The cryptocurrency sector is now prioritizing user engagement after investing years in creating blockchain-powered financial products. The challenge lies in encouraging users to adopt and consistently utilize these offerings.
This issue is becoming more critical as the crypto industry integrates further into traditional finance. Asset managers are launching tokenized funds, exchanges are branching into lending and payment services, and blockchain networks are targeting institutional clients. The primary concern has transitioned from merely demonstrating that these products can be developed to understanding how to effectively attract consumers and institutions to utilize them.
For companies like Coinbase, the focus has shifted from the underlying technology to addressing customer needs regarding their finances.
“Historically, the crypto industry has been heavily technology-focused,” remarked Ben Shen, Coinbase's head of financial services and loyalty products. Many products were laden with complex terminology that could overwhelm users.
As cryptocurrency increasingly aligns with conventional financial services, this emphasis on technology has diminished. Customers are more interested in how they can grow, hold, send, spend, or borrow against their money, rather than the blockchain technology itself.
Coinbase aims to identify what Shen refers to as “magic moments,” which are instances where a customer can instantly recognize the value of a product. However, enticing a user to try a product just once is not sufficient.
Coinbase envisions user adoption as a cyclical process: funds are deposited onto the platform, customers find reasons to retain their funds, and then they discover various ways to utilize them. This could involve receiving salaries, making deposits, earning rewards on holdings, and eventually spending or trading those assets.
“Creating the right magic moments across these three components of the cycle will encourage users to bring more capital onto the platform,” Shen explained.
Incentives play a crucial role in initiating this cycle. Some rewards are integrated into the product, while others serve as temporary motivations to encourage users to transfer funds from existing products. These strategies can help overcome user hesitance, according to Shen.
However, Coinbase aims for users to integrate their funds into the platform beyond just promotional incentives. The expectation is that once users deposit their money, they will find additional opportunities to engage with it.
For instance, a user might initially be attracted by a yield offer but later use the same assets for trading or spending.
"Demonstrate Adoption"
Kevin O'Leary, the Shark Tank investor and chairman of O'Leary Ventures, highlights a similar issue affecting blockchain networks.
Addressing attendees at the Avalanche Summit in New York recently, O'Leary stated that networks seeking institutional clients must prove actual usage of their platforms.
“The hurdle is ‘demonstrate real adoption,’” O'Leary noted.
“The advantages of that blockchain are evident to technologists and S&P 500 companies who recognize its importance for scaling operations, without being overly concerned about transaction volumes,” he added. “However, what I want to see—and everyone else does—is real business deals and adoption, not just pilot programs.”
Securing a significant client can also facilitate attracting additional clients. “The most effective marketing for technology is word-of-mouth among competitors,” O'Leary said.
There is also a consumer angle to this. Trust is vital in financial services, Shen emphasized, as individuals are often entrusting their funds, paychecks, and savings. Recommendations from others who have successfully used a service can significantly influence potential customers.
“In financial services, social proof is crucial,” he stated.
Bringing Products to Consumers
For some companies, achieving user adoption means placing their products where customers are already active.
WisdomTree, a $150 billion asset manager, has developed several tokenized funds, including WTGXX, a tokenized money market fund with approximately $1.2 billion in assets, according to Will Peck, WisdomTree's head of digital assets.
Now, the firm aims to expand access to these funds.
“You don’t have to come directly to WisdomTree,” Peck stated in an interview. “There will be multiple access points, allowing you to engage with WisdomTree through different interfaces.”
Recently, WisdomTree announced a partnership with MoonPay, enabling eligible U.S. retail customers to access WTGXX through MoonPay's platform. Customers who have already completed their verification with MoonPay can purchase the fund using stablecoins without needing to register separately with WisdomTree, Peck explained. MoonPay is not intended to be the only platform for WisdomTree's tokenized funds.
Coinbase is also exploring ways to reach users outside its own platform.
Shen believes that this will not eliminate the need for companies to develop their own applications and websites. Many will likely adopt a dual approach: maintaining their primary platform while also seeking alternative distribution channels for their products.
AI agents could potentially serve as another distribution method, he suggested. Coinbase is working on integrating its services with third-party AI tools while continuing to develop its own platform. Although the technology and products are still under development, the necessity for user engagement is becoming increasingly apparent.
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