The first step to solving a problem is admitting you have one. In crypto, our problem is the profound gap between what people say they want, and what they actually want. This phenomenon, called the “value action gap,” helps clarify why belief doesn’t always turn into action. In crypto, the mismatch is huge: despite strong theoretical sentiment for crypto’s underlying principles, adoption remains shy. But if Web3 is to reach even a fraction of its potential, we can’t ignore this gap any longer.
Mags Kala is the founder and managing partner of Double Down, a Web3 fund.
Crypto’s values are grounded in two powerful ideals.
First, there is the movement toward radical self-sovereignty: you own your money, you own your keys.
Second, there is the dream of a decentralized internet, where we share in the profits companies generate from our activity, and retain increasingly more control over our online identities. The problem? Most of us can’t be bothered to set a strong password — let alone take on the responsibility that this level of control requires.
In the decade since Vitalik’s Ethereum white paper, we’ve seen an explosion of projects that tap into these desires for self-sovereignty and decentralization, from NFTs and DApps to blockchain games. But after three crypto winters, and a landscape littered with smart contracts, broken DeFi platforms, and PFPs, what do we actually have to show for it from the mainstream consumer adoption perspective? Not enough beyond the boom-and-bust cycles of a 24/7 casino.
People might care about crypto’s underlying values… but not enough to onboard solely because of them. Instead, what they want is far simpler: money, status, and unique functionality that actually solves a real problem (shocker!). If we hope to truly catalyze the crypto space — as founders, builders, or investors — we must acknowledge this reality and embrace users for who they are, rather than who we want them to be.
In a Consensys survey published in June, respondents overwhelmingly said they want more control over their online identities and data. But is that really what’s driven adoption in Web3 so far? The evidence points elsewhere: namely, speculation. It’s everywhere in crypto, thanks to our inherent bias toward immediate (and potentially outsized) gains. Maybe it’s time we stop apologizing for users’ speculative interests, and embrace their root cause: humans are financially motivated, especially when their financial security is otherwise non-existent, as is the case for millennials.
We can intellectualize crypto all day long. But if we want to drive real, mass-scale adoption, we need to be honest about what consumers actually want
We’re driven by status, too – something that has fueled much of the activity in NFTs. NFTs are more than digital assets: they denote social standings, group affiliations and taste. NFTs unlock unique experiences in IRL spheres, offering nuanced social and cultural interactions. While the tokens themselves hold speculative value, for some, the experiences, communities, and new social strata they enable are priceless. The most powerful status markers are earned, not simply bought – and crypto offers a powerful array of tools and experiences for both how tokenized “status” can be earned, and what it can provide.
Finally, we’re driven by unique functionality – that is, technology that solves key problems in our life in novel and powerful ways. Think Ledger, which made it easy and accessible to protect your keys (show me a stronger need for crypto native customers… I’ll wait). Or, some of the most now-fundamental apps in tech, when they first arrived: Uber, Stripe and Instagram. Before these products became ubiquitous, they solved one key problem incredibly well, in a way we hadn’t really seen before. In Web3, we’ve yet to see more than a few innovations of this type.
We need to be radically honest about what drives consumer behavior in the crypto world: money, status and unique functionality. Everything else is garnish. Axie Infinity and Top Shot didn’t surge because of the decentralized utopia that was promised, but because they tapped into these fundamental human motivations — the chance to make money and have the new hot/rare thing. Products that lean into these drivers have done exceptionally well, especially in the short term. Instead of resisting this reality, the winning strategy is to double down, building products that align with consumers’ true motivations, supported by long-term sustainable business models. Here are the three investment theses that drive what we’re currently prioritizing as a firm:
In an era of widening income disparity and hopelessness around economic mobility, the fast gains made possible by speculative mechanisms (think: sports betting or meme coins) have lured a generation desperate to claw its way to financial security. For debt-saddled millennials looking to “get rich quick” in absence of credible “get comfortable slow” pathways, these platforms have served as shaky bridges to financial independence. Whether we like it or not, the cat is out of the bag on society’s speculative interests – the key now is to serve them in well-designed, transparent ways rather than with exploitative Ponzi mechanics.
But there is so much more to crypto’s money game. DeFi represents a real opportunity to rewrite the gig economy, democratize access to real-world assets, and rapidly deploy liquid capital where traditional systems falter – particularly in poorly financialized countries. Technical advancements and globalization have outpaced financial innovation, and crypto can bridge the two, adding much needed flexibility to financial markets. It’s also making possible a wave of new business models, using mechanisms like protocol rewards, bounties, or finders’ fees to capture and redistribute value in innovative ways. Verifying public transactions on-chain may even help business lenders loan to projects that competitors can’t justify with traditional lending algorithms.
Web3 has brought a new social layer to the internet, best represented by blockchain-based communities built around status and digital ownership. We’ve already started seeing this in token-gated crypto communities like Friends With Benefits, or games like Fortnite or Roblox – where people spend loads on Gucci skins – or during the peak of the PFP NFT hype cycle, when celebrities were boosting BAYC on Twitter. We want to signal to peers that we are in, or the first, or the most prolific — and these status symbols have real social benefits. People flex with fashion, cars, and event access in the real world – and they are doing the same in the digital world, every day.
The question is: why haven’t these “status games” taken off in crypto like the “money games”? It comes down to two issues.
One, in status games, money cannot be the focal point of the relationship – unique/earned access is significantly more valuable than ubiquitous/easily purchasable access (besides, nobody likes money grabs).
Two, status doesn’t exist in a vacuum, and Web3 status games have lacked clear third spaces for the status to be flaunted. (Why do you think Twitter profile picture has become such an important real estate for NFT projects?). It’s not enough to introduce leaderboards, loyalty points, or private discords – tech needs to be paired with deeper understanding of human aspirations to truly crack status games.
Now, consider what’s driven mass tech adoption (in crypto or otherwise) in the past: products far superior to existing alternatives. Amazon revolutionized the online marketplace. Apple revolutionized the phone. Rather than rely on the supposed benefits of decentralization, the functionality of new blockchain-based applications should thrust the user experience into a new paradigm.
Users will jump through hoops to get what they want – but you have to give them something they truly want. Music NFTs have yet to take off, for example, because minting music on-chain still hasn’t exceeded the benefits of instantly streaming millions of tracks for just $10.99 a month.
Feature parity won’t cut it either; we need to hold Web3 startups to the same standards as the rest of tech innovation, because that’s what target customers do too. Your product that happens to be built on blockchain needs to (a) meet the classic 10x improvement vs. existing alternatives adoption test, and (b) have credible source of defensibility vs. incumbents (who are particularly adept at the functionality game given their resources and distribution advantages).
Lofty ideals are simply too high on the hierarchy of needs for new consumption in the over-stimulated user environment – Web3 builders need to focus on the end-user benefits, serving core needs and wants first. Once users have onboarded to address their practical needs, then we can “smuggle in” the idealistic aspects of decentralization.
We can intellectualize crypto all day long. But if we want to drive real, mass-scale adoption, we need to be honest about what consumers actually want. To capture both consumer and investor attention, the pitch can’t just be about the tech; it has to promise a better life in some tangible way. Are we making something that people not only want but will clamor to use?
If you are building a sustainable business that aligns with the themes above, and want a partner to help you think through your strategy and go-to-market, please reach out – our DMs are open.
Edited by Ben Schiller.
