Author: Shenchao TechFlow

For a long time, the crypto industry has felt more like a self-indulgence.

It continuously creates tradable assets and concepts within a limited scope but has never truly penetrated other industries.

Web3, how far is it from being a household name?

On August 29, Binance released a report titled "Web3: A Household Name," analyzing various aspects of the current adoption of Web3, industry use cases, exposure and promotion, and usage scenarios, attempting to answer the above question.

Considering the report is lengthy, this article has refined and organized the key points and charts from the report.

TL;DR

• Although Web3 has made significant progress in key innovation and adoption metrics, it still represents a small fraction compared to Web2. Active on-chain users account for less than 1% of the global population, with an average retention rate of 5.4%. In contrast, 67.1% of the global population uses the internet, and Web2 retention rates are much higher, with a good benchmark rate considered to be between 25-40%.

• Two obvious market trends are distorting Web3's adoption and retention metrics. First, excessive speculation, especially around meme coins, leads to temporary demand and fleeting participation. Second, the strong focus of investors on infrastructure projects overshadows the fundamental development of consumer-facing dApps necessary for driving sustained adoption among everyday users.

• Building decentralized applications ("dApps") that provide real utility for everyday users is crucial for scaling Web3 and addressing retention challenges. Consumer-centric Web3 dApps, especially those centered around speculation, social interaction, or gaming, show significant promise in attracting active users, as reflected in the growth of unique active wallets ("UAW") over the past year.

• Expanding the presence of Web3 dApps across various distribution channels will be key to achieving broader market coverage, especially as overlaps with the Web2 ecosystem become increasingly common. Leveraging existing product bases like Telegram or creating shortcuts on blockchains (like Links) can significantly enhance exposure and tap into the vast network effects of Web2 users.

• Less than 10% of leading Web3 dApps offer a native mobile experience. Given the dominance of mobile internet traffic, achieving mobile accessibility is vital for attracting the most active users.

1. Adoption and Retention Status

Note: The crypto index on the vertical axis of the chart considers various data such as active addresses, transaction volume, stablecoin activity, active developers, academic research, and new projects and contracts to form a composite index. It is evident that the upward trend is becoming clear, indicating stable market momentum.

The adoption rate has a long way to go: there are approximately 54.4 million active on-chain addresses—less than 1% of the global population.

An analysis of blockchain networks with dApps shows that user churn for Web3 products is high.

A major example is Starknet, where the user retention rate plummeted from 18.0% after March to just 4.3%. This drop may be due to the end of their airdrop activities, indicating that speculative incentives have limited impact on long-term participation.

2. What Trends Are Shaping Today's Web3?

First, outside of Bitcoin, meme coin speculation seems to dominate the public discourse around cryptocurrencies. As the hype fades after two to three months, user interest also wanes, leading to brief participation as users chase the next speculative opportunity.

Second, massive infrastructure, small-scale dAPPs.

This disconnect between infrastructure development and application creation stems from the current demand state within the industry. One reason is that consumer crypto dApps still struggle to find a sustainable product-market fit, making them riskier due to their subjective demand. In contrast, infrastructure projects provide more concrete data points for reference.

Third, the crypto market seems trapped in an infrastructure expansion trap, preventing dApps from achieving similar success.

Give it some more time? If Web3 follows a similar trajectory, then the shift in focus from infrastructure to consumer applications is just a matter of time, as consumer applications are ready for mass adoption and attention.

3. Crypto Applications and Use Cases

We see similar trends in Web 3, where consumer dApps drive the growth of unique active wallets (UAW).

Unfortunately, building for the consumer market is one of the toughest challenges in Web3, as it is not just about crypto ownership or financialization.

Future dApps have several paths to take:

• Compete within the existing advantages of cryptocurrencies (like speculation) while building entirely new verticals without established demand;

• Improve Web2 use cases by bringing them on-chain, although this risks direct competition with Web2 applications. Social media, payments, and gaming are already well-established in Web2, so the tricky question becomes: what will motivate users to operate on-chain instead of using their current off-chain applications?

Some products have begun to showcase the potential when consumer experiences are combined with decentralized systems.

A significant distinction between the new generation of dApps and previous ones is that many now cater to mainstream audiences. Users utilize familiar methods, such as email or social logins (often in addition to wallets), pay with credit cards, and do not need to worry about network compatibility or gas fees.

