Crypto’s Path Forward In The Next 10 Years

This episode dissects the critical shift from speculative, inward-facing crypto products to consumer-centric applications, revealing how builders can capture the next billion users by solving real-world problems.

The Challenge of User Retention in Crypto

• Santi from Inversion Capital opens the discussion by stating that crypto has historically failed to retain users. He points to the speculative nature of the ecosystem, where most users arrive with a "casino" mindset, leading to poor retention once the initial excitement fades. He notes that the underlying technology is not yet a reliable, seamless experience for the average person.
• Inversion Capital's Thesis: Santi explains his firm's strategy is to acquire traditional businesses and integrate crypto as an invisible backend technology. This approach aims to improve efficiency without forcing consumers to grapple with the complexities of blockchain.
• Crypto as a Step-Function Improvement: He argues that crypto offers a fundamental upgrade to legacy financial systems, which are burdened by friction and costs like payment processing fees and chargebacks. Santi, drawing on his experience from ParaFi Capital, sees crypto as a ready-to-deploy settlement layer.
• The Regulatory Shift: Santi highlights that a major catalyst for this strategy was the recent shift in the U.S. regulatory environment, making it more viable to implement crypto solutions at scale. He points to Stripe's recent acquisitions of Bridge and Privy as a clear signal that savvy fintech leaders are now embracing crypto rails for stablecoin payments.
• "The question that sort of like I'm obsessed with is... why don't we have more users on chain? If I can bring a billion users on chain, I think the way to do that is acquiring large businesses with really large user bases and then kind of turning on the lights with crypto."

Overcoming Toxic Incentives and Building for the Long Term

• Luca from Pudgy Penguins addresses the industry's tendency to build inward-facing products. He argues that it has been highly profitable for builders to cater to existing crypto capital through schemes like points programs and token farming, which creates a cycle of short-term thinking.
• The Problem with Short-Term Cadence: Building for a mainstream audience is a long-term game, which clashes with crypto's accelerated timeline. This has conditioned builders to prioritize quick financial gains over sustainable, consumer-focused products.
• The Language of Consumer Adoption: Luca emphasizes the critical failure of crypto builders in branding and marketing. He uses the example of "Connect Account" versus "Connect Wallet," where the former has a total addressable market (TAM) of billions, while the latter is niche jargon. Small shifts in language and user flow can dramatically increase conversion.
• A Forced Paradigm Shift: Luca believes the old playbook of financial schemes is running out of steam. The most resilient products will be those not predicated on price volatility. The goal is to capture users' "heart and mind" rather than just their financial aspirations.
• "You've really got to build something that I think is not completely predicated on the financialization of crypto assets and really leverage blockchains as a tool for global composability and accessing global liquidity."

Abstracting Complexity to Onboard Mainstream Users

• Si from BAXUS explains how to overcome crypto's image problem by focusing on solving a tangible consumer problem first. BAXUS, a marketplace for spirits, targets collectors who may not be crypto-native, demonstrating that utility can drive adoption even among less tech-savvy demographics.
• Focus on What Consumers Want: Si argues that the average person doesn't care about the efficiency of wire transfers. They are, however, motivated by tangible benefits. He compares this to Nike's dedicated "Drops" app, where users will jump through hoops for a product they genuinely desire.
• Invisible Crypto Integration: BAXUS onboards users with familiar social sign-ons (Apple, Gmail) and only introduces crypto at the checkout. The platform explicitly shows users how much money they can save on credit card fees by paying with crypto, providing a direct, tangible incentive.
• Helio Pay: A payment service that allows users to pay with various cryptocurrencies, directly showing the cost savings compared to traditional payment methods.
• Onboarding Through Tangible Value: This strategy has successfully onboarded new users, including those in their 70s and 80s. The platform sees usage spikes around holidays when users gift bottles to family, demonstrating a real-world use case that bridges the crypto and physical worlds.

The Global Dichotomy of Crypto Exchanges

• Armani from Backpack provides a nuanced global perspective, explaining that crypto exchanges serve vastly different purposes in different regions. He contrasts the U.S. market, where crypto is primarily a speculative asset, with markets in Asia and South America, where it provides essential financial services.
• The U.S. Market: An Institutional Play: In the U.S., with its deep and trusted capital markets, crypto struggles to compete on core financial services. Instead, its primary role is as a speculative "casino" and as a backend technology for institutions.
• Institutional Demand: Wall Street firms are bullish on crypto but constrained by regulations. This creates a supply/demand imbalance, driving up the prices of accessible assets like Bitcoin ETFs, MicroStrategy (MSTR), and Coinbase (COIN) stock.
• The Asian Market: A Consumer Necessity: In regions like mainland China, crypto solves real-world problems. Armani gives the example of a user who cannot purchase a ChatGPT subscription due to the "Great Firewall" and capital controls. Crypto provides a way to access global services.
• Real-World Utility: In Asia and South America, there is strong retail demand for debit cards, savings accounts, and yield products that provide financial liberty. Tron is highlighted as the dominant chain for USDT stablecoin transfers, enabling people to move dollars freely.
• Strategic Implication: Investors and researchers should analyze opportunities through a regional lens. The most promising use cases and products will differ dramatically based on the maturity and limitations of local financial systems.

The Case for Building Consumer Crypto

• The panel discusses the motivation for building consumer applications when speculation remains so dominant. Luca argues that the largest value capture in crypto's next decade will be at the user aggregation layer, not the infrastructure layer.
• The Application Layer Opportunity: He draws an analogy to Python, the programming language. If Python had a token, Instagram (built on Python) would still be far more valuable. Similarly, consumer apps built on blockchains have the potential to become more valuable than the chains themselves.
• The Tipping Point for Consumer Apps: Luca asserts that the infrastructure is finally ready. "That statement's only been true for the last 6 months." The removal of key technical bottlenecks now allows for the creation of true enterprise-grade consumer products on-chain.
• Non-Native Adoption: Santi predicts that much of the value will be captured by non-crypto-native companies (like Robinhood or Nubank) that adopt crypto to enter new markets or serve customers more efficiently. He references the growth of DePIN (Decentralized Physical Infrastructure Networks), where Fortune 500 companies are already using decentralized data networks.

Emotional Utility: The Ultimate Moat

• The conversation concludes by identifying "emotional utility" as the key to building sustainable consumer products. Si from BAXUS argues that creating joy, access, and a sense of belonging is a powerful and defensible moat that financial engineering cannot replicate.
• Beyond Financial Utility: A user buying a rare bottle of tequila on BAXUS experiences joy and gains access to something exclusive. This emotional connection creates loyalty that a cheaper competitor cannot easily disrupt.
• Composable Joy: Luca notes that Pudgy Penguins' success with its trading cards is rooted in the joy of the experience, which he terms "emotional utility." This creates a powerful brand connection that transcends market speculation.
• The Power of Brand Loyalty: The panel agrees that just as consumers are loyal to an airline for the feeling of being a valued customer, crypto products can build a similar moat by delivering an emotionally resonant experience.
• "Emotional utility is the word. I love that cuz everyone's like financial utility. One of our successes has been emotional utility. And I love that you bring that up cuz consumer does that better than infra and trading and all of that."

Conclusion

The future of crypto growth lies not in financial engineering but in building consumer products that deliver tangible and emotional utility. Investors and researchers should focus on application-layer businesses that abstract away complexity and create genuine brand loyalty, as this is where the next wave of value will be captured.