Original Article Title: Measuring growth in crypto: What's different, what matters, and what needs to be adapted

Original Article Author: Maggie Hsu, A16Z

Original Article Translation: Deep Tide TechFlow

How do you assess the success and growth of a crypto protocol or product? In Web2, marketers have various strategies to measure success. However, in the crypto space, especially in the L1, L2, and protocol realms, marketing strategies are still evolving. Some metrics are not yet available, some are not as crucial, and many metrics need to be rethought for the blockchain.

I have spoken with many growth and marketing leads, each with their own dashboard, which is quite normal because the definition of growth for L1 or L2 differs from that of DeFi protocols, wallets, or games. Let's delve more deeply into these differences:

The growth of L1 and L2 is closely tied to the 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. While MAA growth may not align with application growth, indicating the existence of a few popular or low-quality applications, ideally, both should grow in tandem. In this scenario, the Chief Marketing Officer's (CMO) role, besides promoting the protocol itself, is more akin to a community marketing engine.

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 into the protocol's smart contracts, or Total Value Secured (TVS) — the total value of assets secured by the protocol. Although TVL is a contentious metric, when combined with other discussed metrics below, it provides a broad understanding of the protocol's growth. One founder shared how they also calculate the "Cost of Active TVL," which is the ratio of the incentive amount they need to provide to achieve a certain locked value and the cost or locked value that it brings.

Infrastructure and other Software as a Service (SaaS) growth typically relate 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. Specifically, focusing on the percentage of recurring revenue from existing customer retention or Gross Revenue Retention (GRR) indicates product stickiness and customer stability, which is crucial for measuring recurring revenue. Net Revenue Retention (NRR) also considers upsells 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). However, here it focuses on using the following metrics to measure overall usage and revenue:

· Daily Active Addresses (DAA), the number of unique addresses active on the network each day

· Daily Transaction Users (DTU), which is the number of unique addresses engaging in revenue-generating transactions on the network (a subset of DAA)

· Average Revenue Per User (ARPU), the revenue generated from a user or customer within a specific period

However, if tokens are involved, then the token price and holder distribution will also be impacted, 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 appropriate metrics.

So, how do you build a company-specific metrics dashboard? Below are some potential metric suggestions, along with insights on their position in the marketing funnel. However, ultimately, you need to decide what to measure, how to weigh the importance of each metric, and how to take action based on the data...

Core Metrics: What Really Matters?

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

While these concepts are widely accepted in traditional SaaS, adjustments need to be made in the crypto space as here "customer" typically refers to a "wallet," and the form of value creation is also different. In the following sections, we will redefine these metrics and explore their unique nuances in the crypto space.

Customer Acquisition Cost (CAC)

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

· Broadly speaking, Blended Customer Acquisition Cost (CAC) is calculated by dividing the total customer acquisition cost by the total number of new customers. It tells you the average price paid per new customer across all channels—not just the acquisition cost but also the organic growth cost (which makes it difficult to see which specific growth strategies are driving performance growth).

· On the other hand, Pay CAC only focuses on customers acquired through paid marketing. Many times, teams dive into paid marketing efforts somewhat aimlessly without measuring the results. Pay CAC can reflect the cost of acquiring these customers and whether specific marketing activities are truly effective. In the cryptocurrency field, measuring this is particularly important because early on we found that many teams were distracted by paid rewards without understanding what their product was really doing.

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

Who counts as "customer"? In this context, "customer" may refer to "user" or "developer"; for example, a brand-new wallet transacting on a protocol can be seen as a customer of that protocol.

Customer Lifetime Value (LTV) and Average Revenue Per User (ARPU)

Customer Lifetime Value (LTV) represents the present value of a customer's future net profits over the duration of the customer relationship. LTV essentially measures the customer's feedback post becoming a customer, including their spend on the product.

LTV itself is a complex calculation and concept. In the cryptocurrency field, this concept doesn't always directly translate as "user" isn't always a "customer" in the traditional sense. For instance, they could be anonymous wallets, and a user might hold multiple different wallets. Thus, LTV could reflect the contribution of an individual wallet to the Total Value Locked (TVL), which refers to the total USD value of assets held in a protocol's smart contracts, as mentioned earlier.

For DeFi protocols, TVL can offer a snapshot of the "current total assets," and LTV can help answer "the value of a particular wallet to the protocol over its lifetime."

