Emerging Trends in Consumer Web3 Applications - TOKEN2049 Dubai 2024

hello everyone thank you so much for making it here through the rain through the crocodiles through the alligators very happy to be moderating this panel with these three Legends of the space and without further Ado I'm just going to get us into it and my first round of questions is essentially I'll have each of you describe a consumer product that you think is particularly interesting in crypto and then I'll have the others share their thoughts on that product and see if they agree or disagree we'll start with you Santiago I thought I was going to go last um I'll take the easy answer because uh I think backpack is probably interesting uh yes I'm an investor so you know none of this is Legal Financial any advice uh but I think it's really interesting when you think about the route that you're taking I Define it as consumer because most of the users I think are there are consumers uh and it's really I think in consumer World whenever you're looking at a deal it's always like how are you going to supplant the incumbent whether you're a forecaster when you talk about social media or frch and backpack's no different right you have like you have binance you have coinbase and so convincing users to use something different is quite difficult and the traction that you guys have had is pretty impressive um you know one metric that I always look at is for a lot of these markets you guys have quickly become the largest venue for for trading which is very impressive and I think of it as crypto native because you with madlads you sort of made it uh a much more intimate experience for the consumer from a go to market standpoint from a attention standpoint and I think yeah the criticism with consumer crypto is always well everyone's doing it because they farming points or they they want the airdrop which which is true but I think just looking at that from a CR and criticizing it on that standpoint misses the point that you're actually retaining a lot of users in deposits so that would be my choice it's is it me so I was a very happy angel small investor in fat facts also just very disclosure I grew Santiago um we were the lead investor in Steen back in the days if you lost money in in that app I'm I'm really sorry but uh it was a very interesting uh passive Entertainment app where you make money uh while you exercise Outdoors uh we thought it was interesting at the time because uh straa and the like of fitness apps had meaningful tens 20s 30 millions of ma and I just thought that if uh you combine that plus uh token incentives pioneered by ACC Infinity together uh if people can actually make you know uh the worth of a coffee while walking to the coffee store wouldn't that be a cool application and it takes up none of the entertainment time um the tokenomics you know uh iterated back and forth the company might come up with a more social and simpler version called Step two by the end of the year but you know at its peak it hit maybe 2.5 million daily active users a lot lower uh of that now and I thought that was sort of one of the first things that people talked about after X Infinity during 2022 I thought that product was quite an interesting consumer product in a space for me uh the the me the new meta that's emerging today is uh tokenizing attention and so one of the apps that I'm pretty excited about is pump. fun uh I mean there there are obviously others like top fantasy front Tech and others but pump that fund what it essentially allows you to do is allows you allows any one user to start a new market and start a new token based on any new meta I almost think of this as a global voting machine for the latest and lat latest and upcoming memes that are out there and uh some of the memes that have come out of there is like shark cat is one of them um the Costco hot dog is another one um and what's really happening under hood is the fact that people are incentivized uh based on a token that is like kind of the the way you'd want to think about it so you know obviously farming was one of the kind of the starting points then you have you know new tokens like meme coins that are starting to launch but then what's more importantly happening is the idea that you could tokenize attention in such a way that could help build uh users and verality so if you want to look deeper into that you could think about it this way like music right now the way it's been done even with crypto and nft like sound. XYZ um I don't think that is like the right way to build a crypto like product based on attention you have to think about it more from a lens of like how do you get attention and the way to do that is like really just like launching a token music Market whereby a song could just become a token in in itself so we'll talk more about it but that's the kind of the way we think about it cool actually I'm just going to move to the next round these are somewhat personalized questions on each of your Specialties categories actually go back to you to start Imron you and your team incubate a ton of very high Talent teams and I know a lot of them will probably come to you guys with ideas and some of these are on the infrastructure side some of these are on the consumer side do you have a view that you share with them when they ask you which of these they should build for yeah so it primarily comes down to um uh what what where's the user Behavior today um you know there's a lot to like kind of like alliance's opinion is that there's a lot happening already on the infrastructure side from the VC funding standpoint and all of what's Happening uh but there there isn't a lot happening on the user behavior and like the user uh acquisition side how do you bring on the next billion users into crypto so we've been spending a lot of time on kind of the user acquisition side and one area that really like like like one gravitational pull was front when frontech first launched from then on we spent a