For over a decade, we’ve been promised blockchain-powered apps for everyday use. Checking the weather, looking for the closest sushi place, paying in the grocery store, sending birthday wishes to a friend in Dubai—all that would finally be decentralized, and we could use crypto as easily as a credit card. We envisioned consumer apps to offer:

🟢 Greater user ownership
🟢 Better incentives
🟢 Lower costs than Web2 alternatives

Was that only a fancy science-fiction story, one of those future scenarios that are fun to dream up but never come true? 

Despite the billions of invested dollars and ongoing innovation, mainstream adoption of decentralized consumer apps remains frustratingly elusive. At the same time, the stablecoin market grew to a trillion-dollar market (see our recent report), and consumer apps stagnated with the following:

❌ Poor UX and steep learning curves that fail to attract mainstream users
❌ Over-reliance on speculative token incentives that lead to unsustainable models
❌ A lack of clear real-world utility, unable to compete with traditional alternatives

What happened? If Web3 consumer apps are supposed to be the next big thing, why aren’t they part of our daily lives yet? 

And the critical question is: Can Web3 pivot from hype to sustainable consumer adoption?

In this report, you’ll find a comprehensive, data-driven overview of today’s Web3 consumer app landscape. It highlights both the most promising sectors and key ecosystems, as well as the persistent barriers that apps must overcome. 

To present hands-on evaluations, we tested and analyzed some representative apps ourselves and shared our findings here. In these real-world case studies, you will discover adoption data and receive a business model analysis of applications that are breaking through and others that are struggling. You can learn from both. 

The following chapters will deepen your understanding of how Web3 consumer apps can break free from speculation-driven cycles and deliver value that resonates with everyday users. The takeaways will give you a head start in navigating one of the most dynamic frontiers in Web3 today.

Web3 consumer app failures: hype over substance

Even the first microwave was a failure, and look where we are now with that. The first step to success is understanding the initial mistakes. Once we understand the reasons why crypto consumer apps have failed to make a big breakthrough so far, we can also understand what to avoid and how to improve. 

1. The Play to Earn collapse – the risks of overreliance on token incentives

The Play-to-Earn (P2E) model initially seemed like the perfect fusion of gaming and blockchain. By allowing users to earn cryptocurrency through gameplay, P2E projects promised to redefine the economics of digital entertainment.

At its peak, the well-known Web3 game Axie Infinity counted millions of daily active users that came mainly from developing countries like the Philippines, where players saw it as a potential income source. However, players were left with worthless assets when its in-game token, smooth love potion (SLP), lost over 99% of its value by early 2022. If that wasn’t bad enough, a $620 million security breach in March 2022 destroyed trust in the platform.

The core problem? Players weren’t playing for fun, they came for financial gain. Once token prices fell, engagement collapsed entirely. Axie’s failure revealed a critical flaw in the P2E model: token-driven economies cannot sustain user retention without fundamental gameplay appeal.

2. Move to Earn apps – the same mistakes repackaged

Following the collapse of Play to Earn, the next wave of Web3 consumer apps attempted to gamify physical activity through Move-to-Earn (M2E) applications.

Projects like StepN combined fitness tracking with blockchain rewards, offering tokens for walking, jogging, and running. On the surface, this seemed like a revolutionary way to merge health incentives with digital assets. However, the model soon revealed deep flaws:

• High entry costs: The required NFT sneakers quickly became extremely expensive to purchase. At the height of StepN’s popularity, limited edition sneakers cost over $2,000 each. Needless to say, this steep upfront cost deterred many potential users. Those who paid were mainly speculative investors ready to take on a significant financial risk rather than fitness enthusiasts.
• Declining token rewards: As with P2E, once token values dropped, users lost interest, and new entrants were required to sustain the economy.
• Lack of intrinsic value: People used the app for rewards, not for exercise. Once those rewards decreased, user retention plummeted.

StepN became another example of Web3 applications that struggle to sustain engagement when token value declines.

3. The NFT market – from unprecedented hype to an uncertain future

In 2021, NFTs were heralded as the future of digital ownership, with projects like Bored Ape Yacht Club and CryptoPunks reaching valuations in the millions. But again, many NFT-based projects struggled to retain users beyond their initial hype cycles.

Web3 predictions 2025

Even corporate-backed NFT ventures failed. Nike’s Web3 fashion brand Rtfkt, which was acquired in 2021, announced its shutdown in early 2025, despite generating over $185.3 million in NFT sales.

The problem? Beyond their novelty, most NFTs lacked long-term real-world utility. As speculative interest waned, valuations plummeted, prompting a reassessment of NFTs as a consumer product.

