What new metrics do crypto projects need to say goodbye to the Web2 growth model?

Author | Maggie Hsu

Compiled by | Shenchao TechFlow

How do you evaluate the success and growth of a crypto protocol or product? In Web2, marketers have various strategies to measure success. In the crypto space, especially in the realms of L1, L2, and protocols, marketing strategies are still being developed. Some metrics are not yet available, some are less important, and many need to be rethought in the context of blockchain.

I have spoken with many heads of growth and marketing, each of whom has different dashboards, which is normal because the definition of growth for L1 or L2 is not the same as for DeFi protocols, wallets, or games. Let’s explore these differences more broadly:

The growth of both L1 and L2 is closely related to user and developer communities. We can measure their success by looking at the Monthly Active Addresses (MAA) of L1 and L2 and the number of applications built on them. If MAA grows but application growth is not significant, it may simply indicate the presence of a few popular or spam applications; ideally, both should grow in sync. In this case, the role of the Chief Marketing Officer (CMO) is more like a marketing engine for the community, in addition to promoting the protocol itself.

The fundamental growth metrics for a protocol are the number of users, transaction volume, and Total Value Locked (TVL) — the total value of assets deposited in the protocol's smart contracts, or Total Value Secured (TVS) — the total value of assets secured by the protocol. Although TVL is a controversial metric, when combined with other metrics discussed below, it can provide a rough understanding of the protocol's growth. One founder shared that they also calculate the "capital cost" of "active TVL," which is the ratio of the amount of rewards they need to provide to achieve a certain locked value versus the fees or locked value generated.

The growth of infrastructure and other Software as a Service (SaaS) is typically related to the growth of individual products. For example, the developer platform Alchemy focuses on customer and revenue growth within each product line, similar to what we see in traditional SaaS companies. More specifically, focusing on the recurring revenue percentage of existing customer retention or Gross Revenue Retention (GRR) indicates that the product is sticky and the customer base is stable, which is crucial for measuring recurring revenue. Net Revenue Retention (NRR) also considers upselling and reflects the ability to increase revenue from the existing customer base.

The growth of wallets and games also appears more traditional (similar to the SaaS example above). But here, it focuses on measuring overall usage and revenue using the following metrics:

• Daily Active Addresses (DAA), the number of unique addresses active on the network each day;
• Daily Transaction Users (DTU), the number of unique addresses conducting revenue-generating transactions on the network (a subset of DAA);
• Average Revenue Per User (ARPU), the revenue generated from users or customers over a specific period.

However, if tokens are involved, the token price and holder distribution will be affected, but even these metrics depend on your goals. For example, do you want a large number of small token holders or a few whales? This depends on the category, stage, and strategy of your product or service, and you need to choose the right metrics to measure.

So, how do you build a company-specific metrics dashboard? Here are some potential metric suggestions, along with insights into their positions in the marketing funnel. Ultimately, you need to decide what to measure, how to weigh the importance of each metric, and how to act on the data…

Core Metrics: What Matters?

Metrics such as Customer Acquisition Cost (CAC), Lifetime Value (LTV), and Average Revenue Per User (ARPU) are core to understanding the success and efficiency of customer acquisition efforts (we will define these metrics below).

While these concepts are widely recognized in traditional SaaS, they need some adjustments in the crypto space, as "customers" here often refer to "wallets," and the forms of value creation differ. We will redefine these metrics below and explore their unique nuances in the crypto space.

1. Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) refers to the total cost of acquiring a customer and can be measured in several different ways:

Broadly speaking, blended CAC is calculated by dividing the total customer acquisition cost by the total number of new customers. It tells you the average price paid for each new customer across all channels — not just acquisition costs but also natural growth costs (which makes it difficult to see which specific growth strategies are driving performance).

On the other hand, paid CAC focuses only on customers acquired through paid marketing. Often, teams "aimlessly" invest in paid marketing without measuring effectiveness. Paid CAC can reflect the cost of acquiring these customers and whether specific marketing campaigns are truly effective. This is particularly important in the cryptocurrency space, as many teams early on found themselves distracted by paid incentives without clarifying what their product was actually doing.

What counts as "cost"? When calculating CAC, costs may include advertising spend, sponsorships, marketing collateral development, task token incentives (on platforms like Galaxe, Layer3, or Coinbase Quests), and airdrops to target wallets.