lot of time on like tokenizing attention and what we tell every founder that comes into into alliances have you tried out any of the products what do you see that's missing today um you know what would you build in in a sense that would kind of blend in two different sectors so I mentioned earlier like music and and uh crypto there's also music and social which we talked about and I in the future I think this is going to just bleed into every consumer sector moving forward Santiago you've been investing in the space for a long time we had a lot of fun in defi summer in 2020 so you've seen the evolution of a lot of these things when you invest into protocols projects teams are there core things you're looking for in regard to this consumer Focus or does it not matter depending on what the Tam is of these projects no I I absolutely matters um I think the the common misconception in this space is that um you know every project is going to use tokens from a coordination go to market standpoint uh where I typically don't invest as when to Founders solely focused on that I'm like well focus on the product because no amount of financial engineering is going to solve for a shitty product and when you think about so that's number one like if you don't have a good product that is at feature parody If You're Building a game if the game like why would someone stop playing World of Warcraft and go play your shitty crypto game so that's that's what's wrong with a lot of the crypto games today someone's going to build a really good game that is a featured parody with a web 2 game plus with the token incentives and the mechanism that is really unique to crypto will be explosive we're not there yet um there are a lot of things that also probably don't work like I'm very skeptical of social fi actually particularly something like frch I never get on the platform I don't think you should have a real-time price uh and trade your friends tokens um and as much as I'm a token maximalist I don't think that that particular use case is is relevant uh but I may be wrong but U I think some variations of French may work but just that idea of itself probably doesn't work um it's been tried before like steemit um you shouldn't be financializing things that people would do without without the need for financial incentives sometimes when you introduce a financial incentive to charity or some of these things it actually backfires and I think that's what you're seeing with frch so I think the most important metric that I mentioned in my opening is really focusing on is the product good and what's a retention right and so um that would be so just to add to that uh 100% agreed with what you're saying with at least with front Tech V1 a lot of people lost money and they burned a lot of users and they lose their friends too so like if you lost money on my token are we still friends or how does that work say it again if you bought my token and you lost money are we still friends we're still friends okay yeah great perfect but not with others by um but you know the the when when you hear about this thesis where you know when you're building a crypto product you're building in person like as if you're building a rocket ship it's actually very true because if it blows up all your users lose money and then you know your product could become tainted so building the right product with the right economics with the right incentives is actually very very hard to do and so I do think there are ways to do it but it has to be done in the right way which is why I think front Tech is is giving away all their points uh because now there's more value and that's the only way they could win back those users and and do you feel like uh because this is a question I asked myself like I'm building a small social product myself called big club. and the question I tussle with is like when do I incorporate the web3 element into a consumer product yeah and it I think we're all aware that the user Behavior changes drastically when it can make money yeah so so do you feel like Founders but but if they don't add we3 element it's not a web3 you know consumer application so so way you talk to the founders like do you ask them to find product Market fit without the sort of web three part and then very intelligently adding it or do you sort of have them like incorporate in day one and then like minorly adjust it as they come along I would say incorporate in day one okay yeah it has to be as crypto native as possible I want to go to backpack because I think your go to market was really interesting you guys did a nft collection at the time where salana was like everyone was giving up for dead right you launch madlads uh and that's become instrumental to your goto Market you may not ever have a token but you're getting a lot of attention you're getting a lot of users to use backpack so which is I think very different than most projects because most people immediately think of let me launch a token and the community in Discord is launching when token but you guys have sort of resisted that which I think is pretty impressive but I'm curious what when into that process sure switching out a moderator role no um it's something that has has been enormously valuable for us and has allowed us to have some of the best super users and super fans without a doubt but it really is building a separate company and so I very rarely would recommend it to another team because it's not make some art do a mint and now it's happened it's thousands of hours going into spending time with these people so that they see along the same lines as you and believe in the things that you're doing and if they get those things and internalize them then they want to represent you socially with this profile picture to the world right but if you don't do those prior steps this the second third fourth level effects don't happen and it's not worthwhile um and now switching back into moderator role is that okay you guys have anything else