Deep Dive: State of Consumer Apps on Solana
Deep Dive: State of Consumer Apps on Solana
A path to getting a billion users on-chain
Today we’re talking about the state of consumer apps on Solana. This post is divided into the following sections
What is Solana?
How are Web3 Consumer Apps different?
The categories of Consumer Apps being built on Solana
An overview into some of the top products in each category
A guess at what the future holds
What is Solana?
To quote their website, “Solana is a decentralized blockchain built to enable scalable, user-friendly apps for the world”
If you want to learn more about what a blockchain is, this video is a great starting point.
To break this down further - Solana is an L1 or a base blockchain, which means it is the source of truth for the data and code deployed by apps on top of it. You could think of it as a peer to Ethereum , which is also an L1 blockchain.
Typically, L1 blockchains are expensive because they take time and resources to process transactions to ensure they are not being corrupted. If you’ve lurked around crypto twitter you would have heard the term - “high gas fees” that’s what this is referring too.
This gave birth to another type of blockchain - a scaling or an L2 blockchain - which is built on top of a base chain (e.g. Polygon is built on top of Ethereum). These chains rely on the underlying chain as the source of truth but are much faster than the base chain. They do this by aggregating transactions and periodically writing them to the underlying base chain. They are therefore in theory - less secure.
The way this manifests on ethereum is that you carry out high value transactions (e.g. buying a cryptopunk for 500 or something ETH) on the “base chain” because these need to be secure but low value transactions (e.g. posting on a decentralised social network) on the L2 chain. A great example of this is how Dolce & Gabbana launched their recent NFT collection - minted on ethereum, sold in ETH on the polygon network. You can learn more about polygon and ETH scaling in this SuperTeam podcast here
Solana changes this because despite being an L1 chain it is really fast with really low transaction costs. It achieves this by using a different consensus mechanism which enables it process transactions in parallel instead of sequentially. The network does have its own challenges - there was a recent outage and even though the team resumed services as usual eventually - it is a good reminder of how early we are. You can learn more about Solana in a SuperTeam podcast here.
The implications of this are super exciting because it opens up the doors for people to build a universe of products and services “on-chain” because the cost of transacting (i.e. using products) is much lower.
To turbocharge this further, the founding team behind Solana has been nurturing their developers by providing an ecosystem of support through hackathons, grants and developer support (in a recent podcast their CEO Anatoly said it is only recently that he’s stopped jumping into discord channels helping people debug stuff because now there are enough organically created leaders within the community doing that).
Having been immersed into the ecosystem for a while I can tell you that it feels like one giant startup incubator in the process of taking off. This tweet from their co-founder summarises the sentiment:
How are Web3 Consumer Apps different?
Over the last decade, as consumers we’ve enjoyed some of the best apps built in the history of the internet. Designed to be simple, relevant (to the point of being addictive) and empowering us to be more connected - the original vision that facebook, twitter, whatsapp & other social media apps started off with.
It is not just our social life that moved online but a lot of other parts of our life too - we buy and sell goods (amazon, flipkart) and assets (zerodha, robinhood) online, we book services online (uber, ola, airbnb, urbanclap) , we get food, groceries and other things delivered (zomato, dunzo, big basket) , pay for utilities and p2p transactions online (PayTM, PhonePe, Google Pay). All this while the phone powered by Android & iOS have gotten faster and better along with growing internet penetration.
Take a minute to think about the fact that almost all of these companies came into existence (or meaningful scale) in the last 10 years. We take these for granted and they are a big part of our daily lives now - but they’ve literally come into existence in the last decade. The rate of change of technology is faster than ever - Packy McCormick talks about this in his post on Compounding Crazy.
So, what’s changing in consumer apps now or rather - how can these products and services get better.
Enter Web3.
The apps built on web3 bring the following benefits:
Owned by users
Consumers and creators of web2 products and services have very little control over key product decisions and they also don’t share most of the upside from the growth of these platforms. This was not an obvious issue 10 years ago because these categories were just being created. Artists could focus on making content and platforms focused on getting users hooked and scaling.
