a16z opinion: traditional indicators have failed, how should crypto projects be measured?
Author: Maggie Hsu
Compiled by Deep Wave TechFlow
Original title: a16z: What kind of exclusive new metrics do crypto projects need?
How do you evaluate the success and growth of a cryptographic protocol or product? In Web2, marketers have a variety of strategies to measure success. Meanwhile, in the field of cryptography, especially in the L1, L2, and protocol areas, marketing strategies are still being developed. Some metrics aren't available yet, some aren't that important, and many others need to be rethought for blockchain.
I've talked to a number of growth and marketing leaders, and they each have different dashboards, which is normal because for L1 or L2, the definition of growth isn't the same as the definition of a DeFi protocol, wallet, or game. Let's explore these differences more broadly:
Both L1 and L2 growth are closely linked to the user and developer community. We can measure the success of L1 and L2 by looking at monthly active addresses (MAA) and the number of apps people have built on them. The growth of MAA without significant growth in applications may simply mean the existence of a few popular or junk apps; ideally, the two should grow at the same time. In this case, the role of the Chief Marketing Officer (CMO), in addition to the promotion agreement itself, is more like a marketing engine for the community.
The basic growth indicators of the agreement are the number of users, transaction volume, and total value locked value (TVL) — that is, the total value of assets deposited into the agreement's smart contract, or total guaranteed value (TVS) — the total value of assets guaranteed by the agreement. Although TVL is a highly debated metric, it can be viewed in conjunction with the other metrics discussed below to get an overview of the protocol's growth. One founder shared that they also calculate the “cost of capital” of “active TVL,” that is, the ratio between the amount of rewards they need to provide in order to obtain a certain hedging value and the resulting fees or hedging value.
The growth of infrastructure and other software as a service (SaaS) is usually associated with the growth of individual products. For example, the developer platform Alchemy focuses on customer and revenue growth within every product line, similar to what we've seen in traditional SaaS companies. More specifically, focusing on the percentage of recurring revenue or total revenue retention rate (GRR) retained by existing customers indicates that the product is sticky and has a stable customer base, which is critical for measuring recurring revenue. The net revenue retention rate (NRR) also takes upselling into account and reflects the ability to increase revenue for the existing customer base.
The growth of wallets and games also looks more traditional (similar to the SaaS example above). But here, it's focused on measuring overall usage and revenue using the following metrics:
Daily Active Addresses (DAA), the number of unique addresses active on the web each day
Daily transaction users (DTU), which is the number of unique addresses (a subset of DAA) that conduct revenue-generating transactions on the network
Average Revenue Per User (ARPU), revenue generated from users or customers over a specific period of time
However, when it comes to tokens, the token price and holder distribution will be affected, but even these metrics depend on your goals. For example, would you like a large number of small token holders, or a small number of giant whales? It depends on the category, stage, and strategy of your product or service, and you need to choose the right metrics.
So, how do you build a company-specific metrics dashboard? Here are some potential metrics suggestions, combined with their place in the marketing funnel to provide more insight. But at the end of the day, 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?
Examples of customer acquisition cost (CAC), lifetime value (LTV), and average revenue per user (ARPU) are central to understanding the success and efficiency of customer acquisition efforts (we will define these metrics below).
Although these concepts are widely recognized in traditional SaaS, some adjustments are needed in the field of cryptography, because “customer” here usually refers to a “wallet,” and the form of value creation is also different. We'll redefine these metrics below and explore their unique nuances in the field of cryptography.
Customer Acquisition Costs (CAC)
Customer acquisition cost (CAC) refers to the total cost of acquiring a customer and can be measured in a few different ways:
Broadly speaking, hybrid customer acquisition cost (CAC) is calculated by dividing the total cost of customer acquisition by the total number of new customers. It tells you the average price you pay for each new customer across all channels—not only the cost of acquisition, but also the cost of organic growth (which makes it hard to see which specific growth strategies are driving performance growth).
Paid CAC, on the other hand, only focuses on customers acquired through paid marketing. Too often, teams invest “aimlessly” in paid marketing without measuring results. Paid CAC can reflect the cost of getting these customers and whether a particular marketing campaign actually works. Measuring this is particularly important in the cryptocurrency space, because early on we discovered that many teams were distracted by paid rewards without figuring out what their products were actually doing.
