1. Now is the time to prioritize and make mass adoption a visible, primary focus of development

Mass Adoption has always been the core challenge for Web3. However, the market often tends to focus on short-term wealth effects, overlooking key factors for project sustainability and achieving Mass Adoption. Since BTC’s launch in 2009, across various sectors, only centralized exchanges like Binance, with over 200 million users, have emerged as the first Web3 products to achieve Mass Adoption.

With the approval of the BTC ETF, the market has ushered in a bull market unique to BTC OGs and believers. In contrast, new coins have underperformed due to insufficient liquidity, and altcoins have not shown the same flourishing scene as in the last bull market. Most Web3 users have not experienced the prosperity of the bull market. During the last bull market, the number of crypto users rapidly grew from less than 50 million in 2019 to 420 million in 2022, a tenfold increase. However, from early 2024 until now, the global number of crypto users has only grown by 30 million, with growth significantly slower than in the previous bull market.

A global Web3 user growth chart, sourced from Triple-A

From a first-principles perspective, the fundamental reason for the disparity in growth lies in the market’s misaligned focus. Therefore, now is the critical moment to prioritize Mass Adoption as a visible and central part of the development efforts.

2. Obstacles to Web3 Achieving Mass Adoption

In its “Big Ideas in Tech 2024” report, A16Z emphasized that simplifying the user experience is fundamental to achieving Mass Adoption in Web3. Binance, in its “Road to One Billion On-chain Users” report, pointed out that two core conditions are required for Mass Adoption: first, on-chain applications that users want to use; and second, these applications must be easy to understand and access. Many products that have achieved Product-Market Fit (PMF) and successfully navigated market cycles validate these two key conditions. Additionally, the crypto industry needs to build the necessary infrastructure, tools, and public awareness to make the concept of “digital ownership” easy for global society to understand and access.

Mark Suster, Managing Partner at the Los Angeles-based venture capital firm Upfront Ventures, mentioned that in order to build a product for Mass Adoption, in addition to PMF, the product must be able to generate sustainable revenue and have a sufficiently large target market. Mass Adoption is not just about acquiring users but also capturing the liquidity that users hold.

IOBC Capital believes that resolving the compliance channel issues for traditional institutions entering Web3 is also key to achieving Mass Adoption. Compliance is seen as a form of soft infrastructure. With the approval of BTC/ETH ETFs, the establishment of BlackRock’s RWA fund, and Web3 development being added to U.S. presidential candidates’ campaign promises, the development of relevant policies and compliance channels is progressing steadily and irreversibly.

In summary, for Web3 to achieve Mass Adoption, the following conditions need to be met:

1. Address a real need (i.e., PMF);

2. The target market must include at least billions of people or have a scale of tens of billions of dollars;

3. Low adoption barriers and high product usability;

4. Mature upstream and downstream supply chains and infrastructure that support the product’s core value and experience;

5. The ability to acquire users on a large scale with precision;

6. A long-term sustainable business model.

We observe that for conditions 1-4, there have been many projects in the Web3 space with significant investment and continuous improvement. Telegram and TON bring advantages for condition 5. However, condition 6 has seen little progress. The core logic behind this lies in:

1. Effectively meet a real need (i.e. PMF);

2. The target market has at least billions of people or tens of billions of dollars;

3. The threshold for user adoption is low and the product is highly usable;

4. The upstream and downstream supply and infrastructure that support the core value and experience of the product are mature;

5. Able to acquire users on a large scale and accurately;

6. Have a long-term sustainable business model.

We see that for conditions 1 - 4, there are many projects in the Web3 field that have been focusing on investment and are constantly improving. And Telegram and TON pay dividends for condition 5. But condition 6 has seen little progress. But the core logic lies in:

• PMF (Product Market Fit) ≠ a business model; a good product does not necessarily mean it will generate profits.
• Without sustainable profitability, it becomes difficult to acquire users on a large scale and with precision over the long term. Airdrops can bring an initial surge of low-cost user acquisition, but if a project cannot sustain profitability, who would continue to pay for the tokens distributed in the airdrop?

Looking back at the previous cycle, DeFi, GameFi, NFTs, and the Metaverse all provided substantial momentum for Mass Adoption. Each of these areas met several of the above requirements: Axie Infinity and YGG addressed income issues for the unemployed in the Philippines during the pandemic, while STEPN matched users’ fitness needs and lowered entry barriers with its built-in wallet. However, despite the significant achievements of these projects, their inability to sustain a profitable business model led to a failure in maintaining Mass Adoption. Products without financial returns could not persuade users to pay, demonstrating valuable lessons and insights for future projects.