um question for you Jason so you guys invest in a lot of projects you're based in Asia which I think sadly there's this very large divide between the west and the east in crypto which is something I think would be great in many ways to bridge more of it's hard because you don't speak the language and we don't do it well either but go on sorry yeah but but yeah we speak the same onchain language and we interact with the same things across the world regardless of that and so actually I'm going back to my question I'm curious when you think of consumer in Asia and you look at consumer in the west what are some of the largest differences that you see ah um there's one point I need to make first which is like for these developers in the area um oftentimes they're not English native and they grew up in a web two industry that um also sells to non-english native speakers and users namely Chinese Dev selling to Chinese users um and when it come to web 3 the the script flips which is they don't have the traffic backing of say WeChat and they are building an international product selling to non-chinese audience um I think often times there's a huge gap in the uiux the design the looks and feel and kind of what kind of features you jam in there and that and the cultural difference of building a product like that is often times the biggest Gap I see why they are not successful because you just can't bu with the users um I think the users are when it comes to the I guess the the the users who use web 3 products built by potentially web2 developers I don't know I think they're more of the same which is like I'm I'm going to use this thing that is quite interesting and I can make some money out of it and I think that human nature is quite similar but you just you just got to approach them differently I think you I think a Indonesian user versus a US user you got to press their button slightly differently and uh I tend to feel that whoever is in web 3 uh in the Asia side especially southeast Asia is a lot more mon like monetary value driven and because of you know the the the salary and GDP per capita in those countries um just a quick question yeah on that um is it as simple as uh duplicating what's successful uh into Asian markets or do you feel like there's completely new user Behavior onchain user Behavior that's happening in the southeast Asia Market that's completely different than the West what what are you seeing uh in terms of user Behavior I guess is the question [Music] um like should we Fork a pump du fund for Asia markets right like that that's kind of the way I I think I think that the users find what resonates with them the most when it comes to the UI design okay I think there are certain consumer Behavior patterns that they're used to I'm very used to using a super app but I think a western user absolutely hates it and by the way the Pumped off on Forks are already happening like bondings on can you guys describe pump.

fund for people just cuz it's been mentioned quite a bit Yeah so pump. fund uh was incubated of Alliance um it essentially a uh a memec coin Launchpad um and so anyone can join the app for $2 you can launch any coin with any jpeg uh and the market uh runs permissionless once you hit uh it's on a bonding curve once you hit $70,000 market cap it will automatically see the radium pool it'll burn the lp key so it does it's unrug and then from there it just kind of Trades how do you think about uh so I'm also an investor in pop but in pop f one of the criticisms that I still have is the we talk about attention a lot which is is great like I think memes are you know interesting most memes however have a very short halflife of attention so I mean if I'm going to launch a meme which I won't um but someone does like very few memes are actually successful like if you're not a dog or a cat good luck particularly a dog um everything else like we go back to this discussion of a one point to financial incentives get in the way yep and like if you're a Creator like music nfts for instance I've talked a lot of artists if you're a Taylor St scale or like just a very good artist you probably you're not going to launch nfts because it could actually backfire on your audience you're you're better off selling swag and t-shirts and whatever 100% it's really the upand cominging artist and I think that's what you've seen in nfts because you know when you have a real-time price in a liquid markets it can actually backfire so I'm kind of curious what you think about like what's the end game for pump. fun so for for pump. fun and then I'll talk about about the Taylor Swift uh question thought too but uh for pump. fun the idea is one right now to get a bunch of people excited it's you could think of this as more of a social network uh uh once they added threads people if you read through just the messages of each meme coin that's launched it's actually very entertaining it's pretty funny it's almost as if it's like forchan but tokenized um and so now the concept is like getting a bunch of people together and let's have fun um obviously you know they know what the end result is that most of the time the tokens will dump right but if ites makes it then everyone's Rich uh and so you could think of this as a a a token based prediction Market the problem with prediction markets is the fact that there's a capped upside uh with with something like pump you could think of this as like an uncapped upside almost like a lottery ticket and and so this kind of gets into the the side of gambling but um you know this is just V1 a pump V2 is going to be also very interesting it's going to become more social uh and so you could think of this as like a a consumer based app that's social that allows you to launch tokens and there's incentives and gamified incentives to hold a token yeah look I'm not dismissive of ultimately you can look at traditional entertainment like something like Las Vegas like people lose money on slots the house has an edge