What counts as a “cost”? When calculating CAC, costs may include ad spend, sponsorship, marketing collateral development, mission token incentives (on platforms such as Galaxe, Layer3, or Coinbase Quests), and airdrops to target wallets.
Who counts as a “customer”? In this case, “customer” may mean a “user” or “developer”; for example, a brand new wallet trading on an agreement may be considered a customer of that agreement.
Lifetime value (LTV) and average revenue per user (ARPU)
Lifetime value (LTV) represents the present value of a customer's future net profit over the life of the customer relationship. LTV essentially measures customer feedback after becoming a customer, including how much they spend on products.
LTV itself is a complex calculation and concept. In the field of cryptocurrencies, this concept isn't always directly translated, as a “user” isn't always like a “customer” in the traditional sense. For example, they might be anonymous wallets, and one user might hold multiple different wallets. Therefore, LTV may reflect the contribution of a single wallet to the total hedged value (TVL), which refers to the total dollar value of assets stored in the protocol's smart contract, as described above.
For DeFi protocols, TVL can provide a snapshot of the “total amount of current assets,” while LTV can help answer “the value of a particular wallet to the protocol over its lifetime.”
LTV: CAC ratio
Customer lifetime value (LTV) is commonly used to assess initial customer acquisition costs (CAC) and the customer's “value” over time. The LTV:CAC ratio can provide insight into the cost benefits of attracting new customers by comparing the value brought by customers with the cost of acquiring new customers.
For traditional SaaS products, the 3:1 ratio is considered reasonable because it means that the value you create from the customer is three times the cost of acquiring the customer, and the remaining profit can be reinvested in growth. We haven't established such a benchmark in the cryptocurrency space.
In the cryptocurrency sector, other earning incentives, such as airdrops or credits, also need to be taken into account when evaluating the LTV:CAC ratio, as these measures can mislead the metrics. Ideally, this type of incentive would help entice users to use the product and help them get started, but when users like the product enough, the product can continue to grow even without incentives — in which case CAC declines and LTV rises, improving the LTV:CAC ratio.
Here's a brief summary of the key metrics we've outlined in the article and how they think in the crypto space:
Taken together, these metrics provide a basis for measuring the effectiveness of your growth marketing efforts in attracting users at different stages of the marketing funnel, while taking into account the costs of these efforts.
Unraveling the crypto sector's growth funnel
Once the core metrics have been determined, the next step is to map them from top to bottom onto the marketing funnel. It's important to note that although the crypto sector's growth marketing funnel is different from the traditional Web2 funnel, the differences are mainly reflected in marketing strategies, behavioral characteristics, and unique opportunities at each stage, such as on-chain behavior, token incentives, and community-driven dynamics.
Next, we'll explore each stage of the funnel one by one, analyzing key strategies and metrics, and how they differ from Web2 in the crypto space...
Cognition/lead generation
Whether it's traditional channels or cryptocurrencies, the first stage of the marketing funnel is to increase brand awareness. Even in the cryptocurrency space, increasing brand awareness is a prerequisite for everything that follows.
At this stage, you'll also begin measuring customer acquisition costs (CAC). “Reach” (the number of unique individuals that 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 separate short-term spikes of attention from real “sticky” interests: are users just curious, or are they really 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 field of cryptography:
Key opinion leaders (KOLs) and influencers
Paying random influencers or KOLs with a large audience may seem like a reliable way to increase visibility, but this approach often fails to generate meaningful engagement, especially when the influencer doesn't have a real connection to the project, and their audience doesn't resonate.
However, there is value in partnering with influencers who match the project's philosophy, and they can share their excitement in a credible way. Consider “micro-influencers” (micro-influencers), voices that are more segmented, targeted, and trusted by the audience; or even homegrown influencers, such as experts on the team, who have already established a strong personal influence. Claire Kart, chief marketing officer at Aztec, an L2 company focused on privacy protection, is a prime example. She is not only influencers within the company, but also actively searching for emerging influencers, organically connecting with them, and bringing them into the Aztec ecosystem.
commercials
In the crypto space, advertising faces a range of challenges. For example, many crypto companies are unable to run ad campaigns on traditional platforms such as Google or Meta due to vague and ever-changing policies regarding crypto advertising. Additionally, the crypto community is wary of traditional ads, as similar ad formats are sometimes used by scammers to direct users to malicious websites.