As mainstream adoption for these platforms exploded, creators realised that these platforms had all the control and could often take decisions which impacted their livelihood. E.g. if a platform wants to push a new format - it could tweak its algorithms to ensure anybody making that format got exponentially higher reach than others - thus forcing creators to adopt it. Given most of social media consumption is mindless scrolling it doesn’t take long for people to get hooked to the new format.
Creators and early users also realised that they have no equity upside in these platforms. Keep in mind these are who have contributed to the building and growth of these platforms in meaningful ways by driving adoption and providing feedback. This is not to take away from the visionary bets and the effort put in by the companies and their employees - but if you look at it from the creators lens - the scales are leaning way over on the other side right now.
Moving to crypto native web3 apps isn’t the only way to solve this, recently Indian EdTech platform Unacademy announced that they’ll be granting equity to educators. But this is not natural or intuitive to most of these platforms, neither are short term incentives of their execs aligned with doing this. I’m expecting more platforms to do this to be able to survive eventually but in the short term my bet is that these will be exceptions.
On the other hand, this is the default for web3 apps. Not out of good natured generosity, but because it is the only way they can build and grow. To be able to compete with the enormous existing platforms they need to offer creators and users something they’re not getting - ownership and upside.
At a very high level - they do this by issuing tokens which are required to use and govern the platform. The best case scenario is that early users earn tokens for generating output (content, engagement) which grows the platform. As more people enter either to use or speculate on the platform - the price of the token goes up, thus giving true equity upside to everyone who came in early.
Censorship resistant
Let’s break this down into two parts:
Platforms censoring creators or users
Over the last couple of years a lot of platforms have been struggling to find the balance between being just a platform (i.e. a pipe through which content flows) vs making publishing decisions. The concern is not about black and white cases - if something is obviously illegal - any platform must take it down. The issues arise on grey areas of ambiguous “community guidelines” defined, interpreted and enforced pretty much unilaterally by these platforms. As a creator all the hours you invested in building your identity, content and following can be taken away instantly. Now, platforms have no incentive to go rogue and do this at scale because everyone would leave but it is happening.
Here’s an example of it happening recently - this is not an endorsement of the content or the podcast - just an example of what platforms can do. It did get reversed as a “human error” after some outrage on twitter - but it is happening.
Web3 apps promise transparency and participation through on-chain governance where users and creators are active participants in this kind of decision making or atleast in setting up framework and structure to delegate it to a group within the community. This brings its own sets of coordination challenges that web3 apps will need to overcome (e.g. i doubt facebook as a company would’ve voted to spend a few billions on acquiring instagram and whatsapp - these were bold founder led bets).
Governance of web3 apps is super early, off-chain and informal in many cases and it’ll be interesting to see it plays out - products that are able to find a balance of empowering their community and moving fast will win.
Platforms getting censored
If a platform itself gets censored by the authorities of a region, creators lose everything along with it - a good example of this is the Tik Tok ban in India. The market did correct for this with many competitors spinning up instantly, but creators had to scamper and re-build themselves across these. In the world of web3 apps, with data being on-chain it should (in theory) be easy for creators to move their content and following to other platforms. Portability is also something communities will probably demand in the early stages of product building unlike web2 platforms (imagine an early instagram meeting where a new product manager said “how do we allow creators to move to another platform in case we go down …” , ngmi)
Meme: most web2 companies are wired to take a platform first approach
More resilient
The best web2 apps, especially social networks, have become so ubiquitous that it seems impossible to imagine them going down - but it’s been happening in the recent past. Either because some key infrastructure (AWS, Akamai) went down or infra issues within the company, most recently with facebook messing up their domains which stopped even the keycard systems that allowed employees getting into the building.
The promise of web3 apps is that they’ll be operated by many different “nodes” on a blockchain and thus not have a single point of failure. Again - these are early days, as we saw earlier - Solana had an outage - if that happens, all web3 apps on Solana are down too. These systems will need to earn this trust by coming good on their promises consistently over time.
