Web3 Traffic Shift: Integrating & Monetizing Users on Web2 Platforms

20 min readSep 18, 2024

Disclaimer: This document is provided for informational purposes only. It is not intended to provide any investment, tax, or legal advice, nor should it be considered any investment advice relating to virtual assets to any person in any jurisdiction.This document may include estimates, forward-looking statements, and insights, including forecasts, which should not be considered as a guarantee of future performance. The information provided is not intended to be exhaustive or comprehensive, and no express or implied representations or warranties are made regarding its accuracy or completeness. The opinions expressed in this document are as of Sep 2024 and are subject to change without notice. Readers should exercise their own discretion when relying on the information presented herein. It is important to note that investing involves inherent risks that should be carefully considered.

This report was developed in collaboration with Samuel Qin, who played a pivotal role in the research and formulation of this document. Follow his insights on X: @Samuel_Q6.

TL,DR

Current Status and Challenges of Web3: Currently lacks a globally recognized narrative, leading to stagnation in user growth and insufficient liquidity within the Web3 ecosystem. Expanding channels for traffic acquisition, lowering entry barriers for users, and uncovering genuine user needs are key to future development.
Traffic Potential of Web2 Platforms: As one of the top four global instant messaging apps, Telegram holds immense potential for user conversion for the cryptocurrency world. Many crypto projects on Telegram leverage its community management and traffic accumulation functions to accelerate the transition of users into crypto.
Telegram’s Strategic Blockchain Integrations: Telegram has partnered closely with The Open Network (TON) blockchain and has created a venture builder (TOP). Launch of an integrated wallet and a Mini App ecosystem, it is easy for users to explore Web3 without leaving Telegram’s native environment.
Traffic Monetization and Integration: Efforts are focused on the gaming sector, avoiding the reliance on token issuance and paving the way for consumer-oriented mini apps. Telegram’s group and channel features aid Web3 projects in community building and user engagement, while ads and push notifications help users discover new Web3 Apps.
New Era of Traffic in Crypto: Transitioning Web2 users to Web3 requires a smoother path. Platforms like Telegram can leverage their traffic to facilitate this shift. Diverse, user-driven applications are key to attracting new users.
Future Direction of the Crypto Industry: After turbulent market shifts, Web3 has gained significant growth in both popularity and diversity worldwide. The focus now is on finding stable revenue streams and leveraging traffic growth to reshape the industry. The future holds opportunities in both existing and new user markets.

1. Scarce Traffic

Is Market Confidence Returning?

Since hitting its all-time high in 2021, the crypto market has spent the past year in a bearish downturn, with market confidence shaken by several factors. In the post-COVID landscape , the global economy has been disrupted by frequent regional conflicts, energy crises, and soaring inflation. In response, Central Banks worldwide have hiked interest rates to curb inflation. This tightening of monetary policy and higher interest rates have driven up investment costs. Moreover, the sustained strength of the U.S. dollar has further squeezed crypto investments, which are already viewed as high-risk assets.

*Source:* *Cryptorank Bitcoin & Traditional Financial Assets Performance in 2022*

Since 2023, frequent issues affecting centralized exchanges (CEXs) and crypto banks have significantly shaken confidence in the industry. The crypto market lacks a globally accepted narrative to drive growth. While sectors like AI, Decentralized Public Infrastructure Networks (DePIN), memes and inscriptions have shown promising performance and feedback, their inherent characteristics and maturity levels have prevented them from achieving scale. This is in stark contrast to the widespread participation and discussion sparked by the DeFi and NFT sectors in the previous cycle.

The recent rebound in the crypto market, driven by the arrival on the market of multiple Bitcoin Exchange Traded Funds (ETFs) and the entry of traditional financial institutions, has been limited. As of now, the total market capitalization of crypto stands at approximately $2.07 trillion, down 28% from its all-time high of $2.88 trillion and about 21% below its peak in the first half of 2024 ($2.63 trillion).

Source: *Cryptorank BTC Significantly outperforms Traditional Financial Assets in 2023*

Source: *TradingView Crypto Total Market Cap*

The Cycle Remains Sluggish

For stablecoins, the overall market capitalization has increased by $40 billion since the beginning of 2024. However, this growth is noticeably slower than the increase during the previous cycle from the 2021H2 to 2022H1.