Who counts as a "customer"? In this case, "customer" may refer to "users" or "developers"; for example, a brand-new wallet that transacts on a protocol can be considered a customer of that protocol.

2. Lifetime Value (LTV) and Average Revenue Per User (ARPU)

Lifetime Value (LTV) represents the present value of future net profits from a customer over the duration of the customer relationship. LTV essentially measures the return a customer provides after becoming a customer, including the amount they spend on the product.

LTV itself is a complex calculation and concept. In the cryptocurrency space, this concept does not always translate directly, as "users" do not always behave like traditional "customers." For example, they may be anonymous wallets, and one user may hold multiple different wallets. Therefore, LTV may reflect the contribution of a single wallet to the Total Value Locked (TVL), which refers to the total dollar value of assets held in the protocol's smart contracts, as mentioned earlier.

For DeFi protocols, TVL can provide a snapshot of the "current total asset amount," while LTV can help answer the question of "the value of a specific wallet to the protocol over its lifecycle."

3. LTV: CAC Ratio

Lifetime Value (LTV) is often used to assess the initial Customer Acquisition Cost (CAC) and the "value" of that customer over a period of time. The LTV:CAC ratio provides insights into the cost-effectiveness of acquiring new customers by comparing the value brought by customers to the cost of acquiring new customers.

For traditional SaaS products, a ratio of 3:1 is considered reasonable, as it means you are creating three times the value from customers compared to the cost of acquiring them, with the remaining profit available for reinvestment in growth. In the cryptocurrency space, we have not yet established such benchmarks.

When assessing the LTV:CAC ratio in the cryptocurrency space, it is also important to consider other acquisition incentives, such as airdrops or points, as these can skew the metrics. Ideally, such incentives can help attract users to use the product and help them onboard, but when users like the product enough, it can continue to grow even without incentives — in this case, CAC decreases while LTV increases, improving the LTV:CAC ratio.

Here is a brief summary of the key metrics outlined in the text and how to think about them in the crypto space:

Overall, these metrics provide a foundation for measuring the effectiveness of your growth marketing efforts in attracting users at different stages of the marketing funnel, while considering the costs of these efforts.

Analyzing the Growth Funnel in Crypto

After identifying core metrics, the next step is to map them from top to bottom onto the marketing funnel. It is important to note that while the growth marketing funnel in the crypto space differs from traditional Web2 funnels, the differences primarily lie in the unique marketing strategies, behavioral characteristics, and unique opportunities at each stage, such as on-chain behavior, token incentives, and community-driven dynamics.

Next, we will explore each stage of the funnel one by one, analyzing key strategies and metrics, as well as how they differ in the crypto space compared to Web2…

1. Awareness/Lead Generation

Whether in traditional channels or cryptocurrency, the first stage of the marketing funnel is to raise brand awareness. Even in the crypto space, increasing brand awareness is a prerequisite for everything that follows.

At this stage, you will also begin to measure Customer Acquisition Cost (CAC). "Reach" (the number of unique individuals who see your content) should also be one of the core metrics. Reach is particularly important when evaluating the success of mass marketing channels such as news, media, and public relations. The challenge at this stage is to distinguish between short-term spikes in attention and genuine "sticky" interest: are users just curious, or are they truly interested in using the product?

In addition to core acquisition metrics, the channels you use to find new users each have their advantages, risks, and unique nuances in the crypto space:

2. Key Opinion Leaders (KOLs) and Influencers

Paying random influencers or KOLs with large audiences seems like a reliable way to increase awareness, but this approach often fails to generate meaningful engagement, especially when the influencer has no real connection to the project, and their audience does not resonate.

However, collaborating with influencers who align with the project's vision is valuable, as they can share their excitement in a credible way. Consider "micro-influencers," who are more niche, targeted, and trusted voices; or even local influencers, such as experts within the team who have already built strong personal influence. Claire Kart, the CMO of the privacy-focused L2 company Aztec, is a prime example; she is not only an internal influencer but actively seeks emerging influencers, building organic connections with them and bringing them into the Aztec ecosystem.

3. Advertising

In the crypto space, advertising faces a series of challenges. For instance, due to ambiguous and constantly changing policies regarding crypto advertising, many crypto companies are unable to run ad campaigns on traditional platforms like Google or Meta. Additionally, the crypto community is somewhat wary of traditional advertising, as similar ad formats are sometimes used by scammers to lead users to malicious sites.