These are the promises of web3 apps, let’s also look at the major areas of improvement and thus opportunity:
Better Onboarding
To use a web3 app you need to jump through many hoops. Because tokens are the ticket to using/transacting on these products you need to buy some on a centralised exchange, setup a web wallet (involves writing down a seed phrase) and then connect. This is way too much friction for a population that swipes to the next video in 3 seconds.
This will possibly play out as a race between big platforms entering (the waitlist for the Coinbase NFT platform is now higher than active users on OpenSea, Stripe has announced they’re setting up a crypto team) and web3 native ones solving this.
User Experience
There’s a lot to unpack here but I want to focus on two areas
The Blockchain is irreversible
It takes a minute to realise the flip-side of a decentralised platform. No one can help correct a mistake you made. By virtue of being centralised platforms provide the security of correcting most user errors (lost an item on an uber trip, forgot password on account, disputing a credit card charge etc) but web3 native apps are designed to not have this kind of control.
Here are some screenshots from Phantom support docs:
Source: Phantom Docs
Source: Phantom Docs
Platforms will trade off some of this decentralisation for providing this peace of mind to their consumers. Here’s an example of someone’s recent experience with FTX returning funds they sent to an incorrect chain
My guess is that the way this will play out is a suite of apps along the spectrum of decentralisation for people to pick based on what works for them & most likely those that optimise for usability while demonstrating security and trust consistently will gain much more adoption.
Mobile support
These apps are built web first whereas internet growth is exponentially higher on mobile platforms. I’ve personally never used a single web3 app on my phone, most of them don’t have native android or iOS apps. Solving for mobile UX will be critical to setting up for scale. This also opens up new challenges because these ecosystems are guarded by the companies that run these platforms and operating systems.
Customer Support
In my recent post on Port Finance I spoke about how a bug in their protocol which resulted in user’s losing funds was rectified and they paid compensation by broadcasting information via their social media.
To quote from that post … web3 products will get amazon level customer service soon but for now if you want to use a product, get a feel of their community, join their discord, follow their social media - you’ll be more plugged in when things break.
This works for early adopters who are part of the community and the building process, however it won’t scale - we’re used to a certain customer service from today’s platforms - and products that solve this will win disproportionate trust and thus scale.
Categories of Consumer Apps
With this context in mind, let’s understand the different categories of consumer apps being built on Solana.
At a high level, there are five categories of consumer apps on Solana
Web3 Wallets: Having a compatible wallet is a prerequisite to using any web3 apps. You will also need to fund it with some SOL, being on-chain means each time you use an app you need to pay (in case of Solana - a very small 0.0000xx SOL ) a fee to validators who keep the network running. A lot of apps have test networks too where you can get test tokens sent to your wallet and play around. This is also probably going to be the home of all your tokens, NFTs etc.
DeFi: This is the space with the most number of products and services right now. There’s a variety of products providing services like being able to exchange tokens, borrow and lend, speculate and invest. The first half of this post I’d written earlier has a good introduction to DeFi if you’re new to the space.
NFT Marketplaces: This is where you go to discover, create, buy and sell NFTs. In reality, you most likely discover the project on twitter or discord and then head over to the marketplace to make the transaction.
Games: This is the space with the fastest growth. At the time of writing, 3 out of the top 5 ignition projects by community votes are games. The biggest shift in web3 games is that all the in-game assets are developed as NFTs which players own - this gives players a direct financial upside from playing and makes it easy for people to trade and speculate on the success of the game - thus bringing in more liquidity. In fact - it is reported that Vitalik built Ethereum because his character in a game was rekt by the developers. Additionally, games also have governance tokens which give decision making back to community members.
Social Networks: This is probably the most nascent space of them all. And rightly so, we’re still building adoption for the platforms - it will be a while before there are sufficient network effects for these platforms to kick off. For all practical purposes the social networks used today are still Twitter, Discord, YouTube, Medium etc, but there are some really interesting products being built here and we’ll take about them later in this post.
Wait, what happened to DAOs?