Learning from Web3’s early challenges

Web3 consumer applications promised to disrupt traditional industries by offering decentralization, lower costs, and better user incentives. Yet, many applications overestimated the power of token incentives and underestimated the importance of user experience (UX), trust, and long-term utility.

1. Token incentives are not enough

The Onchain Research Team conducted an in-depth Web3 consumer survey to better understand the underlying challenges and adoption barriers. We gathered answers from 1,005 Web3 users plus 660 founders and business executives building consumer-facing blockchain applications. 

Our survey findings reinforce the assessment described above. 37.08% of users cited financial incentives as their primary motivation for using Web3 apps. While this initially drives adoption, it does not create sustained engagement. A project must offer real utility that keeps users engaged even in the absence of token price appreciation.

2. UX remains a barrier

Poor UX has been an equally significant obstacle. Unlike Web2 applications, where onboarding is seamless, Web3 apps often require users to navigate complex wallet setups, manage private keys, and deal with unpredictable transaction fees. These barriers mirror the early days of the internet, when technical friction limited mainstream adoption.

Our survey data highlights these pain points, as shown in the following chart.

Trust and brand confidence are still lacking

There’s more. Even if Web3 applications improve their economic models and UX, the need to build strong trust and credibility remains. Without these, reaching mainstream users is impossible. High-profile failures caused by hacks, rug pulls, or regulatory uncertainty eroded the space’s confidence. Many users remain skeptical, and major brands have been hesitant to fully embrace Web3 due to fears of reputational risk and legal uncertainty.

Despite these repeated disappointments, there are signs that things are finally picking up. Web3 might be approaching a similar turning point to the internet after many failed startup attempts. This time, the focus is shifting away from speculation to solving real problems that matter to everyday users.

1.1 Are Web3 consumer apps finally ready for prime time?

If history teaches us anything, it’s that early waves of any emerging technology frequently generate questionable use cases, overblown expectations, and a fair share of scams. 

Just think of the internet’s first steps, when it was common to dismiss online enterprises as “just another dot-com”. As the bubble burst, skeptics believed the internet’s potential had been vastly overstated. What followed was a period of real growth driven by practical, user-centric applications. Today, e-commerce, social media, and on-demand services dominate the web and our lives. 

Similarly, Web3’s high-profile failures do not negate its underlying potential; instead, they highlight the need for more meaningful utility and sustainable business models.

From infrastructure to applications: The Web3 value shift

In the early days of blockchain, the dominant belief was that Layer 1 networks like Ethereum would capture most of the economic value, while decentralized applications (dApps) would struggle to monetize. This view, known as the “Fat Protocols” thesis, was supported by soaring token prices and rapid infrastructure innovation. However, a growing number of founders, developers, and investors now argue that the landscape is shifting toward the application layer, where real user demand is concentrated. Why do they believe this?

This shift is a deja-vu of what happened in Web2. Internet protocols like TCP/IP, HTTP, and SMTP provided the backbone for digital communication but were not the primary value drivers. Instead, companies like Google, Facebook, and Amazon built intuitive applications on top of these protocols, capturing the majority of economic power. Web3’s path is much the same: Blockchains remain essential without direct user interaction. They engage with applications that abstract complexity and provide seamless experiences.

The biggest winners in this next phase of Web3 will be the platforms that make blockchain technology feel as simple and accessible as Web2 apps.

1.2 Blockchains are (finally) ready for mass adoption

A major barrier to Web3 adoption has been the underlying blockchain infrastructure itself. On the one hand, networks like Ethereum introduced powerful financial primitives through smart contracts. On the other hand, they struggled with congestion and expensive fees, making them impractical for everyday use and preventing decentralized applications from scaling beyond early adopters. 

This is beginning to change. Several key technological and market developments are converging to offer optimal conditions for Web3 consumer apps. The evolution of blockchain infrastructure, the rise of artificial intelligence (AI), and a clearer regulatory environment combined create new opportunities for entrepreneurs, developers, and businesses to build applications that can compete with their Web2 counterparts.

Gradually, a new generation of blockchain infrastructure has emerged that makes consumer applications more viable than ever before.

• Layer 2 networks like Arbitrum, Base, and Optimism significantly reduced transaction costs while increasing throughput, making blockchain interactions faster and more affordable.
• Alternative Layer 1s like Solana and Sui built high-performance environments optimized for consumer applications, enabling real-time, low-cost transactions.
• Modular blockchain architectures now allow developers to customize infrastructure based on application needs, significantly optimizing cost and performance. For an in-depth analysis of this topic, check out our The Future is Modular Report from last year.