LTV:CAC Ratio

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

For traditional SaaS products, a 3:1 ratio is considered reasonable because it implies that the value you create from a customer is three times the cost of acquiring the customer, and the remaining profit can be reinvested in growth. In the cryptocurrency field, we have not yet established such a benchmark.

When evaluating the LTV:CAC ratio in the cryptocurrency field, you also need to consider other acquisition incentive measures, such as airdrops or rewards points, as these measures may skew the metrics. Ideally, these types of incentive measures can help attract users to use the product and help them get started. Still, when users like the product enough, the product can continue to grow even without incentive measures—in this case, CAC will decrease, LTV will increase, thereby improving the LTV:CAC ratio.

Below is a brief summary of the key metrics outlined in the article and their perspective in the crypto space:

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

Decoding the Growth Funnel in Crypto

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

Next, we will delve into each stage of the funnel, analyzing key strategies and metrics, as well as their differences in the crypto space compared to Web2...

Awareness/Lead Generation

Whether through traditional channels or cryptocurrency, the first stage of the marketing funnel is to increase brand awareness. Even in the cryptocurrency field, raising brand awareness is a prerequisite for everything that follows.

At this stage, you will also begin to measure Customer Acquisition Cost (CAC). "Reach," or the number of unique individuals who see your content, should also be a core metric. Reach is particularly crucial when evaluating the success of mass marketing channels such as news, media, and public relations. The challenge at this stage is to differentiate between short-term spikes in attention and real "stickiness" of interest: are users merely curious, or are they genuinely 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 subtle differences in the crypto field:

Key Opinion Leader (KOL) and Influencer

Paying a large-scale random influencer or KOL to promote may seem like a reliable way to boost awareness, but this approach often fails to generate meaningful engagement, especially when the influencer lacks genuine 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 authentically share their excitement. Consideration can be given to "Micro-Influencers," who are more niche, specific, and trusted voices; or even local influencers, such as team experts, who have already built strong personal influence. An exemplary case is Claire Kart, Chief Marketing Officer of the privacy-focused L2 company Aztec, who not only serves as an influencer within the company but actively seeks out emerging influencers, establishes organic connections with them, and integrates them into the Aztec ecosystem.

Advertising

In the cryptocurrency space, advertising faces a set of challenges. For instance, due to the ambiguous and ever-changing policies regarding crypto ads, many crypto companies are unable to run ad campaigns on traditional platforms like Google or Meta. Additionally, the crypto community exhibits a certain level of caution towards traditional advertising, as similar ad formats are sometimes used by scammers to direct users to malicious sites.

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

Referral and Affiliate Marketing

The concept behind referral programs is similar to traditional marketing: you receive a reward when others sign up through your referral. The uniqueness of cryptocurrency lies in the instant and on-chain verifiable rewards, streamlining the incentive mechanism, making the entire process more seamless. Projects like Blackbird demonstrate how on-chain referrals evolve into a complex network effect through ongoing loyalty programs and community engagement, rather than just one-off customer acquisition activities.

Word-of-mouth marketing is one of the most powerful growth drivers in the crypto space: for consumer-facing products, adoption is often driven by recommendations, where users recommend the product to others because they enjoy the experience and see the value in it. For infrastructure projects, recommendations usually 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 to see if they were recommended after signing up or completing onboarding and who the referrer was.

In this sense, referrals act as an inverted, bottom-up marketing funnel: users don't just stop at the conversion stage but rather loop new potential users back to the top of the funnel. Early users become advocates, bringing more people into the network (potentially being rewarded for their contribution), thus keeping the growth flywheel spinning.

On the note of accuracy: accurately measuring the growth of real users/customers versus bot users is a challenge faced across industries, especially in the social media space. Cryptocurrency has some unique identity primitives we can leverage, such as verifying "proof of humanity" through World ID or verifying identity through zero-knowledge proofs (via zkPassport). These primitives can help differentiate real users from bot users or airdrop farmers. The growth team can not only use these primitives to build resilience against Sybil attacks for airdrop and other community growth mechanisms but also gain a better understanding of actual users to help plan for product retention.

The Power of a Growing Network

Lastly, one of the unique growth drivers in cryptocurrency is tokens, often the best way to attract users, developers, and liquidity to markets that traditionally face a challenging cold start problem. However, this is not driven purely by speculation; more importantly, a token's price appreciation can attract new users who want to be part of a movement or emerging project. Developers also take note, as price appreciation can indicate an active community and genuine demand, making the platform more appealing.

