Finding Bull Market Catalysts: Crypto Consumer Applications

Author: IGNAS | DEFI RESEARCH; Source: Substack; Compiled by: Lynn, Mars Finance

I am tired of seeing yet another L2 come to market with $5 billion in FDV.

I am even more tired of seeing Uniswap, Aave, or Liquity forks reappear on these new L2s.

And I am no longer keen on buying another infrastructure protocol (data availability, Oracle, blockchain as a service, etc.) at a high valuation because these protocols do not bring any value accumulation to the token.

What I want is innovation! Where is the innovation?

Looking for internal catalysts for the bull market

In my last blog post, I covered the dull state of the market and shared potential external catalysts to drive the market higher.

ETH ETFs and the change in the US government’s stance on cryptocurrencies will play a role, but more external catalysts such as rate cuts will drive the bull market in the later stages.

The Boring State of the Market and What’s Next #2

IGNAS | DEFI RESEARCH · MAY 15 READ FULL ARTICLE

However, I really like the positioning for the 2020-21 bull market.

It’s a perfect storm: governments have to print money due to Covid (external catalyst) and people are bored at home speculating on NFTs, farming 1000% DeFi yield farms, Metaverse, and working on games on Axie Infinity or other P2E games.

We have multiple innovations in crypto to keep us engaged.

But this bull run has been boring so far.

I believe that for this bull run to turn into a supercycle, we need strong internal innovation (on top of macro) to attract retail investors and keep them interested while we all see paper gains inflate.

If we can’t energize our internal crypto casino, even crypto natives will choose to simply hold BTC, ETH, SOL because the risk/reward ratio makes no sense for trading in PvP markets.

For now, we just farm credits or speculate on memecoin.

Memecoin is fun, and there are signs that some new retail users have joined the market.

But if you don't have a special advantage, the chances of making money with memecoin are slim. Influencers, market makers, and pump-and-dump groups take advantage of naive traders.

Credits are a dwindling trend of airdrops where the rich get richer, as rewards are usually based on 1) deposited funds and 2) trading volume. You can at least earn more airdrops by creating multiple wallets and performing manual trades.

But most airdrops right now are linear, and LayerZero's anti-sybil efforts could be a game changer. Oh, Ruslan…

So what innovations in this cycle can reignite retail enthusiasm?

You know I’m bullish on the re-staking narrative because it’s a playground for printing new tokens, and re-staking can increase ETH yields and demand.

But re-staking is not an attractive story for retail. Few people really understand or care what a “universal inter-subject work token” is.

No, re-staking is a whale’s game. Although the innovative AVS may attract more tech-savvy retail investors.

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BTCFi with Ordinals and Runes is my second favorite innovation/narrative of this cycle. I explained why in my previous post:

Rune Protocol Launch Guide: Beyond the Initial Hype

IGNAS | DEFI RESEARCH · 16 Apr Read Full Article

But even tech-savvy Ethereum/Solana supporters are not too interested due to technical complexity and lack of a clear value proposition. Although there are some fun videos of Chinese grandmas trading BRC20.

No.

We need something to reinvigorate our own animal-degenerate spirits and attract a whole new class of retail users, and (unlike most memecoins) actually make money for them.

It’s hard to predict what the current cycle of NFT/P2E will look like, but I’m betting on a new generation of consumer applications.

There are already signs of this happening.

Hot Consumer Apps

On May 7, four new social apps briefly entered the top 15 protocols by fee generation

• Fantasy Tops

• AUO

• Pump Points Fun

• YOLO Games

“The number of users is still small (none has a DAU of more than 20,000), but from a monetization perspective, their success represents a shift in crypto-native business models toward proprietary distribution built at the application layer." - Excerpt from the Consumer Ecosystem report of Our Network newsletter.

To be honest, I was very skeptical of Blast L2 (powered by Paradigm) because it was just another L2 that let you earn points. And I wasn't planning on depositing any ETH to earn points.

But Fantasy Top got me on board with Blast. Turns out, I don't care that much about another L2. I care about the apps on top of the L2.

Fantasy Top speculates on Twitter influencer engagement. You can earn Blast Gold + FAN points, or you can trade your hero cards.