Source: *DefiLlama Total Market Cap of Stable Coins*

In 2024H1, BTC surpassed its previous all-time high, with its market dominance clearly on the rise. The siphon effect of leading cryptocurrencies is evident, as the market cap of coins other than BTC and ETH hasn’t seen much growth since the last bear market. This suggests that, as speculative bubbles in financially-driven topics deflate, investors are hesitant to enter or even stay in the market, choosing instead to minimize their exposure to the risks associated with crypto asset allocations.

*Source: TradingView Market Cap BTC Dominance %*

Source: *Crypto Total Market Cap VS Total CryptoCap without BTC & ETH*

The Crypto Traffic Dilemma

The current situation can be attributed to the following reasons:

Lack of New Users: The crypto sector’s regulatory frameworks are relatively underdeveloped and in need of further refinement. The disclosure of risks related to sudden events, policies, etc., can lead to significant price volatility, prompting countries to impose stricter entry restrictions on the crypto market.
Challenges with Existing Users: Blockchain technology lacks fresh and practical use cases, making it difficult to implement. Projects overly focus on financial aspects and rely too heavily on price fluctuations, which severely shortens their lifespan. As speculative bubbles in finance-related topics burst, participants are unwilling to stay in the market.
Lack of Innovative Business Models: While current blockchain projects excel in different technical aspects, they still rely on token issuance expectations to attract participants. Once the expected returns are achieved, projects often lose momentum.
Lack of Access Channels: Entry barriers for Web3 users are high, with more complex initial account (wallet) setups that differ significantly from mainstream account systems, resulting in higher user friction. It is also challenging to discover new applications through specific channels and information is more fragmented.

Given these challenges, attracting new users has become crucial for the growth of the crypto industry. Expanding traffic acquisition channels, identifying potential users, lowering entry barriers, and meeting real user needs will be key to driving industry change. Telegram is currently at a pivotal point in this process.

2. Untapped Platform Traffic

In April 2024, Telegram surpassed 950 million monthly active users, placing it among the top four instant messaging apps globally. Its user base is widely distributed, with downloads spread across the world. In the regions where Telegram ranks highest, there is a significant presence of Web3 participants who are generally more open to the crypto industry. When these hundreds of millions of users are fully exposed to the crypto space, the potential is enormous.

Telegram’s use of end-to-end encryption aligns with Web3’s privacy principles, making it popular with many Web3 projects. It has become a vital hub for community interaction and traffic retention within the Web3 ecosystem. Users can join various groups and channels to access a wealth of cryptocurrency information and engage in real-time market discussions. This environment not only sparks users’ interest in cryptocurrencies but also provides a steady stream of industry news and educational resources, helping to accelerate their journey into the crypto world.

Many crypto projects leverage community enthusiasts’ interactions on Telegram to offer early investment opportunities, airdrops, and testnet access. These activities provide easy entry points for everyday users, drawing them into the cryptocurrency market. Moreover, Telegram’s multi-platform reach allows users to move seamlessly between different systems and devices, ensuring a consistent experience across platforms and boosting their confidence to explore the crypto world further.

3. Leveraging Traffic Through Blockchain

In recent years, Telegram has established a deep cooperative relationship with the TON blockchain while TOP has helped fund and scale multiple successful projects on TON. Leveraging TON’s established sharding architecture, Telegram can handle massive user interactions on its platform, enabling a deeper integration with Web3 applications. Telegram and TON have formed an official partnership to jointly develop the Telegram Web3 ecosystem. TOP developed the Telegram integrated wallet (@wallet), which is accessible from Telegram’s main interface, allowing users to take their first seamless step into the on-chain era.

Through the development of TON’s underlying infrastructure, Telegram aims to acquire users via its centralized platform traffic, subsequently driving commercial growth and product iteration. This collaboration creates a collaborative, mutually beneficial ecosystem between Telegram, TON and TOP, with significant potential for further expansion.

Currently, the @wallet feature, as a custodial wallet, allows users to perform transactions within Telegram, similar to WeChat Pay’s in-chat transfer functionality, while also supporting on-chain interactions within the Telegram app. The @wallet also includes the non-custodial wallet service TON Space. Unlike @wallet, TON Space supports NFTs and Jettons, enabling users to experience more DApp functionalities through this channel. Funds can also be transferred between @wallet and TON Space. The integration of various payment options within Mini Apps, web applications that work inside Telegram’s interface, further shortens the path for users to seamlessly transition to Web3.

