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Key takeaways
Distribution is just as important as the product itself in the onchain economy.
Effective onboarding (onramp) is key to getting new users into blockchain ecosystems.
Onchain discovery helps users find and engage with products, boosting ecosystem growth.
Existing Web2 user bases give companies like Coinbase and Telegram a big advantage in building blockchain networks.
Blockchain interoperability may reduce the power of traditional 'distribution moats,' making user experience more important.
Distribution has always been a key part of the internet economy, and it’s even more important as we move into the onchain world. In the Web2 era, companies like Facebook, Google, and Amazon became successful by mastering distribution. They used network effects to attract more users, keep them engaged, and grow their influence. Distribution allowed these platforms to maintain dominance by ensuring they were the central hubs for user activity. In this piece, we’re going to look at how distribution works in the onchain world and why having control over distribution is so valuable for blockchain networks and applications. We will also explore how distribution is evolving as blockchains and decentralized applications continue to grow.
Same Idea, Different Context
As Justin Kan (founder of streaming service Twitch) said, "First-time founders are obsessed with product. Second-time founders are obsessed with distribution." This means that while building a great product is important, it’s equally important—if not more so—to ensure people actually find and use that product. Without effective distribution, even the best products can go unnoticed. In the onchain world, both onboarding new users and helping them discover onchain products are key to giving those products the visibility they need to succeed. A decentralized product, no matter how innovative, is only as strong as its ability to attract and engage users.
Distribution in the onchain world can be understood through two main ideas: the 'onramp' and onchain discovery. The onramp is all about getting new users into the onchain space. This means making the first steps, like creating a wallet or interacting with an app, as easy as possible. It’s about reducing friction and making sure new users feel comfortable starting their onchain journey. The onramp experience plays a crucial role in ensuring that people who are new to blockchain don’t feel overwhelmed. By making the onboarding experience smooth and straightforward, more people can be encouraged to participate in the onchain ecosystem.
Onchain discovery, on the other hand, is about making sure users can find and interact with the different products and services available once they’re onchain. This part of distribution also includes attracting developers to build on a particular blockchain, which helps grow the entire ecosystem. The more developers that build on a chain, the more diverse and appealing the products become, which, in turn, attracts more users. Onchain discovery is essentially about creating opportunities for users to explore the ecosystem, which helps build a vibrant, interconnected network of services.
These two types of distribution—onboarding and discovery—work closely together. For example, Coinbase has a strong onboarding system through its large customer base and also has an onchain discovery engine through its L2 network, Base. With over 100 million verified users, Coinbase can bring a lot of new people into the blockchain space and direct them to use its own network. This means that the onboarding process and the discovery process are seamlessly connected, giving users a path from simply joining the ecosystem to becoming active participants. Similarly, Telegram has its TON chain, which could potentially onboard its 950 million users, creating a massive potential user base for onchain applications.
Other tech companies are noticing the value of using their existing customer bases to jumpstart blockchain networks. Sony, for instance, recently launched its L2 network, Soneium, and has over 120 million PlayStation Network users that it could bring onchain. By leveraging the PlayStation brand and its loyal user base, Sony can effectively create an onchain ecosystem that attracts both developers and users. This approach shows that existing customer bases from the Web2 world can be a significant advantage when building out blockchain networks, as they provide an instant pool of potential users who can be introduced to onchain products.
This can also evolve as aggregators without their own blockchain ambitions can partner up with onchain counter parties to provide mutually aligned onramping pathways. Robinhood is one such candidate priming users for an onchain journey, but not (for now) sporting their own onchain network.
As the onchain economy is still a mere fraction of it's future potential, the platforms that have aggregated large clusters of users on the web2 side, have a lot of power and potential to direct the growth of the onchain economy itself. They are the Distribution Kings.
But this isn’t the only way to build an onchain distribution engine. Pudgy Penguins is taking a different approach by leveraging its strong community and brand to create a consumer-focused network called Abstract Chain. This is an interesting strategy because it relies heavily on community engagement and the power of brand loyalty rather than simply onboarding users from an existing Web2 base. The Pudgy Penguins community is being used as a seed to grow the network, and if successful, it could become a model for other brands to build blockchain ecosystems around their fanbases. However, it’s not yet clear if it will succeed. If it doesn’t, it could support the idea that having a large Web2 user base is key to success in the onchain world because those companies have the biggest distribution channels.
Attracting developers and building a strong ecosystem is even more important when we consider blockchain interoperability—the idea that different blockchains could work together seamlessly. If we move towards a future where blockchains are interoperable, the idea of a 'distribution moat' (something that keeps users locked into a specific platform) might change. In Web2, platforms tried to keep users locked in to maintain control, using proprietary systems and closed networks. But in the onchain world, distribution might be separate from the product itself. For example, a user could start their journey through a network like Base (from Coinbase) but then find and use completely different applications across other blockchain ecosystems. This flexibility changes how value is captured and shifts where the real power lies in these networks.
In an interoperable blockchain future, the value will come from providing the best user experience, the most engaging products, and the most accessible onboarding pathways, rather than simply locking users in. Users will be free to move across different blockchain networks with ease, and the platforms that can provide the most value, not just the best distribution moat, will be the ones that succeed. This could lead to a healthier ecosystem overall, where platforms compete on user experience and innovation rather than on their ability to control users.
Ultimately, understanding distribution in the onchain economy means recognizing that it’s not just about how many users you can onboard—it’s also about how effectively you can help those users discover, engage, and create value once they’re part of the ecosystem. The combination of onboarding and discovery will define which networks and applications thrive. As more companies and projects figure out how to leverage their distribution engines, whether through existing Web2 audiences or through strong community engagement, the onchain world will continue to evolve and grow.
The onchain economy offers new opportunities for both users and developers, and distribution is at the heart of it all. Whether it’s through seamless onboarding, effective discovery, or creating a network of interconnected products, understanding and mastering distribution is what will separate the successful projects from the rest. The journey of distribution in the onchain world is still just beginning, but it is clear that those who can balance onboarding with discovery, and create real value for users, will be the ones leading the way.
For now, and in the near future, the distribution kings wield much power. But, once people have come onchain, the landscape will change, as there is no lock-in.
Base may be a very attractive place to build now, for its growth potential via Coinbase onramping, but the prospect might entirely change in the future if/when those users fragment across different network.
As always, reach out to me on X or Farcaster if you have feedback or are working on something cool you want to discuss.
