infancy, but here are some promising candidates.
- Stepn. Users earn $GMT ($4.1B fdv) by walking. Stepn requires people to buy a physical shoe that logs each step taken. A great hardware+software play that urges people to get out and walk each day clearly hit its stride, reaching 3 million users in its first six months.
- Sweatcoin. Same idea — encourage people to get off their heinies and move. Sweatcoin reached more than ten million daily active users at its peak. It hasn’t actually implemented the crypto currency yet but plans to soon.
- Dreamland. This new player (still in pre-launch mode) focuses on Sleep to Earn. Yes, you read that right — the goal is to eventually incorporate wearable technology that tracks sleeping patterns and rewards people with tokens for how much shut-eye they log.
The reality is that this category hasn’t yet found a sustainable economic mode. Balancing these ecosystems so users don’t immediately extract crypto to fiat has been a challenge. The opportunity for founders is figuring out the right crypto business model. I’m expecting to see more PhD economists as co-founders for these companies.
There are many more utility applications that should exist. I would love to see a public blockchain tracking supply chain materials and sources for major brands. I would also like to see a searchable record of rights ownership of important assets and IP, almost like a patent database anyone can upload to.
If you’re a founder building a blockchain app that is heavily based in the real world and appeals to consumer needs, please reach out! (mbent at lsvp dot com).
* Lightspeed Portfolio company