but still it's a huge market and people keep I mean inherently I don't think there's anything wrong with crypto just being pure entertainment value now you can tokenize entertainment which is very interesting because then markets can actually be 10 times larger L than Las Vegas because you don't have to fly to maau you don't have to fly to Las Vegas you have it real time 247 and people can bet on or just interact and tokenize so many different things so I'm not like all skeptical about just tokenizing attention and entertainment I do think it just needs to I don't know I'm excited to see the different variations it's interesting because I think ultimately hopefully it's the social aspect that dragged people to Pumped off on website because I I almost view it as like a non gag it's only you speculate on that Meme picture right if that's the concept okay that's interesting so another uh you mentioned like music nfts there's another company we're incubating uh whereby you could take any piece of a clip of a song AI generator or not you could upload it onto the site and you could tokenize it um and so the way you want to think about it is like everyone wants to go viral right and the way do that is they go on YouTube or Etc and they you know they try to like share really good music but I think that era is kind of dying out and the new era that's going to emerge is tokenizing attention whereby that token will help you get verality and I I do think where we're heading next is music than video why do people care about the tokenized clip of the song well a couple reasons one is the meability if the song becomes like someone just creates a song and it just becomes great right uh two is like upcoming artists um and you want to bet on that Artist as you get a stream of the royalties huh do you get a stream of the royalties just tokenized there's no royalties okay but that could be a concept that you could add later on I don't think you you necessarily need to like there is um status is is very important for people and the validation of saying hey I discovered a vichi before he became a vichi I think there's value there like the the Providence of what a blockchain does is it there's a time uh there's a stamp of time and place and that Providence is very valuable for Collectibles for songs for proving I think the biggest issue is that a lot of these things that we've seen tokenized that have done very well have prior provenance so you're seeing it now with these original photos of the dog wh hat meme that sold for you 4 million dollar it's because they have all this history and lore that then once it's tokenized there's a financial form through which you can own it or participate with it and that's much harder to do with something brand new because in that case it may happen but it'll happen way down line when that person has struck you know gold or become famous and so you're looking at much longer time spans that's my sense do you do you think I mean well well whiff is a perfect example of something that just came to being uh in November last year and very quickly that you know but the picture existed for for many years right that's true yeah um I I have a do you guys mind if I have a tangent do you guys anything you want to add to this okay I've been hearing this Theory lately around this whole meme coin craze that everyone's probably been paying attention to there is tremendous am now it's slowed down quite a bit but there was tremendous amounts of capital attention new user onboarding through all of these meme coins I've seen this argument that Meme coins are the largest consumer product in crypto at the moment what do this what does this pull from you when I say that I think it's great I I used to be very skeptical and critical of meme coins um you know when you're trying to modernize Financial system of the world and then a meme coin is worth more than the entire defi sector you're like well it's sort of from the outside in I think it's also one of those things that brings a lot of criticism to crypto it's like these guys are not for real it's the joke of an industry but now I actually think um look clearly memes are incredibly powerful they've been around since humans have walked this Earth and so they're very um they're very important instruments for onboarding and also again like what I think is irrelevant I think the market has historically always told you that it likes memes and it likes this idea of a shared community and now you if you can express that through buying Doge and with your friends then I I don't see any problem with that Jason I I'm with I think um uh memes is just a manifestation of attention times wall share and uh that's kind of actually what a consumer app is it's kind of people people's attention on this entertainment product and it is spend money so I think a web3 enabled consumer app is necessarily financial and thereby necessarily you know having mem coin components to it yeah can I add something if if you're critical of memes then you also are critical of Bitcoin which is the ultimate meme fix Supply like true Austrian economics like every when you think about it everything really is a meme and a social construct so therefore memes are incredibly valuable and Powerful instruments I also think like the emergence of memes at this stage um is doing something that's actually good for the industry which is the inability for Founders to create meability with their own projects and what I mean by that is you know I hate to say it but a lot of the projects that have launched over the past few years um they leverage memes as a way to kind of grow Their audience which is great but some of the projects may not have an actual product um and so I think there's a a Divergence of attention that's now going to memes and the project that would have gotten that Capital they aren't getting that Capital anymore and so I do think there's a Divergence of of memes versus startups that would have gotten that Capital that