Original author: Li Jin, Partner of Variant

Original compilation: Luffy, Foresight News

I observe two broad paths for the future of consumer cryptocurrencies:

Cryptocurrency originated in 2009 with just one asset: Bitcoin, which was designed to be a stateless currency. Bitcoin is a prime example of a category of crypto products that view cryptocurrency as the “why,” meaning that the crypto asset is the entire reason why people want to use something.

Cryptocurrency is very evident in these products: it’s the whole reason people come here. This category of “cryptocurrency-as-a-cause” products also includes memecoin, PFP, and other products that place cryptocurrencies at the center of their value proposition.

The target users of such products are usually early cryptocurrency adopters, degens, etc.

But cryptocurrencies are more than just money and assets, cryptocurrencies are also a technology. So over the past few years, weve started to see builders view cryptocurrencies as a how. In these products, cryptocurrencies are simply technological tools that help accomplish something. Cryptocurrencies are invisible and users have no idea the blockchain even exists.

This part of the product is aimed at ordinary users who have pain points and just hope a product can better solve the pain points.

Both categories are growing and I think they will both be hugely successful.

But what we are seeing now is a new wave of innovation that I call “only with crypto”: products that use the functionality provided by cryptocurrencies to create new experiences.

In this category, cryptocurrencies unlock a whole new design space and create engaging experiences that were simply not possible in Web2 before.

Products that can be built “only with cryptocurrencies” have unique features rooted in cryptocurrencies:

• Global payment channels

• Composability of on-chain assets and identities

• Create new markets and new assets

These elements combined will unlock new experiences.

Lets look at some examples.

Last month, I competed in “Crypto: The Game,” a two-week survival online game show.

There are certain dimensions of gaming that are only possible through cryptocurrency. First, it is built using crypto payment methods, allowing it to involve real monetary rewards and be globally accessible from day one. Founder Dylan Abruscato said he couldnt imagine building the game on any other payment channel.

In the future, you can imagine games introducing all kinds of novel mechanics that leverage cryptography, such as prediction markets that allow viewers to bet on what happens next, adding another layer of engagement in Web2.

Another example of just using cryptocurrencies is new networks that would not be possible without cryptocurrencies.

Based on my experience investing in markets over the past seven years or so, I realized that there should be a whole set of markets and network types in the world that would benefit the end user. But this is not the case, as the huge market and network types make it difficult to achieve a cold start.

Examples range from new dating apps to hyperlocal social networks to marketplaces for a variety of services. Many Web2 founders have tried to build similar networks, but have encountered huge difficulties in getting started or promoting them.

You can build these networks using tokens as new bootstrap tools. What excites me about this category is that instead of recreating a network that already exists in Web2 through tokens, you are building an entirely new network that doesnt currently exist.

Another example of something only possible with cryptocurrencies are new composable applications and distribution channels that connect to users’ wallets to enable richer operations.

Last month Farcaster launched Frames, a framework for building mini-applications that can be distributed within Farcaster.

In other words, these apps serve users needs where they already spend their time and where their wallets are already connected. Weve already seen developers use this new framework to create experiences ranging from ordering Girl Scout cookies to minting NFTs from social media feeds.

As an extension of this, composability allows you to create headless marketplaces that leverage global on-chain liquidity, but with an end user experience that meets the needs of users connecting wallets from anywhere. The end result is reduced transaction friction and deepened liquidity network effects.

As an example, we have seen prediction markets built using this framework, where users can bet on certain predictions from their social feeds.

These are some examples of “cryptocurrency-only” products, with new examples emerging every day.

This is the category of apps and web that Im most excited about and I believe will bring the next wave of users. Just as technology companies in Web1 and Web2 were previously only able to work on these new computing platforms, applications in Web3 will take advantage of the advantages offered by encryption technology to provide differentiated experiences that cannot be found elsewhere.

As a long-time investor in the consumer cryptocurrency space, I am very excited about this future!