In April of this year, Tether announced the issuance of USDt on the TON network. Currently, the net circulating supply is approximately $680 million, ranking fifth in terms of stablecoin circulation on the platform. In July, USDt-TON became the fastest growing USDt standard by total circulation among those that are tracked by Tether. The significant circulation of stablecoins indicates strong demand for crypto services on TON.

USDt payments on TON are enhanced by the W5 standard for gasless payments. This standard was released by the team behind Tonkeeper, a TON-based wallet, incubated by The Open Platform. The feature allows users to cover network fees using the same token being transferred, eliminating the need to hold Toncoin for transaction costs. W5 is available to developers through the TON API, a service for building dApps on TON. The presence of gasless payments across the ecosystem further shortens the path for onboarding Web2 users to the Web3 environment by eliminating the need to acquire the native token first to handle the transaction. This is especially useful for newcomers who may have received a USDt payment or reward but do not own Toncoin yet.

Source: https://tether.to/ru/transparency/

It was also disclosed in July 2024 that a Layer-2 expansion network, TAC (TON Application Chain), will be launched on TON Blockchain. This network is expected to use Polygon CDK and Agglayer interoperability protocols to overcome previous incompatibility issues with Ethereum, enhancing the integration of decentralized applications within Telegram and unlocking new possibilities that could drive significant user engagement.

In June, TON’s daily active address surpassed those of Ethereum, however, both daily active addresses and transaction volume still lag behind more established blockchains and those attracting significant industry attention, like Solana. However, since the second half of 2023, TON has shown notable growth, with increases that outpace other chains during the same period.

Source: *https://app.artemisanalytics.com/chains*

Meanwhile, older blockchains have become bogged down in internal competition, focusing on performance scaling and consolidating various sectors. This has made their narratives increasingly stale and out of touch. Their pursuit of fleeting industry trends has further diluted their focus, limiting their potential for sustained growth. While chains associated with memes and inscriptions have performed exceptionally well this cycle, users find it challenging to sustain profits through these models.

In contrast, the TON ecosystem, bolstered by deep collaboration with Telegram, is closely tied to traditional social applications. The frequent release of hit Web3 mini-programs has captured significant market and industry interest, drawing a large influx of users and developers.

4. Lessons from Others

The Rise of Telegram Bots

Telegram Bots have seen significant development since the introduction of the Bot API in 2015. These bots can perform a wide range of automated tasks within the Telegram chat environment, from sending personalized messages to handling transactions. This capability has allowed developers to create richer interactive experiences and e-commerce features. With the emergence of blockchain and Web3, Telegram Bots have increasingly supported related applications. For instance, the @wallet bot mentioned earlier exemplifies Telegram’s strategic push into Web3, highlighting its commitment to advancing cryptocurrency trading and smart contract interactions.

The automated, embedded interactivity that bots provide allows users to trigger predefined actions through clicks, text inputs, and other forms of engagement. For example, trading data from the past 180 days shows that the top 10 trading bots have collectively processed over $30 billion in transactions, spanning 13 blockchains, including Ethereum and Solana. Data from a leading trading bot indicates that, in the last six months, it has gained over 10,000 new users daily, with a cumulative user base exceeding 200,000. This suggests that as memecoins gain popularity, the use of bots for participating in new token launches, alongside on-chain contract deployments and transaction monitoring, has significantly streamlined the trading process for users.

*Source:* *https://dune.com/whale_hunter/dex-trading-bot-wars*

*Source:* *https://dune.com/whale_hunter/banana-gun-bot*

Launch of Telegram Mini Apps (TMAs)

Telegram Mini Apps, introduced in 2023, are a major feature which marks a logical evolution of the Bot Platform. They function similarly to regular websites, complementing Telegram’s existing interface and signaling its transition from a simple messaging app to a comprehensive service platform. These Mini Apps enable developers to create lightweight applications within Telegram, allowing users to access a variety of services — from e-commerce to interactive content — directly within the chat environment.

