Crypto and Mobile in 2022 Series Part 2: Blockchain, crypto, and what it means for mobile

In part one of our Crypto and Mobile in 2022 series, we looked at key developments that drove user adoption for crypto apps. With all the hype and excitement around crypto and blockchain, the topic can be a little difficult. Blockchain, cryptocurrency, Web3: what do these terms mean, and what do the technologies mean for mobile apps and developers?

In this post, we unpack key concepts, explore how mobile is a gateway to the crypto ecosystem, look at the challenges and opportunities facing crypto exchange apps, and explain why MMPs like Adjust play a crucial role in helping crypto and fintech apps become users’ preferred platform for digital assets.

Buzzwords, hype, and financial speculation aside, what underlies crypto and Web3 is a new type of back-end data structure. Perhaps the word most associated with the technical promise of crypto is “blockchain.” A blockchain is a type of decentralized, distributed (and usually public) digital ledger. It can be thought of as an open and distributed database. Blockchains use a series of records (“blocks”) that are linked together (“chain”) using cryptography. Blockchain architecture was popularized by the Bitcoin whitepaper in 2008. Distributed ledger technology (DLT) is also sometimes used, in order to include data models other than blockchains. These terms refer to how data is stored and structured.

A blockchain is maintained by a network of participants who reach an agreement on a state of the network using a consensus mechanism. These mechanisms are how networks are secured from attacks, and how participants come to agree on a state of truth for the network. The most commonly used are Proof of Work (PoW), as used by the Bitcoin network and currently Ethereum, and Proof of Stake (PoS), which is commonly used by smart contract platforms. Tokens on these networks are distributed to participants for their role in securing the network through the consensus mechanism.

Beginning with Ethereum, some blockchains are also smart contract platforms. What makes this different from the Bitcoin network (a network used for the peer-to-peer transaction of Bitcoin, the asset) is that the blockchain is used for more than just a record of currency transactions. It can also store more complex information and run smart contracts, which can execute complex transactions based upon agreed-upon conditions. These platforms are also sometimes called “Layer 1 networks,” and in addition to Ethereum, include projects such as Cardano, Solana, Avalanche, Luna, Tezos, and more. Applications built on these networks are called decentralized applications (dApps).

A large driver of the interest in crypto markets are two key use cases that have developed on these networks: decentralized finance (DeFi) and non-fungible tokens (NFTs). DeFi is a set of applications that provide decentralized financial services such as borrowing, lending, derivatives, and more to users using blockchain-based cryptocurrencies. We’ll discuss NFTs more in the next part of this series.

In the broadest sense, cryptocurrencies and NFTs are tradable digital assets built on digital legers (such as a blockchain) and secured by cryptography. However, beyond this simple definition, cryptocurrencies can vary widely, and how they relate to existing assets such as currencies, securities, and commodities is debated. Some cryptocurrencies (such as Bitcoin and Ether) are native assets integral to the functioning of a decentralized network, while others are created on top of existing smart contract platforms (most commonly, Ethereum).

In addition to investment in Bitcoin as a speculative asset, and usage of smart contract platforms for decentralized applications, two other classes of cryptocurrency have driven user adoption: stablecoins and memecoins. Stablecoins are cryptocurrencies pegged to a real-world financial asset, most commonly the United States Dollar. These can either be centrally issued and backed by assets in a bank account (such as with Tether or USD Coin), or can be algorithmic and decentralized (such as with DAI). USD Coin issuer Circle has recently been valued at $9 billion, while USDC has been integrated as a payment settlement option with payment networks Visa and Mastercard.

Meme coins such as Doge and Shiba Inu have gained popularity and high market capitalizations. While these joke-based coins lack technical novelty and utility, they have attracted large and passionate followings and media attention, attracting new users to the space with their community and virality.

Desire to use DeFi applications and purchase NFTs, as well as the desire to invest in cryptocurrencies as speculative assets or use as a payment and savings method (particularly in emerging markets), has driven a large wave of crypto adoption in 2020-2021, with the Chainanalysis Global Crypto Adoption Index showing a yearly rise of over 881% as of Q3 2021, and of over 2300% since Q3 2019. And mobile apps provide one of the primary and growing gateways to access these digital assets.

Mobile apps have arisen as a key gateway for access to cryptocurrencies and access to the crypto economy. The majority of crypto apps are exchanges, which allow users to buy, sell, transfer, and hold cryptocurrencies. While many have grown by focusing exclusively on crypto (such as Coinbase, CoinDCX, Binance, FTX, and crypto.com), they are increasingly facing competition from traditional fintech apps adding crypto purchasing functionality (such as Robinhood, Square, and PayPal). Other crypto-related apps include portfolio trackers, blockchain-based games (which we’ll cover in the next part of this series), and mobile wallets, which store private keys to access digital assets and allow users to interact with blockchain-based dApps.

In addition to exchanges, apps such as BlockFi and Celsius Network provide financial services using cryptocurrencies, such as lending and borrowing using crypto asset collateral. As competition for users and value grows, the line between crypto exchanges, financial services providers, and traditional fintech brokerages is beginning to become blurred, as larger apps seek to expand their footprint in the space.

However, as user adoption of crypto assets has grown, so have regulatory concerns. Financial regulators worldwide have grappled with how to classify cryptocurrencies and regulate access to them, and regulatory actions in the US have forced American-based crypto apps such as Coinbase and BlockFi to scuttle products such as interest-bearing products that were not properly registered as securities. Globally, an ever-evolving regulatory landscape provides a critical defining dimension to the operations and product offerings of crypto apps.

In addition to regulatory uncertainty with certain financial products, crypto exchange apps can also face challenges with mobile advertising. After the 2017-2018 crypto bull market, major advertising platforms such as Google, Facebook, Twitter, and LinkedIn cracked down and banned all cryptocurrency-related ads, due to the number of scams in the space. However, as the industry has matured, these restrictions have eased, and compliant crypto ads can once again advertise if they follow network policies.

While crypto apps face a number of challenges, they also have enormous opportunities, as public awareness and user demand for investing in digital assets has grown dramatically in 2021. As competition increases to become users’ preferred gateway to digital assets, crypto and fintech apps will need to maximize their user acquisition (UA) efforts, optimize their spend, and accurately measure every stage of the user journey, from pre- to post-install and beyond. Adjust provides a single platform for mobile attribution, campaign automation, and data privacy and protection, giving crypto app marketers the tools they need to grow their app at any stage. Request a demo here.

To learn more, download our upcoming “Fintech Deep Dive: Digital Currencies 2022 Playbook” to learn how crypto apps performed in 2021, how user engagement on crypto apps compares to stock trading apps, and how crypto apps can make the most of their UA efforts to attract and keep high-LTV users.