Consideration/Interest

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

In the cryptocurrency space, this is especially crucial, as every decision—from buying a token to ordering a hardware wallet—usually requires a significant amount of education, given that cryptocurrency is still a relatively nascent (and often complex) industry for users and developers alike. Providing users with the right information to help them make decisions and weigh competing products or platforms can have a tremendous impact. This is why companies like Coinbase and Alchemy have invested in consumer- and developer-facing educational content.

Effective educational content not only entails detailing the product's features and benefits but also includes the product's mechanics (such as security, custody, community and treasury governance, tokenomics, etc.). Developers may require in-depth technical documentation and tutorials, while consumers typically need explanatory content (e.g., before transferring real funds between wallets or blockchains).

Key tools include user education via email in critical processes (e.g., product registration or purchase), in-product prompts and tooltips, interactive guides, as well as product trials or "testnet" setups before committing to asset transfers to demonstrate and experience functionality. Companies are also starting to optimize their educational content for Large Language Models (LLMs) so that when someone poses a question, the company's content can be retrieved.

Successful teams measure interest not only through clicks or downloads but also by users taking intermediate actions (e.g., joining a wallet waitlist or adding a small amount for testing purposes) to demonstrate trust and intent. However, understanding the success of these efforts depends on the chosen channel since each channel has its set of metrics. Ultimately, you need to map these metrics to some form of conversion, as we will discuss below.

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 take.

As a metric, "conversion rate" is a broad term: in traditional marketing, it might refer to the number of customers purchasing a product, users registering for a demo, or individuals requesting a conversation with the sales team. In the crypto space, conversion might also include wallet downloads, token purchases, or even code deployments on a platform. Defining the specific form of conversion depends on the product and goals, but accurately defining conversion metrics is crucial for devising optimal measurement methods.

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

Precisely measuring conversion also relies on attribution models, which are particularly complex in the crypto space, especially the journey users take between traditional websites, social networks, and on-chain activities (e.g., from off-chain to on-chain behaviors or vice versa), which are challenging to accurately track.

Network tracking tools like Google Tag Manager can track website conversions, and new tools targeting wallet users (such as Addressable) can bridge the gap between off-chain ads and on-chain activities, enabling teams to trace actions from websites or Web2 ads to on-chain behaviors. However, user journeys are often non-linear; for example, a user might first see a post on X, attend an offline event, and then make their first transaction.

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

Post-Conversion Engagement

In traditional marketing funnels, engagement/interest stages typically measure pre-purchase product interactions. These interactions are a way for users to better understand the product and brand, serving as a critical stage where initial interest converts into loyal engagement.

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

For example, online engagement (also covered in our social media guide) can include the following metrics:

· Engagement on Discord or other forums/chat platforms

· Activity on X (formerly Twitter)

· Sentiment analysis on social channels

· User engagement in governance or voting

While many crypto marketers still rely on traditional social listening tools, these methods need to be adjusted for the crypto space. For instance, sentiment tracking can provide directional insights into the community's 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 information dissemination. However, the crypto community is dispersed across multiple platforms, with varying metric quality and depth, and a few highly active accounts can skew data, leading to more 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 instance, identifying those who amplify content, create memes, participate in discussions, or energize the community. However, it's worth noting that incentive-based activities are prone to manipulation: certain incentives may attract those more interested in rewards than the project itself, which could result in short-term community activity but lack sustainability.

Crypto marketing can still achieve meaningful organic growth through non-incentivized or non-paid means. For example, by employing a strategy that intertwines different types of content. The stablecoin liquidity layer Eco has adopted an organic content strategy based on the "4-1-1 Rule": publishing 4 pieces of educational content about their market opportunity, 1 piece of "soft sell" content (such as third-party endorsements), and 1 piece of "hard sell" content (such as "use our product"), and repeating this cycle every few hours over 7 days. Solely through an organic posting strategy and leveraging significant product announcements and joint marketing efforts, Eco increased its total monthly impressions by nearly 600%.

Offline engagement (such as attending conferences or events) also plays a significant role in helping users participate through deeper connections. Traditionally, these events' measure has been collecting email addresses to expand the email list (e.g., by scanning attendees' QR codes). More sophisticated tools include using NFC chip-tagged giveaways (e.g., through IYK) and running various activities to encourage users to click or scan it. Online platforms (such as Discord or Towns) provide a dedicated space for ongoing interaction and relationship-building, where teams can track the quantity of user interactions over time (posts, likes, replies) and analyze the quality and sentiment of these interactions.