3. Advantages and Challenges of the TON Ecosystem in Achieving Mass Adoption

3.1 Advantages

Based on a Social Network of 1 Billion Users — Ability to Acquire Users at Scale

As of now, Telegram has 950 million monthly active users, and its social network offers extensive opportunities for social viral marketing. Social viral (Word-of-Mouth) marketing is one of the most efficient methods for large-scale user acquisition, and the ability to acquire users at scale is a crucial prerequisite for achieving Mass Adoption.

Comparison of Marketing Methods and Channel Effectiveness in Web2 Era, Source: Miniton

Leveraging the TON ecosystem’s advantages, it has successfully nurtured multiple ecosystem projects with tens of millions of users, with 60% of active projects being in the gaming sector. Among them, Notcoin was the first to achieve this milestone, attracting over 35 million crypto users since its launch. Its token, $NOT, went from launch to exchange listing in less than a month and saw a 400% increase within two weeks of listing, making it one of the standout altcoins in the current bull market.

Attracting Developers Through Mini Programs Framework — Maximizing Coverage of End-User Needs (PMF)

For ecosystems and infrastructure, achieving PMF (Product Market Fit) is a matter of probability. An ecosystem can address PMF by increasing the number of products—eventually, one of these products will meet user needs. The combination of Telegram Mini Programs and the TON ecosystem has clearly attracted numerous developers to create a large number of mini programs, closely approaching various user needs.

Developers are drawn to Telegram and TON for clear reasons: a large user base and a high conversion rate from exposure to application use. Mini programs provide the shortest access path for users, eliminating the need for URLs or downloads—users can access them instantly. This not only lowers the barrier to use but also improves user acquisition conversion rates.

Banana Gun is a Telegram bot that launched on Binance on July 18, 2024. It facilitates both automated and manual trading on the Ethereum network and supports manual token trading on the Solana network. Banana Gun’s success is undoubtedly due to Telegram’s bot and mini program support, as well as the advantages of reaching users on Telegram.

Highly Integrated MPC Wallet — Low Barrier, High Usability

TON currently offers two wallet tools: Telegram Wallet and TON Space. Except for users in the U.S., other users can activate Telegram Wallet by adding the wallet bot and start TON Space within the Telegram Wallet mini program. Transactions within the Telegram app—from registration to transfers to each payment—are designed to provide the most convenient user experience, akin to WeChat Pay.

With the low-barrier wallet provided by the TON ecosystem, Catizen in the TON ecosystem achieved a 10% on-chain user conversion rate, with 25 million players, about 1.5 million on-chain gamers, and over 500,000 paying users globally. In-game revenue exceeded $16 million.

On July 23, Binance Incubator announced an investment in Catizen’s issuer platform, Pluto Studio. Binance co-founder and Binance Labs head He Yi stated, “Binance Labs has always been keen on supporting projects like Pluto Studio that have the potential to attract billions of users to Web3. We look forward to supporting more visionary builders aiming to create products designed for Mass Adoption.”

3.2 Challenges

Single Dependency on Telegram

The biggest advantage of the TON ecosystem is its exclusive support from Telegram: it is the only Web3 infrastructure integrated with and promoted within Telegram. This is both an advantage and the greatest risk; any changes in Telegram could have systemic impacts on TON. For example, on the day Telegram founder Pavel Durov was detained, the TVL of the TON ecosystem dropped by over 60% in a single day, highlighting the systemic risk of relying solely on a centralized organization.

Underdeveloped DeFi Sector

While users are the foundation of funds, not all products and teams have the ability to monetize traffic effectively. The current widespread issue of insufficient user payment ability on Telegram is not an ecosystem problem but rather related to product types and teams. For example, Catizen and several Trading Bots/mini programs have effectively captured liquidity behind Telegram traffic. In high-revenue Web2 WeChat mini-games, about 60% of traffic comes from decentralized product virality. Nevertheless, the TON ecosystem’s TVL scale remains unreasonable, mainly due to the lack of DeFi projects. Currently, STON.fi and DeDust account for 80% of the total TVL in the TON ecosystem.