This initiative is part of Telegram’s broader strategy to integrate more deeply with the Web3 ecosystem, offering developers and users innovative opportunities within Telegram’s secure environment. Telegram Mini Apps (TMAs) aggregate functionalities, allowing developers to incorporate HTML, CSS, and JavaScript into TMAs, and also provide tools to assist with integration. TMAs support 20 common payment methods, including Google Pay, Apple Pay and Telegram Wallet.

A selection of TMAs is available in Telegram Apps Center (tApps Center) — a catalog showcasing pre-moderated TMAs across various categories. tApps Center functions as a centralized marketplace where users can discover and access a wide range of Telegram-based applications. For developers, it provides a streamlined platform to distribute and promote their applications within the Telegram environment, supported by tools like the Apps Moderation Bot to ensure quality and compliance.

The Future of TMAs

TMAs are similar to WeChat Mini Programs, with both Telegram and WeChat leveraging their large user bases as key assets. Launched in 2016, WeChat Mini Programs have become an essential feature, rooted in a vast user base and offering a wealth of use cases that can inform the development of TMAs. As one of the most frequently used types of applications, instant messaging platforms are critical channels for traffic retention within the internet ecosystem. One of the key challenges TMAs face is how to activate and monetize the significant traffic that is already embedded within their platform.

According to relevant data, the top 20 WeChat Mini Programs by MAU fall into six main categories: Social Life, Payments and Finance, Shopping and Dining, Office and Business, Travel Service, Gaming and Entertainment. WeChat Mini Programs cover nearly all aspects of users’ daily lives, and over time, users have become accustomed to managing their personal needs within WeChat’s all-in-one ecosystem.

This long-term user habit-building is something TMAs can aspire to replicate, offering a similarly seamless experience within Telegram.

*6 Main Categories for Wechat Mini programs*

Mini Program developers targeting billions of users only need to focus on traffic acquisition and subsequent monetization, relying on platform-constructed functional components (such as payment and advertising). This approach is far more efficient than developing an excellent app independently and then trying to attract users. As a result, nearly all commercial brands in China have established their own Mini Programs within WeChat, using them both as another form of e-commerce channel and as a member management system. They further operate their brand, store, or personal private traffic through tools like WeChat Enterprise, groups, and official accounts.

This traffic operation logic is also entirely applicable in Telegram’s Web3 ecosystem. Project teams can focus on developing lightweight applications while leveraging the traffic of a centralized social app. With built-in blockchain, wallet and ads placement components, the difficulty of an initial cold start is significantly reduced.

Shift in Monetization Logic

Compared to typical Web3 applications, traffic monetization is often a convoluted process. It usually involves attracting early users through airdrops, accumulating a large number of active wallets and interaction data and then listing the token on CEX for an exit. Traffic data becomes a critical metric for listing tokens, indirectly generating profits for project teams. However, this monetization model is often criticized for its potential to resemble a Ponzi scheme. The various parties involved may be incentivized to inflate the bubble further to achieve greater returns, which can lead to economic losses for those who buy in at the market’s tail end. It is important to note that this critique does not completely negate the innovation of Web3 projects in introducing token-based incentive models but rather highlights that the oversaturation of similar projects has pushed the market toward a near zero-sum game. The value created by genuine project innovation has become negligible compared to the massive gains from token issuance, which undermines sustainable development. This problematic monetization approach needs to be reformed.

Currently, projects within the Telegram ecosystem are innovating the traditional traffic monetization model, with a particular focus on the gaming sector. Although the primary method still revolves around airdrop incentives, there have been advancements. For example, a popular Telegram mini-game launched in April of this year has seen a significant increase in daily active users (DAU), with the cumulative number of on-chain users surpassing 1.5 million and on-chain gas fees exceeding 90,000 TON. The number of paying DAUs has also consistently increased. The game itself is a relatively simple synthesis and nurturing game, where users can pay to accelerate in-game production and automate synthesis, leading to voluntary payments by users. This has generated substantial revenue for the development team.

This business model addresses the issue of balancing operational costs and project revenue during the cold start phase, avoiding the reliance on token issuance as the sole means of generating returns. Investors can also better assess the business’ inherent profitability.