Crypto marketers have found more success promoting specific applications on X (formerly Twitter), LinkedIn, Reddit, TikTok, or the Apple App Store. They can also consider alternatives, such as ads on the Brave browser, Spindl ads within the Coinbase/Base app, or MiniApps and sponsored posts on Farcaster, even optimizing for prompts and integrating them into AI search answers.

4. Referral and Affiliate Marketing

The concept behind referral programs is the same as traditional marketing: you receive rewards when others sign up through your referral. The difference in cryptocurrency is that rewards can be sent instantly and verified directly on-chain, coordinating incentives and making the entire process smoother. Projects like Blackbird demonstrate how on-chain referrals can develop into compound network effects through ongoing loyalty programs and community engagement, rather than just one-time customer acquisition activities.

Word-of-mouth is one of the most powerful growth drivers in the crypto space: for consumer-facing products, adoption is often driven by referrals, as users recommend the product to others because they enjoy the experience and see the value. For infrastructure projects, referrals often come from existing customers and developers.

Measuring word-of-mouth growth can be done by simply tracking the Net Promoter Score (NPS) or directly surveying new users on whether they were referred upon signing up or completing onboarding and who referred them.

In this sense, referrals act like an inverted, bottom-up marketing funnel: users do not just stay at the conversion stage but bring new potential users back to the top of the funnel. Early users become advocates, bringing more people into the network (and possibly earning rewards for their contributions), thus driving the growth flywheel.

Regarding accuracy: Accurately measuring the growth of real users/customers versus bot users is a challenge faced across industries, especially in social media. The crypto space has some unique identity primitives we can use, such as verifying "proof of humanity" through World ID or verifying identity through zero-knowledge proofs (via zkPassport), which can distinguish real users from bot users or airdrop hunters. Growth teams can leverage these primitives not only to build resistance against sybil attacks for community growth mechanisms like airdrops but also to better understand actual users and help plan product retention.

5. The Power of a Growing Network

Finally, one of the unique growth drivers in cryptocurrency is tokens, which are often the best way to attract users, developers, and liquidity into markets that traditionally face cold start problems. However, this is not driven by speculation: more importantly, when token prices rise, it can attract new users who want to participate in a movement or something that is developing. Developers also take notice, as rising prices can indicate an active community and real demand, making the platform more attractive.

6. Consideration/Interest

The next stage of the traditional marketing funnel is consideration, where potential customers show positive interest in the product and evaluate it against other products.

In the cryptocurrency space, this is particularly important, as each decision — from purchasing tokens to ordering hardware wallets — often requires a significant amount of education, as cryptocurrency remains a relatively emerging (and often complex) industry for users and developers. Providing users with the right information to help them make decisions and weigh competing products or platforms can have a huge impact. For this reason, many companies, from Coinbase to Alchemy, invest in educational content aimed at consumers and developers.

Effective educational content not only details the features and benefits of the product but also explains how the product works (e.g., security, custody, community and treasury governance, token economics, etc.). Developers may need in-depth technical documentation and tutorials, while consumers typically require explanatory content (e.g., before transferring real funds between wallets or blockchains).

User education through email during key processes (e.g., product registration or purchase), in-product prompts and tooltips, interactive guides, and product trials or "testnet" setups to demonstrate and experience features before committing to transferring assets are all standard tools. Companies are also beginning to optimize their educational content for large language models (LLMs) so that when someone asks a question, the company's content can be retrieved.

Successful teams measure interest not only through clicks or downloads but also through intermediate actions taken by users (such as joining a wallet waitlist or adding small funds to test features) to demonstrate trust and intent. However, understanding whether these efforts are successful depends on the chosen channels, as each channel has its own set of metrics. Ultimately, you need to map these metrics to some form of conversion, which we will discuss below.

7. Conversion

Conversion is the stage in the marketing funnel where users complete the desired action. At this stage, users have been attracted, engaged, and informed, ultimately taking the action you want them to complete.

As a metric, "conversion rate" is a broad term: in traditional marketing, it might refer to the number of customers who purchase a product, users who register for a demo, or the number of people requesting to speak with the sales team. In the crypto space, conversion might also include downloading a wallet, purchasing tokens, or even deploying code on a platform. The specific form of conversion depends on the product and goals, but precisely defining conversion metrics is crucial for developing the best measurement methods.