Incomplete Commercialization Services

Developers typically focus on four aspects of an ecosystem:

1. Platform scale

2. Infrastructure completeness

3. Efficiency in reaching users

4. Support for traffic monetization

In these four aspects, points 3 and 4 pertain to commercialization services/infrastructure. In these areas, TON has achieved only 50% effectiveness each.

In terms of reaching users, TON has achieved large-scale and efficient outreach: the current user acquisition model of the TON ecosystem mainly relies on Telegram Ads’ CPM model and mini-programs with point walls for traffic flow. However, due to data privacy protections, precise targeting and effective marketing cannot be achieved unless Telegram violates its product principles and collects extensive user data.

Regarding traffic monetization, TON offers excellent payment tools, such as Web3 payment tools Telegram Wallet and TON Space, as well as Web2 payment tool Telegram Star. However, many of the products most aligned with user needs, such as free tools and light games, are not suitable for paid monetization methods. These free products often struggle to establish a stable and reliable business model, which is essential for achieving Mass Adoption. The shortcomings in commercialization services/infrastructure within the TON ecosystem seem to be the final unresolved obstacle to creating Mass Adoption products.

Regarding the sustainability of business models, there are participants addressing this issue. MiniTon, a commercialization service provider funded by the TON Foundation, offers TaaS (Tournaments as a Service) solutions for casual and competitive game developers. This helps them move beyond reliance on ad-based monetization and redefines game social operation models to establish sustainable Web3 business models.

The revenue model for competitive tournaments (EF & RK) is one of the three major game monetization models, alongside ad-based (IAA) and in-app purchases (IAP). This model has been widely used in PvP games such as chess, with an annual market size exceeding $30 billion in the Web2 market and has been a major driver of Mass Adoption in Web2 social applications. MiniTon utilizes crypto technology to seamlessly integrate the competitive tournament model with Telegram and optimizes the operation model for PvP games in the $30 billion market using crypto social protocols.

MiniTon received significant investment and incubation from Waterdrip Capital in its early development phase. Currently, MiniTon provides a social competitive platform where players can experience esports in single-player casual games and build new social connections through game battle contracts. Developers can integrate MiniTon’s monetization solutions with just 1.5 days of development time by using the provided SDK.

As of now, MiniTon has completed Alpha I closed testing, with 30,000 users participating and achieving a 1% conversion rate. The Alpha II test version is expected to launch at the end of September, expanding the testing scale to hundreds of thousands of users.

Notably, MiniTon’s game contracts are a multi-chain protocol, not relying solely on a single ecosystem, thus offering strong resistance to systemic risks.

4. How Much Can the TON Ecosystem Learn from WeChat’s Successes and Failures?

4.1 Is WeChat worthy of reference?

WeChat and Telegram are both social products centered around communication and social relationships. However, there are significant differences between their users. Here is the user data for Telegram over the past week, according to third-party monitoring:

Overview of Telegram user data, data source: Waterdrip Capital

4.2 The user portraits of Telegram and WeChat users are different:

Excluding differences in geographic user distribution, the most notable distinction between Telegram and WeChat lies in user behavior:

• WeChat is a typical social networking app focused on close personal connections, whereas Telegram functions more as a general social app, similar to QQ.
• WeChat: Average daily usage time per user is 1.5 hours. Telegram: Average daily usage time per user is 0.5 hours.

As of June 2024, WeChat Mini Programs have achieved an impressive 930 million monthly active users, with a penetration rate exceeding 90%. The key reasons for success in the WeChat Mini Program ecosystem include:

1. Ultra-lightweight user access: No need to download or enter a URL; instant use.

2. Effective social-based user acquisition: Approximately 60% of traffic comes from user sharing.

3. New growth markets: As of February 2024, WeChat Mini Games had 755 million monthly active users, surpassing the 650 million users of mobile game apps.

4. Efficient commercialization infrastructure: Through WeChat ads and WeChat Pay, Mini Game revenue reached $3 billion in 2023.

Telegram Mini Programs already possess the first three advantages listed above, but there are noticeable gaps compared to WeChat:

1. Weak user payment capacity: The majority of users come from low-payment-capacity regions.

2. Lack of precise targeting: Due to privacy protection principles, precise marketing services like those offered by WeChat Ads are not available, making it difficult to reach high-net-worth or target users.