If you want to try Fantasy Top, please join via my referral link: DefiIgnas

It’s a niche protocol that combines speculation with crypto Twitter. But just like Facebook started as a platform for Harvard students to communicate and later expanded to other Ivy League schools, Fantasy Top may expand its reach to include famous Twitter or Instagram influencers.

Elon Musk’s cards will be in high demand.

Growth outside of crypto circles is what I expect from this cycle. Which app is most likely to achieve this?

Friend Tech briefly succeeded in doing this: attracting Only Fan girls? But they didn’t stay for long. Friend Tech is currently at the crossroads of reinventing itself, launching another points program for its native L2.

Pumpdotfun is a great platform. Yes, I don't like speculating on memecoin, but Pumpdotfun as a platform finds a good PMF in the current stage of the market.

The YOLO game is also mainly based on speculation, but there is one consumer app that blends speculation and social elements better than others: Polymarket.

Polymarket Prediction Market

Polymarket is a prediction market that allows trading binary event-driven options with a settlement price of $1 or $0.

You can choose to exit your position before expiration.

For example, you can bet on who will win the US presidential election or whether ETH will replace BTC in 2025.

I like it because it uses the collective wisdom of the crowd for real-time sentiment analysis. It helps to understand world events more clearly.

Vitalik has praised Polymarket many times:

During the ETH ETF approval speculation boom, Polymarket had about 2,000 users per day. Although it is still too few, the growth potential is huge.

Polymarket just raised $70m from Vitalik Buterin and Founders Fund (Peter Thiel's VC firm). I wouldn't be surprised if they launch an airdrop soon.

There's only one consumer app I'm more bullish on: Farcaster

Farcaster - Decentralized Twitter

Farcaster reportedly raised a crazy $150m at a $1bn valuation!

Compared to other funding rounds in 2024, Eigenlayer raised $100M, Optimism raised $89M, and Berachain raised $69M.

Farcaster is the 0 to 1 innovation of this cycle, combining what social media (Twitter) offers with the best features of cryptocurrencies. It could become a super crypto app, combining social interactions with financial transactions like payments, trading, etc.

It's good enough so that if X suddenly disappears, all Crypto Twitter users can instantly move to Farcaster.

Join Farcaster with my invite link and get 50 WARP tokens for free.

Farcaster saw a huge growth in users in February when $DEGEN community tokens were airdropped to early users. Surprisingly, daily active users continue to grow, reaching 59k.

Lens Protocol is another layer of decentralized social media, with 19k daily users.

Despite having fewer users, Lens is actually the only network that stores user content and identity on-chain. Farcaster’s posts and interactions are off-chain (while user profiles are on-chain).

Lens unexpectedly announced a migration from Polygon PoS to one of zkSync’s ZK Stack hyperchains. This is a big win for zkSync and a loss for Polygon.

What other consumer applications are you bullish on? I asked this on X and received quite a few interesting comments.

New Ways to Make Money

I am bullish on consumer applications because they innovate in user reward mechanisms and token economics, providing a way out of the low float, high FDV problem that has plagued this cycle.

The problem is: there are still too few consumer applications that are popular enough!

Also, it may seem complicated to speculate on the growth of Farcaster or Lens at this point, but one thing I know about crypto is that it always finds unique ways to reward early users.

As an early user of Farcaster, I received a few thousand dollars in DEGEN airdrops. In fact, Farcaster also has 47 "Scenecoins" (social memecoins) that you have never heard of.

Lens has its own memecoin, but I am sure Lens will launch a $LENS airdrop in the future. I am not so sure about Farcaster.

Your airdrop will depend on your engagement, so posting one or two posts will not earn you much, however, these platforms provide a way to exit the current "rich get richer" dot meta, in which your airdrop depends on the size of your pocket.

Even on Fantasy Top or Polymarket, rewards are more elitist: if you’re smart enough, you can get outsized returns.

These consumer apps may have different token economics and may escape the low float, high FDV trap. Friend tech airdropped 100% to the community. I hope other consumer apps follow FT’s lead.

A fair, generous Polymarket will shake up the market, potentially attracting more VC money and user attention from infrastructure products to consumer apps.

