Author: Pillarbear

Compiled by: TechFlow

Welcome to the third edition of Consumer Watch, a newsletter covering the latest news and insights on consumer cryptocurrency.

In this issue, we discuss the emergence of vertical blockchains as an alternative to general-purpose blockchains or application-specific blockchains. Vertical blockchains provide a centralized platform that serves users and applications with similar interests and characteristics.

Below, you’ll also find a market recap outlining key market news, as well as our curated insights showcasing a range of materials that provide valuable trends and insights into consumer cryptocurrency.

The rise of vertical blockchains

Don't try to do it all. When you are first, you create a good buzz. Delighting your customers and being a leader in your field and region, whatever that may be, is very valuable. - Fabrice Grinda

So far, there are two main types of blockchains: general-purpose blockchains and application-specific blockchains.

Most of the blockchains that exist today and are about to be launched are general-purpose blockchains. These blockchains can support a wide variety of applications to be built on top of them, giving them the potential to become the largest hub of activity for most blockchain activities. However, these blockchains, especially the newly launched ones, are often difficult to distinguish from other blockchains. While there is still considerable room for improvement, the advantages that applications gain from this advanced infrastructure often do not fully compensate for the disadvantages of losing a large user base and composability between tokens and applications within a single chain. In addition, the repeated launch and launch of projects with little differentiation in the L1/L2 space has led to user and investor fatigue, mainly benefiting only liquidity providers.

At the other end of the spectrum are application-specific blockchains. While experiments are ongoing, few examples have been implemented in practice. The limited adoption of application chains is likely due to their inability to provide a smooth user experience when exploring multiple applications. Additionally, running a full blockchain just to run a single application is inefficient for most developers in this space. While frameworks that can mitigate these challenges are being developed to help users and developers, it seems that it will take some time before these solutions are fully implemented and put into use.

Source: Making Your Market Unit Economics Work

A promising and relatively unexplored alternative solution is the concept of purpose-built vertical blockchains. While this is not a completely new concept, it has gained more prominence recently. Vertical blockchains are similar to vertical platforms in Web2 businesses, a trend that typically emerges during the maturity phase of a market. While general-purpose platforms still generate the majority of transaction volume and user activity, over time, vertical platforms that focus on specific industries or features tend to attract specific user groups.

Vertical blockchains are tailored for specific industries or functions, providing users with a seamless multi-application experience. These platforms host applications with similar characteristics, creating an ecosystem focused on a specific user group. For example, there is a clear contrast between users trading memecoins and betting on internet trends and those dealing with treasuries and yield optimization. By catering to the needs of each user base, vertical blockchains eliminate the need for users to switch between different ecosystems.

These specialized chains also leverage network effects to support their onboarding services, solving common “cold start” challenges encountered by new applications. For emerging applications, these platforms serve as effective distribution channels, provide opportunities to directly reach target audiences, and demonstrate their value proposition. Some chains go a step further and offer specialized tools and features that can significantly reduce developers’ initial costs and operational overhead. This allows the team to allocate resources more efficiently and focus primarily on service development and innovation.

Source: What is Consumer Cryptocurrency?

The most obvious, but not exhaustive, examples in this topic are Abstract for consumer applications and Plume Network for RWA projects.

While Abstract is expected to provide special features and tools as a consumer chain, such as the Abstract Global Wallet (AGW), its real value may lie in its role as a comprehensive distribution channel, generating network effects through similarities in user demographics and application types. Although its detailed strategy and functionality are uncertain, Abstract seems to have the best chance of success among similar projects.

Unlike infrastructure innovations or B2B services, the success of consumer-facing crypto applications is far more difficult to predict than one might expect. This uncertainty stems from the volatility and fickle nature of user behavior and preferences, especially in an area where most services are designed to capture user excitement and interest rather than satisfy specific needs.

The current cryptocurrency environment emphasizes user engagement and novelty, which makes it particularly challenging to predict the best user experience. In this context, the key lies in creating an ecosystem that implements multiple positive expected value (EV) strategies, thereby increasing the overall probability of success.

Pudgy and Luca have demonstrated outstanding marketing and community building skills in the crypto space, crafting viral marketing campaigns and building influencer communities. Their success relies on more than just attention-grabbing tactics; they maintain a consistent brand strategy and high quality standards, which are key factors for long-term success of consumer apps. This commitment and skill is particularly rare in the crypto industry, where many projects prefer to quickly move to the next hype cycle.

Abstract seems to be positioning itself to capture this dynamic. Through its superior community building and marketing capabilities, they aim to attract a large number of targeted users to its platform. This user concentration, in turn, may attract more talented developers to its ecosystem. The potential synergy between premium services and an active user base could significantly enhance Abstract’s position as the leading vertical blockchain for consumer applications.

Source: Plume

Another important vertical blockchain candidate is Plume Network. Plume is a modular blockchain designed to solve the main challenges of RWA while creating the emerging field of RWAfi. By integrating the tokenization engine and compliance directly into its platform, Plume greatly reduces the difficulty of building RWA projects.

Plume is creating a virtuous cycle, lowering barriers to entry and attracting more assets and users to its ecosystem. In the Plume ecosystem, users will be able to leverage tokenized real-world assets (RWAs) similar to how they currently use other on-chain assets and protocols. This includes using RWAs as collateral for loans, staking them to generate interest, borrowing against them, and even engaging in highly leveraged speculation through derivatives trading. By supporting these diverse activities around RWAs, Plume is not only tokenizing assets, but also creating a new financial ecosystem that blurs the lines between physical and digital assets.

Note that Abstract and Plume are not the only vertical blockchains. More and more blockchains are attracting developers through focused operations, branding, and functionality. As the industry matures, we are witnessing the end of the era of focusing on building general-purpose chains. The next phase will involve the development of industry-specific platforms that are able to build network effects that concentrate users and applications with similar attributes and interests.