wouldn't get that Capital like let's take away to pretense you're actually building something and just like go to means directly the rough answer would be build better products but exactly like I think that would be the hope well let let me ask you the question if you didn't have madlads do you think you would have the same amount of success that you've had today no I don't think so I think Community yeah I'm I'm personally not adverse to memes but I do think that there is this intrinsic quality to our industry which is that as humans we are compelled by stories above everything else above reality above anything else stories are what drive us and it allows for a lot of stories to drive the financialization of many of the things within our industry so my next question is in that vein how do we make the story match the product or make the story match the energy going into building something that may have real usage do you guys have a sense for that well I gu I I guess the the question is like what do we think is actually going to be the the consumer or the consumer applications of crypto I don't really have a good answer to that I mean I think historically we've anchored on what is this like idea of skoric Concepts which is let's replicate and build what's successful in web 2 defi uh games but um I don't know my imagination doesn't stretch that far I I I think uh I want to say I'm far more excited about all the different possibilities that extend beyond what just copying what has been successful in web 2 I'll be there I'll try to back it I'll try to invest it but I can't tell you what that is in the same way that like when the smartphone came around no one really predicted Uber Netflix and all this other stuff absolutely yeah I I don't know I um I think one lesson with Stephan we had is that like they implemented the recursive way of growth some would call it Ponzi I wouldn't use that term here and one the once the wave goes nothing kind of gets left over you kind of have a user base that became healthier so with other products that I think necessarily once you implement this way of recursively growing your product uh ideally something gets left over and same thing with the meme coins that people launch you you kind of and in my mind hopefully you build a network NE like you build a product with a community base that is already Network effect proof for example right we invested in this product called Matrix fire which is a mobile FPS shooter um FPS Shooters on mobile are notoriously hard to build not only because the starting budget is $15 to20 million but that the marketing cost for something like this in a category that already has a leader with 5 to 10 million daus is multiples of the R&D cost so how do we slice into this Market well spending actual cash dollars would not work the only way to go into it probably is by giving away pseudo equity in your entire business and having people earn your pseudo Equity all while playing your game and that's kind of what Stephan nxy did except in the mobile FPS case hopefully once you go through this growth curve you have half a million a million two million users and then you you have this like user base that is somewhat competitive with the leading category leader and I think that's kind of what what3 could be used in slicing into two c consumer categories um I'll I'll draw probably an the easiest example is tenzer um they when they first uh so they they were incubated out of Alliance as well um and the problem that they wanted to solve at the time was prot trading on salana which didn't exist at the time and there was a a group of users that wanted this like product um it was a very small group at the time and so they went out and they built it and they ended up becoming the the extension of the tenser's growth marketing strategy because they love the product they addressed the problem they love the product and they ultimately became like the largest stakeholders for for tenzer so I'd say like for anyone that's building a company or startup start with the user find a core group of users and try to solve their problem and they will ultimately be become the the generals for your army within the community there's a can I just add something there there's this idea that I've had over time which is when people think about why is it possible that people can make all this money as nft artists or and step in in these applications and I think I go back to a core primitive of crypto which is when you think about the value extraction creation and then extraction and distribution in social media and just internet Giants it's very very concentrated in in equity holders of or founders of Facebook or YouTube but when you look at the value for a network for instance YouTube like YouTube wouldn't be YouTube if it didn't have all these people uploading videos but the people that actually upload the videos and create the value earn 5 10 20% of all the ad Revenue that goes to YouTube and so it's almost game over for these Platforms in many ways I think it will probably take time but I don't think we're far away from uh like historically would have been like the activation energy to get a new social network off the ground is huge Herculean but in instances like when you can create with the infrastructure is there to have like a live peer that can actually render the video correctly and today you go to an artist and you say hey do you want to use YouTube or do you want to use this alternative on one you make 5% Commission on the other you make 50 or 60 or 70 I think it's going to be very compelling where they're going to go and so to your point it's going to take time um and it might be a tail end of creator but over time I think I'm very bullish on the category that we can actually supplant a lot of the internet Giants because users will make more money and that's the way it should be that's the way the inter that's the core premise of the internet which is distributed decentralized and the value