You’ve probably heard about them if you’ve spent time in the space and yes, DAOs are a super exciting space as well. But they aren’t really products you consume - they're a tool that many of the products we’ll talk about use to organise themselves.
So, everything from DeFi protocols, games, NFT projects or any consumer app can choose to organise as a DAO. This is the most principled way to ensure community governance. There will probably be a separate post on the SuperTeam blog at some point about the state of DAOs on Solana. In this post we’ll focus on consumer apps.
Web3 Wallets
Like we said earlier, a wallet is your passport to entering the web3 universe. There are a few types of wallets:
Self-Custody Web Wallets
These are the most popular wallets right now, they operate as browser extensions and allow you to connect to any web3 app. The most popular Solana wallets are phantom (~800k users on the chrome store at the time of writing) & Solflare (~40k users) & Sollet [open source and more suited for developers]. Worth noting that none of these support mobile apps as of writing this. Slope is probably one of the first wallets with mobile support. I personally use phantom, it has a great interface and is very easy to use. Keep in mind - self-custody means you own your private key and seed phrase - anyone who gets them can access your wallet and if you lose them no one can help you get them back. It is common practice for people to have multiple wallets and use “burner” or “Test” wallets while interacting with unknown apps. In general do not click on links you don’t know and never auto-approve transactions from a website (phantom recently disabled the feature itself)
Hardware Wallets
These are probably the most secure wallets out there, because they aren’t connected to the network by default - so you don’t have to worry about them getting hacked because you clicked on a spammy link or authorised an incorrect transaction etc. Ledger is the most popular hardware wallet. It is advisable to use these for storing large amounts that you don’t plan on trading or spending. Ledger also supports extensions with wallets like Phantom and Solflare, attempting to give you both the security of a hardware wallet and the convenience of a web wallet.
Custodial Wallets
These are wallets operated by companies like Coinbase and FTX. They are typically “on-ramps”, i.e. you swap fiat money for crypto here and then fund your web3 wallet. While these are easier to use they aren’t decentralised, so if an exchange gets hacked or goes rogue you will lose your funds. Currently they don’t interact with web3 apps but that is changing with FTX recently launching their NFT marketplace and coinbase following suite.
Here’s an overview of the landscape of available wallets from the Solanians infographic, you should definitely follow their twitter account for the latest info on the ecosystem.
Source: Solanians Twitter Account
Apart from this there are many projects in the Solana ignition hackathon which are building wallets or tools around them, here’s an overview of some that I found interesting:
Radiant: Filling in the gap for mobile support, they’re launching mobile app wallets. You can find a demo here
Cryptid: It works like a wrapper around your wallet and attempts to simplify wallet operations and unlock new use cases like setting spending limits etc. I’m not sure about how they’ll bypass the wallet transaction singing step though
Hey Wallet: They’re setting a wallet and using twitter tipping as the growth hack to launch
IOU Guru: A hardware wallet kit which prints out paper receipts (IOUs) enabling you to pay one in crypto.
SollWallet: A multi-chain wallet with mobile app support
Unifolio: An aggregator to consolidate wallets across chains and view your balance in one place
Ignition wallet projects
DeFi
Alright, now that we’ve got our wallet in place, let’s start by understanding the types of DeFi Apps available. Here’s a snapshot of the space:
Source: Solanians Twitter
The DeFi eco-system broadly comprises of the following functions:
DEXs & Swaps
You can buy and sell tokens at market determined prices here. Raydium is probably one of the more popular ones. Most of these are powered by AMMs and not market making via order books - this means that they aggregate liquidity by accepting deposits and programmatically set prices. You can read more about this here
Lending & Borrowing
You can earn interest by depositing into liquidity pools and borrow against the collateral you’ve deposited. Some of the popular projects for this are marinade, parrot, francium & an upcoming one is cropper finance. What raydium and cropper finance have done is also setup launchpads which allow projects to do their IDOs and users who stake into the pools of these protocols can win allocation - thus incentivising users to provide liquidity.