Source: *https://www.tonstat.com/#countOfActiveWalletsDaily*

However, it is worth noting that for app-based game developers, cost calculations typically include channel costs, user acquisition costs, and development costs, with channel costs often being the highest. App stores also take a significant cut from in-app purchases. For example, on the WeChat Mini Program platform, there are limitations on the size of game code packages, which restricts games with high demands on visual quality. However, this can also reduce development costs. Additionally, the user acquisition logic for Mini Programs is simpler, and channel costs are primarily concentrated on advertising and app store revenue sharing, making the overall cost lower than that of app-based games.

However, the product life cycle of Mini Program games tends to be shorter. Compared to app-based games, which can support more content and immersive experiences, Mini Program games are limited by the platform’s ceiling. Even successful Mini Games on WeChat rely heavily on trending topics, distribution channels and advertising or word-of-mouth spread within user groups to sustain engagement. Revenue mainly comes from in-app purchases (IAP) and in-app advertising (IAA).

Despite these limitations, the viral spread mechanism of Mini Games can attract a large number of users in a short period and cater to different types of users. Therefore, using games as an entry point to explore non-transactional Mini Programs is a very effective strategy. Users who become accustomed to Mini Programs may later transition to more consumer-oriented applications, such as e-commerce, dining, travel, short videos, and other non-transactional apps, which also hold significant potential.

Major TON ecosystem players are allocating their resources to generate traffic with the intention of eventually converting it into paying users. The Open League (TOL), a seasonal competition for users and projects initiated by the TON Foundation, has acted as a major traffic generation channel since its inception in March 2024. Similar to airdrops, TOL is an incentive-based user acquisition initiative. The central part of the program is the boosted liquidity pools for holders of ecosystem tokens (jettons). Simultaneously, a competition for TON-based projects was held, where the best-performing projects shared a prize pool in Toncoin. Allocating rewards to both users (in the form of boosted liquidity pools, token mining, and airdrops) and best-performing projects (as a Toncoin prize pool and grants) ensures a synergistic effect. The competition created an incentive for projects to maximize the use of the tools and reward pools provided by TOL, while also boosting the exposure of these projects to new users.

The surge in most on-chain metrics that started in March and continues as of this report was largely influenced by TOL. Of course, TOL introduces the user retention challenge, but the seasonal structure is meant to mitigate this by building longer-term user habits and converting them into paying users.

5.Integrating Traffic from Individuals to Community

The Community Governance Hub

Instant messaging platforms have evolved through four distinct stages: starting with basic 1-on-1 chats, progressing to multi-user online chat rooms, then to group chats that can accommodate thousands of participants, and finally shifting from familiar social interactions to those involving strangers and acquaintances. This progression is a hallmark of the mobile internet era and is especially relevant in Web3 communities, where these scenarios frequently occur. As content accumulates, interest-based groups form, driving the need for communication within these groups.

However, opening a channel with thousands of messages can be overwhelming, as the sheer volume of irrelevant or filler content can make it difficult to navigate. To address this, Telegram has introduced Discord-like channel management features, which are particularly useful in Web3 community management. These features allow the separation of different message types and the creation of distinct groups for different community members, each with its own set of management permissions. This helps streamline the management of large communities, making it easier to handle the various types of information and enhancing interaction with core members.

The channel function on Telegram is similar to WeChat public accounts, where channel owners can broadcast various types of information. However, unlike WeChat, Telegram currently does not distinguish between broadcast channels and regular chat channels, and there is no dedicated entry point for each. Some of the top Web3 mini-programs on Telegram have already surpassed millions of subscribers. Notably, channels tied to trending topics can see substantial subscriber growth in a short period.

Source: *https://tgstat.com/ratings/channels*

Source: *https://tgstat.com/channel/@notcoin/stat/subscribers*

Expanding Traffic Entry Points

Based on information shared by Telegram’s founder Pavel Durov’s Du Rove’s Channel, despite Telegram generating over a trillion views per month, only about 10% of this traffic is currently monetized. Compared to other social platforms, Telegram is still in the early stages of exploring monetization opportunities. As a result, the commercialization of ads within Telegram channels has become a priority. Channel owners can now earn revenue by hosting ads and sharing profits with Telegram, primarily through in-line text ads within channels. These earnings are distributed and withdrawn via the TON Blockchain, marking an important step in the transition from Web2 to Web3.