Tracking conversions through marketing channels (e.g., the number of wallet downloads from offline events) is essential. Understanding which sources drive results can help teams optimize budget allocation, messaging, and more.

Accurate measurement of conversions also relies on attribution mechanisms, which are particularly complex in the crypto space, especially as users' journeys between traditional websites, social networks, and on-chain behavior (e.g., from off-chain to on-chain behavior or vice versa) are difficult to track accurately.

Web tracking tools like Google Tag Manager can track website conversions, while new tools for wallet users (like Addressable) can bridge the gap between off-chain ads and on-chain behavior, allowing teams to track from websites or Web2 ads to on-chain actions. However, user journeys are often not linear; for example, a user might first see a post on X, attend an offline event, and then make their first transaction.

Although attribution tracking in the crypto space has historically been challenging, with improvements in analytics tools, teams can gain a more comprehensive understanding of growth. While many people have multiple wallets, advancements in analytics technology have improved the ability to match multiple wallets to a single user, allowing on-chain behavior to be associated with specific users. As privacy regulations (like GDPR, cookie restrictions, etc.) make Web2 attribution more difficult, the transparency of on-chain data provides an advantage while also protecting user identities.

8. Post-Conversion Engagement

In the traditional marketing funnel, the engagement/interest stage typically measures product interactions before purchase. These interactions are ways for users to better understand the product and brand and are a key stage in converting initial interest into loyal engagement.

In the crypto marketing funnel, post-conversion user engagement is equally important, including both online and offline, on-chain and off-chain behaviors. This not only helps teams gain insights into how to retain users but also understand how to maintain the overall health of the community, regardless of where users are.

For example, online engagement (which we also cover in the social media guide) can include metrics such as: engagement on Discord or other forums/chat platforms; activity on X (formerly Twitter); sentiment analysis on social channels; user participation in governance or voting.

While many crypto marketers still rely on traditional social listening tools, these traditional methods need to be adjusted for the crypto space. For instance, sentiment tracking can directionally gauge community feelings about a project but should not be the sole basis for decision-making. Sentiment tracking can help teams identify active contributors, key influencers, and assess the effectiveness of messaging. However, the crypto community is dispersed across multiple platforms, with varying quality and depth of metrics, and a few highly active accounts can have an outsized influence, leading to significant data noise.

In addition to sentiment tracking tools, some teams also use other social media monitoring tools (like Fedica) to track and reward user engagement. For example, identifying contributors who amplify content, create memes, participate in discussions, or inject energy into the community. However, it is worth noting that incentive-based activities can be easily manipulated: certain incentives may attract those more focused on rewards than the project itself, potentially leading to short-term community activity without sustainability in the long run.

Marketing in the crypto space can still achieve meaningful organic growth through non-incentive or non-paid methods. For example, by interweaving strategies of different types of content. The stablecoin liquidity layer Eco employs an organic content strategy based on the "4-1-1 principle": publishing 4 pieces of educational content about its market opportunities; publishing 1 piece of "soft sell" content (e.g., third-party endorsements); and publishing 1 piece of "hard sell" content (e.g., "use our product"); and repeating this cycle every few hours over 7 days. Through organic publishing strategies and leveraging major product announcements and co-marketing activities, Eco increased its total monthly exposure by nearly 600%.

Offline engagement (such as attending conferences or events) also plays a crucial role in helping users engage through deeper connections. Traditionally, the way to measure these events is to collect email addresses to expand mailing lists (e.g., by scanning attendees' QR codes). More refined tools include using NFC chip tags on giveaways (e.g., through IYK) and running various activities to encourage users to click or scan them. Online platforms (like Discord or Towns) provide exclusive spaces for ongoing interaction and relationship building, where teams can track the number of interactions users have over a period (posts, likes, replies) and analyze the quality and sentiment of these interactions.

9. Retention

Retention answers a key question: "Who is sticking around?" Retention can be measured as the percentage of users who complete on-chain actions after a set period or more broadly measure the sustained activity level of users. The method for calculating retention is to divide the number of existing users at the end of a period by the number of users at the beginning of that period. If you are measuring email list subscribers or wallet downloads, tracking retention is not just about initial registration but measuring users who remain active after a period. Common retention metrics include: returning users or the number of daily active addresses over a period.