Seriously, we do need more successful consumer apps this cycle! For our industry. I like Picolas’ point here that we need something to get crypto out of its current slump.

Other sectors also have the potential to attract a large number of new users. Telegram <> TON integration and new crypto games.

You can read more about my bullish thesis on the TON ecosystem and dApps here:

Top 5 Low-Key Layer 1s to Watch

IGNAS | DEFI Research · May 1st Read the full article

Another sector is Gamefi.

To learn about the latest hit GameFi games and their innovative token economics and incentives, I teamed up with Skipper, our Pink Brains researcher.

Be sure to follow him on Twitter for more GameFi content.

GameFi: 3 Top Web3 Games Worth Playing for Early Adopters

Let’s face it. Most previous GameFi projects lacked the “play” in “earn by playing”.

Also, the “earn” element was often paid to users in utility tokens that accrued no value — because these unplayable games lacked appeal.

This will change in 2024.

For the first time, we’re seeing player-centric Web3 games gain mainstream attention.

Here are 3 early Web3 games that are worth your attention:

1. Rainbow Heroes

Nyan Heroes is a lot like Overwatch, but with cats driving giant mechs. This Solana-based first-person shooter entices players with a rich arsenal of weapons and dynamic actions like climbing.

After only 2 quarters of pre-alpha testing, Nyan Heroes has become one of the top 5 most popular games on the Epic Games Store.

The free-to-play game launched its $NYAN token on May 21, which still has a market cap of $25 million, but has been listed on Bybit, Gate.io, HTX, MEXC, and Backpack Exchange — a good sign for future price action, as long as the team keeps working on it.

9 Lives Interactive, the studio behind the game, raised $3 million in a funding round in early March.

Nyan Heroes Bullish Catalysts:

• Ranked among the 30 most popular games on the Epic Games Store.

• Over 200,000 downloads in two weeks of pre-alpha release.

• The full game with NFT integration will be released in early 2025.

How to get rewards as an early player:

• Wait for the next pre-alpha season announcement.

• Play the third season of the game.

• Earn CATNIP points by increasing your MMR ranking.

Nyan Heroes Twitter is here.

2. Metalcore

Metalcore is like Battlefield meets the Star Wars saga, all powered by a Web3 open economy with earn-while-playing potential.

Thanks to Unreal Engine 5, Metalcore is one of the first Web3 games to truly rival mainstream titles in terms of graphics and overall aesthetic — and the game is still in closed beta.

This first/third person territory war shooter blends PVP and PVE elements 

Bullish Catalysts for Metalcore Music:

• Highest quality graphics in Web3 games thanks to UE5.

• Won Best Blockchain Game of the Year 2024 at the Global Blockchain Awards.

• Metalcore has raised a total of $20 million and is backed by Delphi Digital, Arrington, and Spartan Group.

How to get rewarded as an early player:

• Start playing Metalcore once access is turned on.

• Focus on high-quality cooperative play, not just scoring.

• Players can also earn $MCG tokens through strategic play and tactical decisions.

Metalcore Twitter is here.

3. Shrapnel

Shrapnel is a first-person shooter game developed in Unreal Engine 5 with earn-while-playing elements.

This Avalanche-based FPS is still in early development, but the game's airdrop event with a prize pool of over $100,000 has attracted a lot of interest from Web3 creators and is starting to attract attention from Web2.

Shrapnel's Bullish Catalysts:

• Play Airdrop Event with a Prize Pool of $100,000.

• Emmy Award-winning team members come from works such as "Halo", "Call of Duty" and "Westworld".

• Shrapnel has one of the largest creator communities in the Web3 gaming space.

How to get rewarded as an early player:

• Buy the Shrapnel Extraction Pack NFT to play.

• Play during the next game airdrop event (to be announced soon).

• The top 1,000 players on the leaderboard will share in the prize pool.

Don’t get caught up in over-optimism

Consumer applications need to attract mainstream users beyond the crypto community.

But Brave offers a valuable lesson: the success of a protocol is not necessarily correlated to token performance.

Despite BAT being one of the most successful consumer applications, its token is still trading at 2017 prices.

The likelihood of any dApp featured in this blog outperforming BAT in the long term is low.

So please research when to take profits.