Today’s dApps are tomorrow’s utilities
Crypto doesn’t have a UX problem. Not really.
For a long time I was convinced that, for crypto to be successful, we would need to abstract away all the blockchainy stuff. Take what people know from web2, get rid of the cloud infrastructure it’s running on, slot in a decentralized network, and voilá: mass adoption.
Some refer to this as crypto’s UX problem. Complaints pile up: it’s just too complicated to use current applications; there are too many steps to onboard onto a network and start making transactions; tx costs are a non-starter, the list goes on. We say all these things, but what we mean is that we want that good old web2 UX we’re already used to. I admit that I was subscribed to that perspective too.
But the current discussion is happening at the wrong level. Most current dApps are operating at a very low layer of abstraction. If they have a front-end, UX mostly refers to substituting calling a smart contract with pressing a button on a website that calls the contract instead. Sure, this makes it more user friendly, but there is no additional meaning making attached to it. It’s a graphical interface for a technical operation.
Utilities, not dApps
In essence, many of these dApps are more akin to a utility. They provide basic services that, without a doubt, are essential. But most of them are not particularly exciting for a large share of the population. Necessary, but not exciting. Think of things like your electricity provider, or your mobile data company. They provide essential services. But I would guess you’re happy if you don’t have to engage with them on a daily basis.
Uber, Airbnb, Robinhood and many of the other “disruptive” non-social applications that were built in the web2 cycle fit in a similar category. I’m not on the Uber app because it’s so much fun. I don’t go there to pass time. I open it when I need to get some place, and the less time I spend on the app the better. Admittedly, these apps have what we now have become used to thinking of as great UX. But more importantly they provide easy access to a service when I need it. They’re utilitarian in nature.
The utility business model
Utilities don’t thrive on power users. Instead, they thrive on capturing a large share of a market of mostly sporadic users. Traditional and web2 utilities make money by delivering a basic service to customers, staying out of their daily lives, and charging either a small % on top of customers’ consumption, or signing them up for a flat fee package (works well for “unlimited” goods like data plans).
The idea here is that most of the time you forget about the company delivering the service, and just take it for granted. You’re not emotionally attached, and usually go for the best deal available. There might be a weak preference for sticking with what you know, or going for something with superior user experience, but that’s usually not the defining criteria. It ultimately comes down to availability and reliability of the service, and competitive pricing.
What does this mean for crypto utilities?
The same thing applies to most of what has been built in DeFi so far: DEXes, lending protocols, and stablecoins provide instant, easy access to basic services: swap, borrow/lend, predictable liquidity. They’re available 24/7 and to anyone with internet access, no sign-up. In this regard, UX-wise they are already ahead of web2 services. But, besides a few power users, the average person has no reason to be active on these platforms on a daily basis. They’re digital utilities after all.
However, the growth strategies of many protocols looked more like that of a consumer app, spending huge shares of their native token to indiscriminately incentivize activity on the platform. My point here is not that projects are spending to onboard new users, that’s not the issue. The issue is spending to turn sporadic users into power users. That’s the unsustainable, non-sticky part, at least for utility businesses.
Paying a retail investor who’s normally making a few trades a month — or even less — to trade more will make a healthy share of them trade more as long as incentives justify it. But they will stop as soon as the incentives don’t justify this any longer, either moving on to a different platform that still has incentives in place, or defaulting back to their normal behavior.
Some conventional businesses have similar practices, but they have very different long-term outcomes. Just think about premium credit cards. Amex waived fees for the first year for their Platinum card if users exceeded a certain amount in volume in the first month. So obviously they did that, shifting spending behavior, frontloading purchases, making payments for friends and relatives. After exceeding the threshold they went back to their normal spending behavior.
The difference here is that Amex will still make money on customers who stick around for more than a year, paying the full price for the credit card afterwards, even if they’re not actively using the service. So paying to onboard them makes sense, even if they’re inactive afterwards. That’s not true for crypto utilities, as they don’t generate recurring protocol revenue.
How is this about UX?
Well, it’s not! Or it might be, in part. But I would argue that the key to running a successful utility project in web3 is to be clear about target customers. Are you trying to onboard power users and go for a small but very active and lucrative user base? Or are you shooting for the masses?
If you’re taking the first approach UX is less relevant than tailoring your dApp to the specific needs and expectations of a power user. On a DEX or money market they will expect professional-grade trading tools and data analytics. Overall, they will have very different requirements than a retail user. At the same time they care less about polished UX. If the platform offers unique capabilities they can’t get anywhere else they will put up with subpar UX. Just consider the recent success of GMX. Everyone will tell you right away that the UX is bad, and there’s several competitors out there working on “GMX but with good user experience.” But still, people keep using GMX. If the platform provides unique value, the users will put up with a subpar experience.
If you’re targeting retail users, on the other hand, focus on meaning making, translating the value proposition of your utility into something users can easily relate to. Again, at its core, this is less about UX and more about explaining the medium- to long-term value of a platform. Ironically, inducing insane amounts of FOMO might be counterproductive here, creating the feeling that people might have already missed the train by the time they got through the onboarding steps.
Instead, users need to feel like the protocol offers a basic service to them at a quality, availability and price that they can’t get somewhere else. While also giving them the peace of mind that they don’t have to monitor the app on a daily basis to not miss out on an even better offer, or even incur a loss on their position. ETF savings plans do a good job promoting the fact that short-term losses smooth out over the long-term, incentivizing customers to not trade their position on a daily basis and instead just let it sit. It’s a completely different proposition. One that is purpose-built for sporadic users.
Ultimately, crypto in its current state is not uniquely troubled by UX. Instead, I believe there’s a disconnect between the dApps that are currently available, and how they are positioned (and no, this is not about all of crypto being seen as a ponzi). Gaining clarity on a target audience, power users vs. sporadic users, tailoring the project and more importantly the growth strategy to this decision is key. Once it’s clear who will be using the platform, and how frequently, we can go about working on UX.