This progress has expanded the technological capabilities of blockchain systems, opening the door to greater adoption and utility and lowering barriers for end-users to participate in decentralized ecosystems.

The infrastructure stack is reaching maturity

It appears that blockchain infrastructure is reaching maturity, and the industry is shifting toward an application-driven phase.

Each wave of infrastructure sets the stage for new applications to emerge; it’s a recurring pattern:

1. Bitcoin introduced decentralized money but had limited programmability.
2. Ethereum and smart contracts enabled DeFi and stablecoins, unlocking composable finance.
3. The rise of Layer 1 alternatives and Layer 2 scaling solutions form a basis for consumer applications by making transactions faster and cheaper.
4. AI and automation initiate the next leap, abstracting away blockchain complexity and enabling seamless consumer experiences.

Each app cycle builds on top of an infrastructure advancement that further lowers the barriers for developers to create high-quality applications that attract real users.

A perfect storm: AI, infrastructure readiness, and easing regulations

At the onset of 2025 and beyond, blockchain infrastructure will no longer be the primary bottleneck. The next phase of Web3 adoption will be driven by the ease of interacting with decentralized applications and the confidence with which businesses integrate them into existing operations. Two major forces, artificial intelligence and regulatory clarity, contribute to the fabrication of optimal conditions for Web3 consumer applications to scale.

So far, Web3 has been too complex for the common consumer. Even the most promising decentralized applications have struggled to attract mainstream users because the onboarding process is unintuitive compared to Web2 alternatives.

AI addresses these challenges by abstracting away the complexities of blockchain and creating a simple UX.

• AI-powered interfaces make blockchain interactions seamless
  • AI integrates with Web3 applications to guide users through processes like staking, swapping, and lending without requiring technical knowledge, just like a common customer support chatbot.
• AI optimizes transactions and eliminates decision fatigue
  • AI automatically selects the fastest and cheapest network for a given transaction, eliminating the need for users to choose between Layer 1s and Layer 2s thereby avoiding blockchain congestion and extensive gas fees.
• AI-powered wallets remove the complexity of self-custody
  • With AI-powered wallets, self-custody becomes as easy as logging into a Web2 account. It enables key recovery through secure multiparty computation (MPC) and AI-assisted authentication, minimizing the risk of losing private keys. 
  • Coinbase’s Smart Wallet or Pass App is pioneering this approach, removing seed phrases while maintaining user control over assets.

By integrating AI into every layer of Web3 applications, blockchain becomes an invisible backend rather than a technology users need to understand.

Regulatory clarity is bringing institutional and consumer confidence

Another major hurdle to Web3 adoption has been regulatory uncertainty. Businesses, financial institutions, and mainstream consumers have remained hesitant to engage with blockchain applications due to unclear rules and the risk of regulatory intervention. Recent developments give rise to optimism.

• Global regulatory frameworks take shape
  • The Markets in Crypto-Assets (MiCA) regulation in Europe has established explicit rules for stablecoins, exchanges, and crypto service providers, offering businesses much-needed legal certainty.
  • Several regions, including Singapore and the UAE, have introduced crypto-friendly regulations that provide guidelines for Web3 startups and financial institutions.
• Shifting sentiment in the United States makes Web3 more investable
  • The political climate is shifting, and pro-crypto lawmakers are gaining traction in Congress. A growing number of policymakers recognize blockchain’s potential to drive financial innovation, leading to discussions around well-defined frameworks rather than outright restrictions.
  • Regulatory licenses and approvals for major firms, such as BlackRock’s Bitcoin ETF, signal a broader institutional acceptance of crypto assets.

The perfect storm: AI + regulation + infrastructure readiness

Web3 companies have spent years building base-layer protocols, rollups, and modular architectures. Finally, the Web3 ecosystem is eyeing mass-market applications that run on the maturing infrastructure. No longer are we limited to speculative token trading or fringe blockchain games. Instead, a new wave of consumer-facing, utility-driven dApps and services is emerging, fueled by:

1. Cheaper blockspace: Lower gas fees on Layer 2s and efficient Layer 1s make small, frequent transactions viable for consumer apps.
2. AI integration: Smart chatbots and AI assistants reduce complexity by managing wallets and optimizing transaction fees. This allows users to focus on the actual utility rather than the underlying technology.
3. Regulatory clarity: Frameworks like MiCA in Europe are pushing legitimate businesses to explore stablecoins, tokenized assets, and consumer-facing blockchain services without fear of legal gray areas.

You’re not discouraged by the initial failures of these apps to conquer our daily lives; otherwise, you wouldn’t be reading this. It gets better as you move into chapter two and explore with us the Web3 consumer apps landscape to discover its potential and challenges.