#2: Where are crypto's consumer apps?

Today's essay is influenced by a recent discussion I had with a friend who doesn't particularly follow crypto but is open to talking and learning about it. Our conversation revolved around broader applications of blockchain technology in social media, gaming, and other areas.

A question they asked that stuck with me was if crypto has all of these use cases, why aren’t there a bunch of recognizable apps that they can use? Why doesn't the space have apps that an end-user can jump into using that isn't a wallet or exchange? To them, it was hard to imagine using a crypto-enabled app that wasn't Binance or Coinbase.

The reason why crypto doesn't have many mainstream apps yet is something I have some insights on, especially because there have been many broader industry discussions around this of late. That conversation again helped underscore the difference in perspective between an outsider and someone actively keeping up with developments in crypto.

If you engage with crypto a lot, you might be aware of tons of apps/products that let you do a bunch of ‘cool’ and ‘exciting’ things with your crypto assets. However, the average person doesn’t know of these and wouldn’t care much even if they knew because of the perceived complexity of using those products. They care about using products that solve a problem for them or are fun to use, and as far as many people (especially in the Western world) are concerned, crypto doesn’t seem to be focused on that or about that.

This conversation prompted me to write this article as a bid to contextualize crypto’s progress towards mobile apps that are accessible to everyone.

A good place to start is by highlighting that the crypto movement we’ve seen in the last few years started from a place of idealism sparked by the Bitcoin whitepaper following the global financial crisis of 2008. Some of the core ideas at the heart of the crypto movement were:

• Data, especially financial data, should be transparent and immutable.

• Individuals should have self-sovereignty over their financial assets.

• Monetary value should be easy to transfer among people, irrespective of their location.

While these might sound straightforward enough, they were incredibly technical problems to address and tackle.

For example, if in the 17th century you looked up at the moon and idly thought to yourself that humans ought to be able to visit there, getting to that point actually required a number of things to happen: the industrial revolution and the advancements in material science, engineering, and human coordination that stemmed from it. To put it simply, the human race needed to make a whole lot of infrastructural progress first before getting to the moon.

The same holds true with crypto. There were a number of end goals in sight from the start, but getting to the point where those goals could be realized required the infrastructure that would support them to be built first.

A parallel can be drawn to AI here. OpenAI was founded in 2015 but didn't launch their major consumer-facing product (ChatGPT) until 2022. That was seven years spent doing foundational research work that made the existence of a product like ChatGPT possible. This is despite the fact that AI research had been largely ongoing since the 1950s.

In that context, crypto's progress in close to two decades doesn't seem too bad.

If crypto has these numerous potential use cases, why have there largely just been an abundance of exchanges and wallets in the mainstream? Well, the answer is twofold:

1. As mentioned earlier, the crypto movement evolved as a response to the financial crisis of 2008, so a lot of the initial priority was on building infrastructure that offered users more financial autonomy and relative control over their assets. The quickest way to onboard people in this regard was by having centralized exchanges that allowed them to swap fiat money for cryptocurrency assets like Bitcoin and Ethereum.

   

   
   While some names like Binance and Coinbase are globally dominant, there are also a number of regional and country-specific exchanges. The front-facing positioning of exchanges as the starting point of crypto adoption is why many people instinctively think a crypto app can only equal an exchange.
   

2. Wallets are the gateway tools to interacting with any product built on top of a blockchain and are also how you move and keep your crypto assets. They are pretty much multi-functional; they allow you to send and receive assets like a bank account, authenticate transactions, and engage with other crypto products similar to how you can use your email address to sign into various apps and websites.
   
   Given the multiple uses and importance of crypto wallets, many companies spun out with the goal of offering the best wallet user experience. Besides exchanges, it’s the first touchpoint many people have with crypto. They are the keys that open up the doors leading to full-on immersion in the world of crypto, and a lot of companies have their own take on how these keys should be presented to the end-user.

So the simple answer to why there’s been a shortage of crypto apps is that:

• Building the needed infrastructure that would support consumer apps had to happen first, and the focus market for 'infra' products and solutions are developers, not end users.

• Exchanges and wallets are gateway products into crypto for the everyday person, especially for financial use cases, and it’s why they get center stage in marketing aimed at bringing people onboard crypto.

However, I believe we've hit a crucial point where sufficient infrastructure that allows for interesting and useful apps to start to emerge has been built. I say so because of two key developments:

1. Embedded wallets: To interact with a fully on-chain app, you need to own a wallet. Previously, this was a sore point for casual users because you first had to set up a wallet and note down the recovery phrase before using the app. This caused a lot of friction because of the number of steps involved. You wouldn't really bother with all that if you didn't have a strong incentive to use the product already.
   
   But embedded wallets change this by allowing products to offer built-in wallets. It means anyone can get around to using an on-chain app without having previously created a wallet; you can just jump right in.

2. Rise of gas-fee sponsorships: Gas fees have been a huge blocker to many people getting started with crypto products. Using on-chain apps/products previously required users to first fund their wallets with an appropriate amount of crypto to cover their gas fees for in-app transactions and actions.
   
   This was honestly very stressful, and everyone pretty much realized this, so now there are way more products sponsoring gas fees on behalf of their users because an infrastructural development that enables this now exists, making it a lot easier to get into using on-chain apps without worrying about how to cover gas fees.

Arriving at embedded wallets and being able to sponsor gas fees on behalf of users are infrastructural breakthroughs that make it a lot easier to distribute crypto apps. It’s a far cry from where the industry was just a few years ago when it was a lot more complex and tricky to get started with using a crypto app or doing anything on-chain.

Recently, there's been a general shift in sentiment within the crypto industry away from just continuing to build infrastructure towards building a lot more consumer apps.

Some of my favorite recent apps are Moshicam, Daimo, Bolide, and Warpcast. None of these apps require that you already own a wallet before you can use them, and they make me very excited for the near future of crypto consumer apps.