Crypto marketers have had more success promoting specific apps on X (formerly Twitter), LinkedIn, Reddit, TikTok, or the Apple App Store. They can also consider alternatives, such as Brave browser ads, Spindl ads within the Coinbase/Base app, or MiniApps and sponsored posts on Farcaster, and even optimize for tips and incorporate them into AI search answers.
Referrals and affiliate marketing
The idea behind referral programs is the same as traditional marketing: when others sign up through your referrals, you get rewarded. What's different about cryptocurrencies is that rewards can be sent instantly and verified directly on-chain, thereby coordinating the incentive mechanism and making the whole process smoother. Projects like Blackbird have shown how on-chain referrals can evolve into a composite network effect through ongoing loyalty programs and community participation, rather than just a one-off customer acquisition campaign.
Word of mouth is one of the strongest growth drivers in the crypto sector: for consumer-facing products, adoption is often driven by recommendations, and users recommend the product to other users because they like to experience and discover the value of the product. For infrastructure projects, recommendations usually stem from existing customers and developers.
Word of mouth growth can be measured by simply tracking net promoter score (NPS) or directly investigating whether new users are recommended and who the referrer is after registration or completion of the referral.
In this sense, recommendations are like an inverted, bottom-up marketing funnel: users don't just stay in the conversion phase, they bring new potential users back to the top of the funnel. Early users become advocates, bringing more people to the network (and possibly being rewarded for their contributions), thereby driving the growth flywheel to keep running.
Note on accuracy: Accurately measuring the growth of real users/customers versus bot users is an issue faced by all industries, particularly in the social media sector. Cryptocurrency has unique identity primitives that we can use, such as verifying “human proof” through World ID, or verifying identity through zero-knowledge proof (via zkPassport). These primitives can distinguish real users from robot users or airdrop users. Growth teams can not only use these primitives to build anti-witch attacks against community growth mechanisms such as airdrops, but also better understand actual users and help plan product retention rates.
The power of a growing network
Finally, one of the growth drivers unique to cryptocurrencies is tokens, which are often the best way to attract users, developers, and liquidity into markets where cold start problems have traditionally been difficult to overcome. However, this is not speculative: more importantly, when the price of modern coins rises, it can attract new users who want to participate in a sport or something that is developing. Developers will also notice because the price increase can indicate an active community and real demand, making this platform more attractive.
considerations/interests
The next stage in the traditional marketing funnel is consideration, where potential customers are actively interested in a product, evaluate it, and compare it with other products.
In the cryptocurrency sector, this is particularly important because every decision — from buying tokens to ordering a hardware wallet — usually requires a great deal of education, as cryptocurrencies are still a relatively new (and often complicated) 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. That's why companies from Coinbase to Alchemy and others are investing in educational content for consumers and developers.
Effective educational content goes beyond detailing the product's features and benefits, but also how the product works (such as security, escrow, community and treasury governance, token economy models, etc.). Developers may need in-depth technical documentation and tutorials, while consumers often need explanatory content (for example, before transferring real money between wallets or blockchains).
User education via email during key processes such as product registration or purchase, in-product tips and tool tips, interactive guidance, and product trials or “testnet” settings to demonstrate and experience features before committing to transfer assets are standard tools. The company is also beginning to optimize its educational content to fit large language models (LLMs) so that when people ask questions, the company's content can be retrieved.
Successful teams not only measure interest through clicks or downloads, but also prove trust and intent through intermediary actions taken by users, such as joining a wallet's waiting list or adding a microfinance testing feature. However, understanding the success of these efforts depends on the channel chosen, as each channel has its own set of metrics. But ultimately, you'll need to map these metrics to some kind of conversion, which we'll cover below.
transformation
Conversion is the stage in the marketing funnel where a user completes a target action. At this stage, users are already attracted, engaged, and informed, to finally take the actions you want them to complete.