In the cryptocurrency space, retention metrics must consider the tension between "long-term" and "short-term" behaviors, as powerful token mechanisms and behaviors are involved. For example, a surge of airdrop hunters at launch may look like growth, but once the rewards stop, many will leave. This is why it is important to define your "ideal" user and measure retention relative to that group, not just the raw total user count. This is also why measuring product metrics (inherent metrics of the product and natural interest in the product) is crucial, so as not to confuse what is effective and what is ineffective, especially if your product has not yet achieved product-market fit. Otherwise, you may think you have found product-market fit when in reality you have not; that is, people's interest is not actually in your product but in the rewards.

Retention naturally drives Customer Lifetime Value (LTV), as the longer users stay, the more they spend or transact. This not only increases their LTV but also makes the LTV:CAC ratio more favorable.

10. Churn

Churn is the opposite of retention, measuring how many users are lost during their lifecycle and when they are lost. Churn rate is calculated by dividing the number of users lost at the end of a period by the total number of users at the beginning of that period, expressed as a percentage. In the crypto space, an alternative metric for churn (though not fully mappable to traditional churn metrics) is the proportion of inactive wallets after a certain period. For example, users may register wallets through a marketing campaign or cycle but then never use them again. Some of these users may re-engage at some point in the future, but the key to calculating churn is identifying active users, frequently engaged users, and returning users, rather than those who have only performed a single on-chain action and are "hibernating."

There are some tools that can monitor user interactions with decentralized applications (dApps) (like Safary), helping to identify friction points that lead to user churn, such as high transaction fees, complex user experiences, or the need to complete multiple onboarding steps. For instance, when Solana released the Seeker phone, some users wanted a pre-funded wallet (similar to early Saga phones) to reduce the barriers to initial use, as needing to manually fund the wallet to transact could delay product adoption. Although Solana has shifted to conducting dApp reward activities after users receive their phones, reducing friction in the onboarding process remains crucial.

To reduce churn, funnel tracking and user cohort targeting platforms that support crypto-specific user engagement (like Absolute Labs' "wallet relationship management") can be used. These tools allow teams to create custom user segments and re-engage users through Web2 channels and crypto-native strategies (like targeted airdrops). Additionally, sending messages directly to wallets through secure decentralized messaging tools (like XMTP) can provide timely, personalized prompts to encourage users to return and continue engaging.

11. Wallet Share

Another way to track churn versus retention is to observe "wallet share": the proportion of total spending in a category allocated to your product or service. In the crypto space, this concept can be applied very intuitively. By analyzing the composition of wallets, teams can see the types and amounts of assets held and their activity direction. If users stop interacting with your protocol, on-chain data can reveal whether they have turned to competitors. Of course, as the complexity of protocol products and services increases, the reasons for user migration may become harder to discern. But if you observe user behavior shifting towards a competitor or other products with unique features, this may reveal important information.

Similarly, if many of your token holders also hold tokens from a related project, this may present opportunities for co-marketing — for example, collaborating with that project to host joint events or offering your tokens to its token holders. General analytics tools like Dune can facilitate this analysis, while more specialized platforms can provide in-depth insights for specific tokens. Since most users have multiple wallets, linking them to a single end-user identity is also important; on-chain analytics tools (like Nansen) can provide wallet tagging across multiple chains for more accurate wallet share analysis.

Measuring growth in the crypto space is not simply about replicating Web2 methods but adapting effective strategies, discarding ineffective ones, and building new frameworks around the unique advantages of blockchain. Given the diversity of crypto products, from L1 to gaming, each team's growth dashboard will differ.

But data alone does not tell the whole story. Ultimately, quantitative metrics are just part of the narrative: deep qualitative insights into your audience and users are equally irreplaceable. Conversations in the community (whether discussions about the project or simple memes and vibes), the energy felt at events, and even intuitions about what works and what doesn’t all play significant roles in guiding growth strategies. In the early stages, the behaviors of a few core users may be more valuable than those of other users. These qualitative signals are often the earliest indicators of product-market fit. The best crypto growth strategies balance data with intuition, combining short-term tactics to spark excitement with long-term strategies to build a stronger community.