creation gets the contribution is more Equitable and Maps more clearly to creators not just owners question for Tristan um when uh when you first launched two years ago probably uh I remember the wallet I've used the wallet loved it it uh then there was the concept of X nfts what like from then on what made you decide that you wanted to uh use to bootstrap your growth marketing engine by launching an nft because that was I felt like that was at least at the time very contrarian no one had actually launched an nft with the product side by side and now it's kind of becoming the industry standard so these are like what I call the moonshot like moonshot bets and this was one of them so how did you decide to do that yeah I'll give you a cheesy but true analogy we use to come to this decision which is that Bitcoin didn't get to where it is today just because Satoshi solved the double spend problem it was the combination of Satoshi creating this technology and the early cyber punks and Libertarians seeing this technology and realizing that this was potential Sovereign money that this was the potential for the things that they had in their belief system idealized within the real world and that convergence of technology and culture is what was able to bootstrap everything that we've seen since then and we realized we had one of the pillars we had the technology pillar we were really strong on technology but we didn't have the cultural pillar and we realized that we wouldn't be able to have the same type of growth without that intersection and then there was also a very practical reason which is that we needed to Showcase what an xnf collectible looked like versus just an x&f app so we needed to show people what it looked like if your nft was also an application and just exent I I don't mean to put you on a spot also like now that your product has expanded Beyond just nfts and the sort of wallet now you have a centralized exchange um how would a dynamic with your nft holder change let's say if at some point you launch a token so no plans for a token I'll say that but the focus now is product like we have a lot of the story we have this Core group of Believers and now we need to be true to all the story that we've told and build the very best product that we can and that's by far the majority of the focus and one of the beauties that has happened is that the Mad Lads Community is so powerful and full of amazing people that they've become their own decentralized marketing engine where projects around crypto now come to them wanting their attention because they're some of the most active people on crypto that in many ways they are their own entity their own Army that frees us up to focus on the product while they continue to grow themselves so it's it's a very fortunate situation we've arrived to but it did take thousands of hours of work to get to that point right yeah just to add to that what you you mentioned something very powerful which is the the nft collectors are your growth marketing engine um if if you want to extrapolate that token holders also are a growth marketing engine they are and so what's really happening here is you're creating your decentralized army and this Army is your growth marketing engine so what pump is doing is essentially creating its own Army mini armies is what I call it or for Fantasy or for stepin and all of these other products they're all kind of building this like incentivized growth marketing engine it's the token holders essentially that are doing that it was interesting I'm having this discussion with a deep end founder before this panel and like networks are incredibly hard to bootstrap both the supply and the demand side like when you think about Uber when you think about you know social media networks like it's it's incredibly hard and capital intensive um so this particular deepin project was able to bootp sh and get to scale much larger than like a web 2 company with basically a couple million dollars the web2 anal the web2 competitor has uh fundraised over 200 million yeah and doesn't even have the exact same breach and I asked him well why is that U kind of rhetorically and he said well uh because the the Fanatics the you know build it yourself have a very clear incentive to set up the mobile the station that provides all the coverage and I think uh we haven't talked about deep in but I think deep in is one to be one of those killer applications that makes crypto very relatable for people um and and it's actually going to be a pretty good case study of uh how to bootstrap networks in a very Capital efficient way because oh by the way if we hadn't been in a record interest rate environment over last 12 15 years none of the networks like Uber or lft would have gotten off the ground because they requ they're incredibly unprofitable they still are but now with tokens you have more flexibility and more Capital efficiency and I think that by far there's one takeaway at least for me is that's why I think we have a better shot of creating better networks at scale with tokens as the main go to market and um uh mechanism so that's I think in my mind the huge novelty about crypto yeah and I think you can do it not just with Wi-Fi you know equipment it could be with phones like Jambo you buy a phone you do quests you play games and airdrop token to you it pays back to phone in like a day it can do it with bracelets you can do it with you know many many products out there anything really very powerful the thing for everyone to solve is what those tokens do and where they gain value so that people can actually get their dollars out on the back end at some point so I think that's where a lot of energy needs to go into at some point as well um quick fire question 7 seconds left which blockchain do each of you think has the highest chance of being the web 3 consumer blockchain Santiago Sal Jason salana or base IM salana or base all right thank you so much everyone thank you for your time take care thank you