Transparency with Anonymity

Ankita Verma

February 13, 2024

The power of on-chain data for Growth & User Acquisition

Hello Fam!

Thank you for all the love in the previous newsletter. In this one, we'll explore the transformative potential of on-chain data and its role in user acquisition and growth in the decentralized era! To all the crypto marketers and growth leaders out there, this one is especially for you! Let’s dive right in 👇

User Acquisition Challenges in Web3

Today, effective user acquisition in Web3 is hard!

There are a few popular ways to do it – Airdrops, Conference Sponsorships, Rewarded Quests, Discord & Twitter Posts and Messaging, and Influencer Marketing. However, these approaches often lack the precision needed to target users effectively at scale. Hence, these methods fail to drive efficiency, let alone retention.

Old Web2 ways don’t work! Google, Twitter, and Facebook offer massive reach. But, it is often hard to directly bridge Web2 users into your Web3 product funnel just via marketing due to the steep learning curve (this will change in the future).

Plus, Web2 ad platforms rely on cookies for targeting, and with GDPR, California data rules, and cookie-blocking, crypto marketers are left scrambling for effective paid acquisition channels.

Enter the On-chain data

On-chain data, public and anonymized, offers a groundbreaking approach to understanding and engaging Web3 users. Think of it as cookies 2.0 – a unique, anonymous identifier connected to real purchase data, not just browsing history or unverified information. This shift unlocks powerful insights into user preferences and behaviours, unlocking a whole new way of understanding user behaviour.

Navigating the On-Chain Labyrinth: Finding Your Target Users

On-chain data holds tons of insights for user acquisition, but it is very easy to go down the rabbit hole if you don’t know what you are looking for. Here's your guide to filtering the data and pinpointing your ideal audience - starting with the most basic to more advanced ones!

Making sense of On-chain data - Basic to Advanced techniques!

1. Heuristics: These are simple rules that you implement to include and exclude wallets from your target list based on certain high-level criteria. These are sufficient if you want to keep the targeting broad. As a marketer, you ought to decide if the filters apply to your use case or not.

Some common examples include:

  • By Chain: This is quite straightforward – you can segment wallets by the chains they are active on. For instance, if you are an Arbitrum-based on-ramp solution, you may want to target wallets that transact on Arbitrum or chains that bridge easily to Arbitrum.
  • By Wallet Balance: Launching a high-end NFT collection? Target wallets with a minimum balance or create your thresholds to target a shrimp (small balance holder) or a whale (big spender).
  • By specific holdings: You can target those with specific tokens or NFTs (Pepe, BAYC, etc.) if you feel your offering is similar (think of it as a manual “look-alike” segmentation.)
  • By Activity levels: Weed out inactive accounts. Focus on wallets with recent activity to ensure engagement.

2. Transaction pattern matching: The next level of targeting is achieved by pattern-matching transaction types (NFTs, tokens, coins), transaction volume, transaction frequency, transaction timing, etc. There are tools available to do this or you might need some light-weight ML models to achieve this in-house.

This approach helps you map wallets to one or more popular categories of crypto enthusiasts, each with its unique style. You can target one or more of them based on your use case. Some example categories include:

1/ Newbie: New to crypto and web3, wallet has been recently created, and holds a handful of popular NFTs or coins.

2/ NFT holders: Buy and sell NFTs, curate collections, and participate in NFT communities.

3/ Flippers: These generally flip NFTs, and usually have a high average transaction frequency

4/ Long-term investors: Hold tokens for extended periods, prioritize established projects

5/ Play-to-earn gamers: Actively play blockchain games, and earn tokens through gameplay

6/ Metaverse enthusiasts: Own virtual land assets, rent them out for income and participate in metaverse economies.

7/ Early adopters: Buy tokens at launch stages.

8/ DAO members: Hold significant governance tokens, actively participate in voting and proposals, and influence decision-making.

9/ De-fi Degens: High trading volume, active across multiple protocols, seeking high yield opportunities, comfortable with risk.

10) Airdrop farmer: Points farmer looking to maximize farming points for future airdrops

3. Interest-based classifications: Next, is the most advanced level targeting that breaks the contracts down by granular “interests”. This is non-trivial, and one way to do it is a mix of data labelling, training, and using an AI classifier model that learns and tags contracts into categories based on their metadata.

With this, you will be able to classify Play-to-Earn gamers into Trading Card, MMO, RPG, FPS, etc. Similarly, defi degens into Stakers, Yield Famers, and High-volume Traders, NFT holders based on the types of NFTs they hold – e.g., Movie, Sports, Arts, Sneakers, Philanthropy.

Note, that there are a bunch of tools for this kind of filtering - some at the API level (Moralis, Mnemonic, 2.5 Intelligence) and some at the application level (which I discuss in detail below).