The productization of speculation has succeeded on platforms like Polymarket (prediction market) and Pump.fun (tokenized launch platform). Both combine speculative harvesting with utility, creating products that attract consumers.

Farcaster's most successful application, Warpcast, confirms the potential, as it can help mitigate user volatility with the development of more high-value use cases. Additionally, the introduction of features like frameworks and open actions allows these platforms to attract dApps from outside the native ecosystem, providing greater flexibility to engage users directly through social interfaces.

Additionally, regarding Web3 gaming:

One of the most popular innovations in this cycle is the T2E (Play-to-Earn) games on the TON blockchain.

Even considering the possibility of inflated metrics, these numbers surpass anything we have seen so far in Web3 gaming, demonstrating the potential of this model to attract a massive user base.

While content and infrastructure are key components of the gaming industry, distribution remains a critical factor for success. To bring billions of gamers into Web 3, Web 3 games must be accepted by traditional gaming distribution platforms like the Apple App Store, Google Play Store, Steam, Xbox, and PlayStation. Complementing these efforts with strong marketing and robust social media is also crucial for fostering user investment in the culture created by these games.

4. Distribution: A Necessary Move to Expand Market Reach

A typical Web3 dApp user funnel includes steps like user acquisition, wallet connection, account funding, and activation. Each step presents challenges and relies on users completing the previous step without dropping off.

Without sufficient users and liquidity, many Web3 dApps will struggle to maintain their "presence." Strong distribution strategies are crucial for guiding these dApps to a useful level.

dApps built and distributed on Telegram may face less competition in the early stages, allowing them to activate users more effectively. Meanwhile, Telegram's revenue currently stands at $45 million, but compared to WeChat—when it has a similar user base—it illustrates the potential for billions in revenue.

This highlights the opportunity to acquire untapped users at a low cost and monetize them at a higher rate through in-app purchases, subscriptions, or advertising sharing models.

The Mini App Revolution: Elevating Distribution to a New Level by Offering a Simplified Interface Familiar to a Global Audience.

Notably, Catizen reported a 7% conversion rate—significantly higher than the average of 0.66% for other Telegram crypto interactions—highlighting the channel's potential for customer acquisition.

To elevate this distribution channel to a new level, it will be interesting to see if the mini-app ecosystem can replicate its success in more popular areas like DeFi. The opportunity is there, especially as T2E games have already attracted user attention and liquidity, which may permeate into other mini-app categories. Competitive advantage will flow to those projects that can provide a simplified experience for complex on-chain functionalities.

Conclusion

Making Web3 a household name is indeed an uncharted territory. In a space where new technologies continually emerge and narratives shift rapidly, additional variables will always come into play:

• User Behavior: Serving Web2 and Web3 users requires understanding different cultural backgrounds. The language, preferences, and behavioral differences of these groups are significant and will impact product design and user experience.

• Product Complexity: Web3 is inherently more complex than Web2. While improving user experience through account abstraction, smart wallets, and better on-chain onboarding can help, the nuances of on-chain operations, wallet management, and tokenomics may take time to achieve broader adoption.

• Post-Acquisition Engagement: Attracting users in Web3 after acquisition differs from traditional Web2 strategies. Customer experience programs, email marketing, and other standard Web2 engagement strategies do not seamlessly translate to the on-chain environment. Many dApps rely on wallet-based logins, leaving little room for traditional outreach or ongoing engagement methods. Without clear channels to connect with users, Web3 dApps must find ways to maintain relationships and improve retention rates.

• Brand Awareness: While some Web 3 networks like Solana and Berachain have begun to establish recognizable brands, it is even more important for dApps to cultivate strong communities around their products.

• Adapting to Growth Opportunities: In some cases, utility can emerge around speculative elements, especially where social narratives intersect with the attention economy—for example, by acting as a positive sum (as opposed to zero-sum) Meme for social narratives.

Moreover, expanding the presence of Web 3 dApps across various distribution channels will be key to achieving broader market coverage, referencing Telegram.

Ultimately, a great product can find success with mediocre distribution, but a subpar product cannot succeed with great distribution. The challenge for Web3 founders lies in finding the balance between the two. As we move forward, we look forward to seeing the next generation of dApps drive the upcoming wave of adoption and retention.