Baskets & Indices
Solrise & Symmetry are two products which are going to provide baskets - similar to index funds - which simplify thematic or focused investing. Both are currently in beta, here’s a previous deepdive of symmetry from the superteam blog
NFT Marketplaces
These are places where you’ll browse, discover and buy NFTs. Worth noting that right now you’ll end up finding the project on twitter or another discord server and just buy the NFTs on these platforms. They’re all pretty easy to use, you just connect your web3 wallet and purchase or mint away. The popular ones are magic eden , solsea & solanart.
A cool feature on solanalysis is to checkout NFT stats like upcoming projects, top projects by volume and also for any given wallet. Yep, this is the flipside of wallets being public, anyone can paste your wallet address and see whatchu upto.
Gaming
The three things that web3 brings to games:
Community Ownership: Most games issue two types of tokens: gameplay and governance tokens. These create incentives such that those who create and build the game (designers, developers, community builders, players etc) not only control the development and roadmap of the game - but also share in the upside. Not just this, if the development group of a community has a fallout - users can copy paste the code, pick up their data and spin up another game to literally pick up from where they left off.
Composability: Another benefit of code and data being open is that anyone can come and build on top of the base game. Imagine if someone built a city with players, guns and cars and then someone else comes in & builds quests within different parts of the city - different design, visuals and storyline. This was originally the vision with the loot project.
Liquidity & Speculation : By building gameplay assets on-chain it enables players to get instant liquidity by selling their assets in closed or open marketplaces and it allows them to capture the upside directly from speculators who think the game will grow. Enabling direct play to earn is what fuelled the growth of axie infinity
Now, it is worth noting that a lot of games start by making a pitch, selling NFTs and tokens and then promising a game to be built in the future. This post is not investment advice, but one thing you absolutely should do while getting involved with games is spend time understanding the team and the likelihood of them delivering (capability and intent) on their promised game.
Two of the most anticipated games right now are Star Atlas & DeFi land:
Star Atlas is a space warfare game currently in development. They’ve sold a lot of tokens & NFTs and there’s a lot of excitement for it, from what I could gather the game is expected to take at least a couple of years to get ready.
DeFi Land has just announced a second IDO on raydium after a successful first one on Solanium. They attempt to gamify the world of finance - you can learn more about them in an earlier super team deep dive here
The space of gaming is growing rapidly - the recent ignition hackathon saw gaming as a category see the maximum growth from previous years - a lot of this is possibly fuelled by the massive success of Axie infinity. For continuous updates on the solana gaming world, I’d recommend you follow Barndog’s youtube channel
Social Networks
This is probably the most nascent of all spaces because base blockchains are yet to get the critical mass needed for these network effects to kick in. Couple of shoutouts:
Audius: Like spotify on-chain, audius migrated to Solana because of low cost and high speed.
Grape: While the long term mission is to build a toolset for DAOs, the grape discord is currently the best gateway into Solana. You can learn about upcoming projects, NFTs, games and meet teams through AMAs etc there (Disclaimer: I hold some grape and recently got involved with their DAO)
Gari: A web2 tik tok competitor in India has decided to issue their own creator coin (GARI) on Solana enabling direct monetization and community ownership.
Ignition Hackathon Winners
Here are the winners of the recent hackathon, a lot of these projects will go on to become full blown companies.
Source: Solanians Twitter
Within the gaming track I found StepN super interesting, “StepN is a move2earn mobile game. It aims to attract millions of non-crypto runners to the crypto realm through playing the game, whilst some game's profit goes to carbon offsetting.” You buy or rent a sneaker NFT, and basically level up by running more. Part of their profits go to carbon offsetting.
Conclusion
In Web3 apps that are built on public blockchains, software is open source and data is owned by users. Solana is the first blockchain that has really high speed, low fees & is systematically nurturing its ecosystem. This has created a new paradigm of consumer apps which are focused around communities that use them.
Today, we’re just seeing the first version of these apps. Today, NFTs & DeFi apps are dominating usage because people expect to make money really quickly from them (risky). Gaming and DAOs are growing really fast. It’s anyone’s guess as to how this’ll pan out over the next few years - I expect the activity to migrate towards value generating products and services.