Retention

Retention answers a key question: "Who is sticking around?" Retention can be measured as the percentage of users who perform on-chain activities after a set period of time or more broadly as a measure of ongoing user activity levels. The method of calculating retention is to divide the existing number of users at the end of a certain period by the number of users at the beginning of that period. If you are measuring email subscribers or wallet downloads, tracking retention is not about initial sign-ups but rather measuring users who remain active after a period of time. 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 contradiction between "long-term" and "short-term" behaviors as it involves robust tokenomics and behaviors. For example, a surge in user sign-ups during an airdrop at launch may initially look like growth, but many may leave once the rewards stop. That is why defining your "ideal" user and measuring retention relative to that cohort is crucial, not just the raw total of users. This is also why measuring product metrics (intrinsic to the product itself and interest in the product) is essential so as not to confuse what is effective, what is not, especially if your product has not achieved product-market fit. Otherwise, you might think you have found product-market fit when you haven't; in other words, people are actually interested not in your product but in the reward.

Retention naturally drives Customer Lifetime Value (LTV) as the longer users stay, the more they consume or transact, increasing not only their LTV but also making the LTV:CAC ratio more optimal.

Churn

Churn is the opposite of retention, used to measure how many users are lost during a user's lifecycle and when they are lost. 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 period and expressing it as a percentage. In the crypto space, an alternative measure of churn (though not entirely mapping to traditional churn metrics) is the percentage of wallets that are inactive after a certain period. For example, users may have registered wallets through a marketing hype or a cycle but have not used them afterward. Some of these users may re-engage at some point in the future, but the key to calculating churn lies in identifying active users, frequent participants, and returnees, rather than those "dormant" users who have only executed one on-chain operation.

There are tools available to monitor user interactions with decentralized applications (dApps) (such as Safary), helping to identify friction points that lead to user churn, such as high transaction fees, complex user experiences, or the need to go through multiple onboarding steps. For example, when Solana released the Seeker phone, some users wished for a preloaded fund wallet (similar to early Saga phones) to reduce the initial barrier to use, as the need for manual recharge to transact could hinder product adoption. Although Solana has shifted toward dApp reward activities after users receive the phone, reducing friction in the onboarding process remains crucial.

To reduce churn, funnel tracking and user segmentation platforms can be used, supporting engagement specific to the crypto space (such as Absolute Labs' "Wallet Relationship Management"). These tools allow teams to create custom user groups and re-engage users through Web2 channels and crypto-native strategies (such as targeted airdrops). Additionally, sending timely, personalized prompts directly to wallets through secure decentralized messaging tools (like XMTP) can encourage users to return and continue their engagement.

Wallet Share

Another way to track churn and retention is by observing "wallet share": the percentage of a customer's total spending in a category allocated to your product or service. In the crypto space, this concept can be applied very intuitively. By analyzing a wallet's composition, teams can see the types of assets it holds, the quantities, and the direction of activity. If a user stops interacting with your protocol, on-chain data can reveal if they have shifted to a competitor. Of course, as the complexity of protocol products and services increases, the reasons for user migration may become more challenging to discern. However, if you observe user behavior tilting towards a competitor or another product with unique features, this may reveal valuable insights.

Likewise, if many of your token holders also hold a related project's token, this may present opportunities for joint marketing—such as collaborating on joint events with the project or airdropping your token to their token holders. General analytics tools like the crypto data hub Dune can facilitate this analysis, while more specialized platforms can offer deep insights into specific tokens. Since most users hold multiple wallets, linking them to a single end-user identity is also important; on-chain analytics tools (such as Nansen) can provide wallet labeling across multiple chains for more accurate wallet share analysis.

Growth measurement in the crypto space is not simply a replication of Web2 approaches but an adaptation of effective strategies, discarding ineffective strategies, 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 be different.

However, data alone cannot tell the whole story. In the end, quantitative metrics are just part of the story: a deep understanding of your audience and users through qualitative insights is equally irreplaceable. Conversations within the community (whether about project discussions or just memes and vibes), the energy felt during events, and even intuitions about what works and what doesn't all play a critical role in guiding growth strategy. In the early stages, the behavior of a few key users may be more valuable than that of others. These qualitative signals are often the earliest indicators of product-market fit. The best crypto growth strategy is a balance of data and intuition, combining short-term tactics to spark excitement and long-term strategies to build a stronger community.

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