Airdrops and 2Earn models have got Web3 as far as they can; next, we need better utility.

The crypto industry has witnessed a proliferation of user acquisition strategies, with incentives and meme-based community hype taking center stage. Projects use mercenary methods to attract users to engage with their protocols, from airdrops and yield farming to community contests with token-based prizes.

And that’s because they’re effective, at least for the short term. But while these approaches have undeniably contributed to the sector’s past growth and serve a clear purpose within the expanse of Web3 marketing, most are unable to sustain the long-term viability of our industry.

In the coming year, we’ll witness important milestones marking the crypto finance industry’s growing maturity and credibility. As the sector grows and mass Web3 adoption becomes closer to reality, it will become more important than ever for projects to focus on perfecting their products and growing their brands. It’s time for a mindset shift as we move into what could be crypto’s biggest year to date.

What needs to evolve

Projects like StepN’s Move2EarnWrite2Earn, and Vote2Earn have shown the creativity of the ‘2-Earn’ movement. These concepts typically enable users to earn in-game rewards, often in exchange for real-world currencies. Yet, while they can effectively drive awareness of new projects in the initial stages, the hype for any particular project generally dies down once it becomes clear the product lacks stickiness. A question to consider: If these projects were to remove the earning potential, would people still use the app?

Meanwhile, airdrops, which have proven effective in attracting attention for projects like Arbitrum, zkSync, Linea, and Blast, can also fall into the same trap as Earn-focused projects. Users may or may not recognize the use cases for these Layer-2 solutions. Once the free cash has been handed out, will these users stick around? It’s worth noting here, the most successful airdrops are those that have already built their community first, before the handouts start. In the long term, projects that take advantage of marketing opportunities while prioritizing their ecosystem or products see the best results.

While these unique incentive models have helped bring the Web3 space to its current development phase, such strategies are now faltering. To date, Web3 adoption has seemingly stalled, unsure of where to go.

We’ve now hit a critical juncture where projects across our industry must mature and aim to create meaningful experiences, not just short-term gains. The easy gains of the past are no longer within reach. And significantly more established product types, such as ETFs, are about to hit the market. We need a new rulebook.

Creating meaningful, useful products is key

The main way to move on from the excessive reliance on incentives is to create products that genuinely cater to users’ needs. Rather than treating incentives as a given project’s primary motivator and purpose, the focus must now shift towards offering products with inherent value and utility.

For example, Meta doesn’t market Facebook and Instagram based on the potential earnings for users. It offers a product that people want to access and a solid brand that has attracted communities of billions of users. In the same way, the average person doesn’t open a checking account at a bank with the expectation of making money from it. Instead, it’s the reverse. Bank customers often expect to pay fees for the convenience and security of accessing the account and utilizing the bank’s services.

The Web3 industry should prioritize creating high-quality products and services with real utility for users. There is no other path forward now. Especially as traditional finance is now lending its weight to an increasing array of crypto finance products, which are widening trading accessibility for individuals and institutions.

Providing real utility is the only way to attract long-term users who are genuinely interested in the value our industry can provide.

While we still have a long way to go, onchain financial products deserve more attention since they cater to user needs, such as diversifying risk through derivatives, enhancing market liquidity, facilitating lending and borrowing, and improving payments and transaction infrastructure. These products offer tangible benefits to users and serve as crucial components of a thriving Web3 ecosystem.

Web3 games also hold immense potential to showcase genuine use cases of blockchain technologies centered around entertainment, self-expression, and collectibles. As the industry matures, the arrival of AAA-quality games, which require significant development time, will unveil the true potential of Web3 gaming once they hit the market.

Building brand awareness

Before our industry can reach the next stage of development, it’s essential to acknowledge the inherent nature of human behavior and that incentives have always played a part in motivating actions. As such, the Web3 projects must consider how their incentive programs align with their long-term brand goals.

Brand awareness is key to the success of long-established companies and Web3 enterprises. For example, over a century, a consistent advertising strategy has cemented Coca-Cola as the go-to drink of choice for millions worldwide. Apple has cemented itself as a leader among tech giants for its persistent focus on simplicity and the user experience, which are core to the brand’s “why.”

While the industry is still nascent, Web3 protocols have a unique opportunity to reimagine their strategies and even re-introduce themselves to new users, most of whom have limited blockchain and crypto knowledge experience, as more financial institutions and Web2 companies enter the space.

For example, Polygon Labs has collaborated with Starbucks, Disney, Mastercard, and other well-known names, making its eponymous Layer-2 scaling solution the go-to protocol for institutions and companies looking to enter the space. NBA’s TopShot NFT marketplace is another great example. But note the marketplace is billed as a ‘collectibles’ platform, with no emphasis on the future value of those collectibles. Instead, the focus is on leveraging Web3 for its utility in celebrating the game and its community in a digital-first format.

In closing …

The promise of blockchain technology lies in its ability to empower individuals, foster decentralization, and revolutionize industries. While incentives and other hype-based tools are effective for short-term growth, projects must consider the bigger picture. Web3 players must create products emphasizing user experience and a strong brand. That’s especially the case as 2024 looks set to usher in a new stage of development for crypto finance.

Rachel Lin is a co-founder and CEO of SynFutures, a decentralized derivatives trading platform. A veteran of both the TradFi and CeFi markets, Rachel previously worked in the global markets division at Deutsche Bank, where she specialized in derivatives, and is a founding partner of Matrixport, one of Asia’s largest crypto neobanks.

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