As a metric, “conversion rate” is a broad term: in traditional marketing, it may refer to the number of customers who buy a product, the number of users who sign up for a demo, or the number of people requesting communication with the sales team. In the crypto world, conversion may also include downloading a wallet, buying tokens, or even deploying code on a platform. Defining the exact form of conversion depends on the product and goal, but accurately defining conversion metrics is critical to developing the best measurement methods.
Tracking conversions through marketing channels (for example, wallet downloads from offline activities) is critical. 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 field of cryptography, where users' journeys between traditional websites, social networks, and on-chain behavior (such as off-chain to on-chain or vice versa) are difficult to accurately track.
Web tracking tools such as Google Tag Manager can track website conversions, while new tools for wallet users (such as Addressable) can bridge the gap between off-chain advertising and on-chain behavior, enabling teams to track from website or Web2 ads to on-chain behavior. However, the user journey isn't usually linear; for example, users may first see a post on X, participate in an offline event, and then make their first transaction.
Although attribution tracking in the crypto space has historically been difficult, as analytical tools improve, teams can get a more complete picture of growth. Although many people own multiple wallets, as analytical technology advances, the ability to match multiple wallets with a single user has become stronger, so that on-chain behavior can be linked to specific users. As privacy regulations (such as GDPR, cookie restrictions, etc.) make Web2 attribution more difficult, the transparency of on-chain data provides an advantage while also protecting user identity.
Post-conversion engagement
In a traditional marketing funnel, the engagement/interest stage usually measures product interaction prior to purchase. These interactions are a way for users to better understand a product and brand, and a critical stage in transforming initial interest into loyal engagement.
In the crypto marketing funnel, converted user engagement is just as important, including online and offline, on-chain and off-chain behavior. This not only helped the team gain insight into how to retain users, but also how to maintain the overall health of the community, no matter where users are located.
For example, online engagement (which we've also covered in our social media guide) can include the following metrics:
Engagement on Discord or other forum/chat platforms
Activity on X (formerly Twitter)
Sentiment analysis on social channels
Users participate 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 sector. For example, sentiment tracking can provide a directional understanding of how a community feels about a project, but it shouldn't be the sole basis for decisions. Sentiment tracking helps teams identify active contributors, key influencers, and evaluate the effectiveness of messaging. However, the crypto community is scattered across multiple platforms, and the quality and depth of indicators vary, and a few highly active accounts may have too much impact, causing more data noise.
In addition to sentiment tracking tools, some teams also use other social media monitoring tools (such as Fedica) to track and reward user engagement. For example, identify contributors who amplify content, create memes, participate in discussions, or energize the community. It's worth noting, however, that motivational activities can be manipulated easily: some incentives may attract people who focus more on rewards than on the project itself, and may cause communities to be active in the short term but not sustainable in the long run.
Marketing in the crypto space can still achieve meaningful organic growth without incentives or payments. For example, through strategies that intertwine different types of content. The stablecoin liquidity layer Eco uses an organic content strategy based on the “4-1-1 principle”: publish 4 educational articles about its market opportunities; publish 1 “soft sale” content (such as a third-party endorsement); post 1 “hard sell” content (such as “using our products”); and repeat this cycle every few hours over 7 days. Through organic launch strategies alone and the use of major product announcements and joint marketing campaigns, Eco increased its total monthly exposure by nearly 600%.
Offline participation, such as attending meetings or events, also plays an important role in helping users engage through deeper connections. Traditionally, these activities are measured by collecting email addresses to expand mailing lists (for example, by scanning participants' QR codes). More sophisticated tools include using an NFC chip to mark a giveaway (via IYK, for example) and run various activities to encourage users to click or scan it. Online platforms (such as Discord or Towns) provide an exclusive space for continuous interaction and relationship building. Teams can track the number of user interactions (posts, likes, replies) over a period of time, and analyze the quality and sentiment of these interactions.
Retain
Retention rates answer a key question: “Who's staying?” Retention can be measured as the percentage of users who complete on-chain behavior after a set period of time, or more broadly, the level of continued user activity. Retention is calculated by dividing the number of existing users at the end of a period by the number of users at the beginning of that period. If you're measuring mailing list subscribers or wallet downloads, the tracking you keep is not an initial registration, but rather a measure of users who remain active over time. Common retention metrics include returning users or number of daily active addresses over time.