Applications - How to use the data

I know what most of you are thinking right now – “Ok, great, that’s a lot of data – what do I do with the data?” There are a few ways to do it:

  1. Silent drops: The easiest way to reach a wallet is by directly dropping a token or NFT with your message in the NFT metadata. You can reach out to any wallet and drop these promotional tokens/ NFTs.
  2. As such the pool you can reach out to is huge! However, lack of a notification mechanism attached natively to a wallet, most people might never know that you dropped something into their wallet.
  3. Also, with so many scam token drops, the users, even if they see your drop, might not engage with it. Additionally, wallet UIs/ portfolio viewers often push such drops to the “Auto-Hidden folder” or users might need to actively import these tokens. As such, these drops might not give you the desired results.
  1. Hidden and Auto-hidden folders on OpenSea
  2. Web3 Messaging: As a follow-up to 1), there are a few messaging/ notification services like XMTP, and WalletConnect Inbox that allow you to send notifications to target wallets.
  3. The good thing is that you can reach out to a targeted set of wallets that have opted-in for receiving notifications, hence, high-intent in some way. However, the size of the pool might be limited, given the opt-in clause, making it hard to replicate the results at scale.

Web3 Inbox Notifications by Wallet Connect

  1. Targeting Wallets on Web2 Platforms: This is a developing area where services like Addressable and Blaze have combed through social media to establish Twitter/ Telegram/ Wallet mappings.
  2. The idea is that you can set up your wallet-level targeting criteria and send these wallets a DM on Telegram or show them Ads on Twitter. The pro is that it solves the small audience issue by being able to reach out on largely popular platforms like Twitter/Telegram and Discord.
  3. These campaigns work if your campaigns are reward-based/ looking to grow social engagement and less for high-value conversions like transactions, swaps, NFT purchases, etc. You are also likely to run into Bot and Inactive account issues (the actual #Unique Active Wallet is small and ranges between 2M - 5M per DappRadar).
  1. A Twitter DM campaign on Blaze
  2. Reward-Based Quests: You've probably noticed those rewarded quests and giveaways all over Web3 – Galxe, QuestN, Layer3, and Zealy. They're all about getting users to do tasks (like following on Twitter, joining Discord, signing up, and depositing some crypto), and in return, they get tokens, airdrops, or NFTs.
  3. Gleam made this mainstream, and it's become a go-to growth hack in Web3. They give you big numbers super quickly, and it doesn't cost much.
  4. However, these users don’t add much value to your platform in the long run. Most are airdrops hunters, and some are from less wealthy countries going for small rewards.
  5. They don't engage with your product. Many of them have a bunch of tabs open, switching between questing sites to get as many rewards as possible.

A typical quest on Galxe

Read my detailed analysis of “Quest users” in my last blog post here.

  1. Web3-Native Ad Networks: Web3 Native Ad network like Persona focuses on placing Ads on high-quality decentralized applications – like Web3 wallets, decentralized exchanges, Web3 games, yield platforms, etc.
  2. These are applications where real crypto users frequent and perform transactions daily. Additionally, you can target based on on-chain personas. Read more on how we made it possible at Persona in a blog post from our CTO, Sanjana Haribhaskaran!
  3. By targeting users where they are actively transacting, the probability of them converting through these Ads is significantly higher.
  4. Keep in mind, that you might not be able to target the exact user wallet at the exact time because the number of active wallets in the Web3 world is still low. But over time, this has the potential to become one of the most scalable ways of acquiring hyper-targeted quality Web3 users.

Persona Ad on one of the most popular Dex Aggregator

Don’t forget these caveats and considerations

  • Bot Wallets: About 25% of wallets might be bots. The application you are using should ideally have a way to identify “real” users from “bots”.
  • Zombie Wallets: Make sure you have a way to target active wallets. Focus on those used in the past two weeks to ensure engagement.
  • Multiple Wallets: Users might have diverse wallets for different purposes. Keep in mind, that the wallet personas might be limited and may or may not present a full view of the user. A lot of companies are working on creating a unified on-chain identity which can potentially solve this missing piece but until then, remember, you are targeting a wallet that usually represents a slice of their on-chain persona.
  • Scaling Up: The active Web3 user pool is still small. Keep your targeting broad initially to reach enough users. If you go too narrow in your targeting you might not get in front of enough wallets to achieve significant results.
  • Privacy Matters: This brings me to the final word of caution about user privacy and consent. With the on-chain data being public, technology has to pave the way for a future where users have ownership of and gain from their data sharing. With ZK approaches, this goal might be achieved sooner than we think.

In conclusion, on-chain data represents more than just a tool; it signifies a paradigm shift in comprehending and interacting with Web3 users.

As we embark on this new frontier, let's proceed with caution and prioritize privacy, without compromising on efficiency. We're thrilled about its potential for scalable Web3 user acquisition. 🚀✨

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