However, given that Telegram’s traffic monetization is still in its infancy, the development of detailed user profiles is far from complete. While some insights can be gleaned from the types of channels users subscribe to, there remains significant untapped potential for precise ad targeting at both the channel and individual levels. Exploring ad effectiveness and building vertical platforms within Telegram could be key to its future commercialization.

Given the sheer volume of Telegram users and channels, many users will receive timely updates about new applications through channel ads and may be prompted to explore them further. This passive push approach could significantly alleviate the current visibility challenges faced by new Web3 projects. Using cryptocurrency as a revenue-sharing method is another crucial step for Telegram to make a bigger impact in the Web3 space.

However, Telegram’s open environment also brings increased information security challenges. In the context of Web3, which emphasizes decentralization, the risks of phishing, scams and other security incidents are heightened. Balancing the embrace of Web3 with the need to protect users from malicious actors on Telegram is a critical issue. For example, OKLINK’s Security Monthly Reports show that in just the past quarter, over 50 big-sum phishing scams have happened in various social applications across the web, with total losses exceeding $116 million. Users must also remain vigilant when receiving Web3-related information online.

6. The New Wave of Crypto Traffic

A Smoother Entry Path

At this critical juncture, the traditional crypto narrative is beginning to show signs of fatigue, with persistent liquidity challenges hindering the industry’s long-term growth. As a result, attention is shifting back to traditional instant messaging (IM) applications, which already have substantial traffic reserves. Simultaneously, traditional platforms are exploring new ways to attract additional users. Web3 is becoming an essential part of their growth narrative. Platforms like Telegram, which have already laid significant groundwork in blockchain infrastructure, are leveraging centralized platform traffic to acquire users, driving commercial growth and product iteration. This creates a closed-loop ecosystem within the Telegram and TON framework, positioning the transition from Web2 to Web3 as the new narrative that could define the next cycle.

*Flow Charts from ‘Telegram Ecosystem’ by Telegram Builders Community and TON Foundation*

Closer Integration with User Needs

When it comes to application types, beyond transactional uses, consumer-oriented applications that closely align with users’ daily lives are more likely to meet the needs of potential new users. Large-scale adoption of these applications can help reach a broader Web2 audience. The traffic-driven narrative has been a proven success in traditional sectors, where leveraging social and content platforms for commercialization has already shown significant results.

Broader Participation Scenarios

As the path to monetizing Web3 traffic continues to develop — through advancements in payments, application platforms, and traffic entry points — a more decentralized, open, and shared ecosystem is beginning to take shape. This expansion not only broadens user participation scenarios but also allows smaller, lightweight development teams to benefit from traffic dividends through platform revenue-sharing models. While this approach is still in the exploratory phase within the Web3 space, it holds promise and requires more time to fully prove its effectiveness.

Conclusion

Telegram’s extensive traffic base provides a prime opportunity for Web3 applications to convert existing users into new ones. Through its deep partnership with TON Blockchain, Telegram has laid down solid blockchain infrastructure and is now planning strategic Layer-2 compatibility with other blockchains. By integrating Web3 features directly into its user interface, Telegram is enabling more users to explore and adopt new technologies, thereby speeding up the broader adoption of Web3. This approach not only boosts engagement among new users but also draws in investors and developers to the space.

This strategy can significantly ease the current traffic shortage, as demonstrated by the strong performance of projects on Telegram. Projects can leverage their product strength to generate stable revenue through in-app purchases within mini-programs, reducing overreliance on token issuance for outsized returns. Token airdrops can serve as incentives for early adoption and continued user engagement. However, this approach will require time to cultivate user habits, test payment willingness and refine project strategies. Despite these challenges, Telegram’s efforts have introduced a new model of collaboration between Web2 and Web3 companies, blending their strengths to broaden industry horizons and, most importantly, provide users with more convenient and diverse application scenarios.

The Web3 market is extremely fast-paced, and staying attuned to market shifts is essential for identifying growth opportunities amid the information overload. This focus on user-centric growth is not only what users want but also the direction in which the industry is heading. Companies, which are at the forefront of Web3, are constantly monitoring market trends and technological innovations. Leveraging their technical prowess, they quickly identify and meet user needs, integrate with new blockchain ecosystems, expand their service offerings, and support innovative use cases in the blockchain industry. By providing the tools necessary for agile, user-focused development, they are helping more potential users experience and integrate into the Web3 world.