3. Low payment penetration: Telegram Wallet penetration is only 5%, compared to WeChat Pay’s 92.4%.

Nevertheless, Telegram remains the most penetrated product in the crypto space. Targeting high-net-worth users within the crypto sector can mitigate some of Telegram Mini Programs’ current shortcomings. Therefore, the successful model of WeChat Mini Programs is highly worth referencing.

4.3 Reference Project Development Paths from WeChat Mini Programs / Mini Games Ecosystem

By examining the development history of WeChat Mini Games, we find that the survival of WeChat Mini Game developers heavily depends on the level of developer services provided by WeChat.

Timeline of WeChat Mini Programs Development and Project Examples

Early Phase of WeChat Mini Programs’ Wild Growth:

During this period, WeChat’s operations lagged behind, and the ecosystem developed chaotically. Due to the ease of acquiring a large number of users through viral sharing, there was a prevalence of “reskinned” games—quickly developed in 5 days and recouped costs within 3 days of launch—resulting in relatively low-quality games.

At this stage, mini-games were distributed through decentralized means, primarily relying on other mini-programs and WeChat advertising for user acquisition. The revenue for mini-games and free mini-programs mainly came from advertising (IAA), which involved importing users from other mini-games or mini-programs and integrating WeChat’s advertising monetization plugins.

For Web3 developers, it’s noteworthy that Telegram is currently at a similar stage. Excluding the standout game “Pirates Have Arrived,” 98% of the Top 50 games in this period were casual or casual competitive games, such as “Happy Landlord,” “Number Match,” “Brain Clash,” “Geometry Escape,” and “I Want to Be the Emperor,” which shares similarities with the gameplay of the current Catizen.

2020 - 2022: Ecosystem Adjustment

During this period, there were unique macroeconomic factors, such as the health code mini-program reaching 800 million users in 2020. By October 2022, WeChat Mini Programs had reached 1 billion monthly active users. The WeChat Mini Programs ecosystem focused on expanding traditional industries such as education, healthcare, and dining, while also guiding the gaming industry to improve product quality. Over 100 new features and interfaces were introduced to enhance commercial monetization services (IAA and IAP).

The only standout game during this period was “Sheep Were Lost.” With WeChat increasing its standards for game content quality and restricting viral sharing behaviors, the WeChat mini-games ecosystem exhibited a “smile curve.” Despite this, WeChat’s operational strategy was successful. Among the selected games, 50 games generated over 50 million in revenue, and 7 games earned over 100 million.

WeChat Mini Games User “Smile Curve,” Source: Waterdrip Capital

For Web3 developers, it is noteworthy that during this period, the best-selling games were still casual competitive products, such as card games. From a gameplay perspective, card games, MMORPGs, management, and idle games generated the highest revenue.

From 2023 to now, there has been stable growth with bursts of activity. Thanks to WeChat Mini Programs’ continued guidance for developers to create high-quality content and ongoing optimization of technical support, a large number of mid-to-heavyweight high-revenue games have emerged.

According to Tencent’s Q1 2024 financial report, the total user time on WeChat Mini Programs increased by over 20% year-on-year. Revenue from WeChat Mini Games in 2023 grew threefold compared to 2022, with more than 240 games achieving quarterly revenues exceeding 10 million within a year.

Reasons for the burst of growth in WeChat Mini Programs / Mini Games during this period include:

• Allowing WeChat Mini Games and Mini Programs to advertise on external platforms (such as Douyin) further improved ad placement efficiency.
• Added live-streaming customer acquisition channels.
• The top-selling game categories shifted from primarily card games to include MMORPG, idle games, card games, and management games.
• Monetization transitioned from solely IAA (In-App Ads) or IAP (In-App Purchases) to a mixed model, incorporating both IAA and IAP.

4.4 Lessons TON Can Learn from the Growth of WeChat Mini Programs

• Constantly focus on addressing developers’ concerns (PMF), such as improving compatibility with game engines, enhancing user acquisition efficiency, opening external marketing channels beyond Telegram for Telegram mini-programs, increasing wallet adoption, and supporting commercialization solutions.
• Have a rapid response mechanism to market changes similar to WeChat’s, which adjusted its ecosystem policies frequently in its early stages.
• Provide substantial support for each startup product, such as offering dedicated and free traffic support for each mini-program, akin to WeChat’s selection policies.
• Encourage the creation of high-quality content within the ecosystem.

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