In the cryptocurrency sector, retention metrics must consider the contradiction between “long-term” and “short-term” behavior, as it involves strong token mechanisms and behaviors. For example, the surge in airdrop users at launch may seem like an increase, but once the rewards stop, many will leave. That's why it's important to define your “ideal” user and measure retention relative to that group, not just the original total number of users. That's why it's important to measure product metrics (indicators inherent in the product itself and natural interest in the product), so you don't confuse what works and what doesn't, especially if your product isn't compatible with the market. Otherwise, you might think you've found a product's fit for the market when you haven't; in other words, people aren't actually interested in your products, but in rewards.
Retention rates also naturally drive customer lifetime value (LTV) because the longer users stay, the more money they spend or trade. This not only increased their LTV, but also made the LTV:CAC ratio more ideal.
loss
Attrition is the opposite of retention and measures how many users are lost over the user lifecycle and when. The churn rate is calculated by dividing the number of lost users at the end of a period by the total number of users at the beginning of that time period, expressed as a percentage. In the crypto sector, an alternative indicator of churn (although not fully mapped to traditional churn metrics) is the percentage of wallets that are inactive after a certain period of time. For example, users sign up for wallets through a marketing frenzy 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 computational churn is to identify active, frequently engaged, and returning users, rather than “hibernating” users who have only performed an on-chain operation once.
There are tools that can monitor user interactions with decentralized apps (dApps) (such as Safary, etc.) to help identify friction points that cause user churn, such as high transaction fees, complex user experiences, or the need to complete multiple guidance steps. For example, when Solana released the Seeker phone, some users wanted to pre-set up a money wallet (similar to early Saga phones) to reduce the barriers to initial use, as requiring manual recharge to make transactions could delay product adoption. Although Solana has moved to dApp rewards activities once users get a phone, reducing friction in the guidance process is still critical.
To reduce churn, funnel tracking and user group targeting platforms can be used, which support user engagement specific to the crypto sector (such as Absolute Labs' “wallet relationship management”). These tools allow teams to create custom user groups and re-engage users through Web2 channels and cryptographic native strategies such as targeted airdrops. Additionally, messaging directly to the wallet through secure decentralized messaging tools such as XMTP can provide timely, personalized tips to encourage users to return and continue to participate.
Wallet share
Another way to track churn and retention is to look at “wallet share”: the percentage of a customer's total spend in a category that allocates to your product or service. In the field of cryptography, this concept can be applied very intuitively. By analyzing the composition of the wallet, the team can see the type, amount, and activity direction of the assets it holds. If users stop interacting with your protocol, on-chain data can reveal whether they've turned to a competitor. Of course, as agreement products and services become more complex, the reason for user transfers may become more difficult to determine. But if you observe user behavior in favor of a competitor or other product with unique features, this may reveal important information.
Similarly, if many of your token holders hold tokens for a related project at the same time, this may provide opportunities for co-marketing—for example, partnering with the project to host a joint event, or gifting your tokens to its token holders. General-purpose analysis tools like crypto data center Dune can enable this kind of analysis, while more specialized platforms can provide deep insight into specific coins. Since most users have multiple wallets, it's also important to link them to a single end-user identity; on-chain analysis tools (such as Nansen) can provide wallet tags across multiple chains, enabling more accurate wallet share analysis.
Measuring growth in the field of cryptography is not simply a way to replicate Web2, but rather adapting effective strategies, abandoning ineffective strategies, and constructing a new framework around the unique advantages of blockchain. Given the diversity of crypto products, every team's growth dashboard will be different, from L1 to gaming.
But data doesn't tell the whole story. Ultimately, quantitative metrics are only part of the story: understanding that qualitative insights from your audience and users are just as irreplaceable. Conversations in the community (whether it's a discussion about a project or a simple emoji pack and atmosphere), energy feelings at events, and even intuition about what works and doesn't play an important role in guiding growth strategies. In the early stages, the actions of a few core users may be more valuable than the actions of others. These qualitative signals are often the earliest signs of a product market fit. The best crypto growth strategy is a balance of data and intuition, combining short-term tactics to inspire excitement, and long-term strategies to build stronger communities.
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