Web3 funnel analysis is the key to understanding how users move through your dApp, from first visit to onchain activation. Whether you’re trying to increase conversion rates or turn one-time users into loyal contributors, this guide walks you through how Web3 funnel analysis works and how you can use it to unlock growth.

Key Takeaways

• Web3 funnel analysis maps wallet journeys from landing to onchain activity to optimize conversion and retention.

• Web3 funnel analysis helps teams visualize full user flows, identify drop-off points, and fix UX friction.

• Use Web3 funnel analysis to boost retention, measure campaign impact, and segment users by behavior, source, or value.

• Tools like Formo, PostHog, and Dune let you build open/closed funnels tied to wallet data.

• Actionable insights can drive experiments that improve onboarding, activation, and revenue per wallet.

Web3 funnel analysis tracks user actions to understand how they move toward goals

What Is Web3 Funnel Analysis?

Web3 funnel analysis maps and analyzes a user’s journey across onchain and offchain interactions to understand how they progress toward key actions like minting, staking, or repeat purchases.

In Google Analytics, teams use funnel tracking to monitor how users move from landing pages to signups, checkouts, or other conversions. Web3 has a new level of complexity—with wallet connections, onchain transactions, token approvals, and protocol behaviors. While Web2 funnel analysis relies on cookies, logins, or email tracking, Web3 funnel analysis uses wallet activity (onchain and offchain) as the core signal.

The Purpose of Web3 Funnel Analysis

Web3 funnel analytics helps teams visualize, measure, and optimize these unique journeys with greater clarity and impact. Here are 5 purposes of web3 funnel analysis:

Funnel analysis chart

1. Visualize Full User Journeys

Web3 funnels include both offchain and onchain steps. Funnel analysis enables teams to:

• Map how users move from initial entry points (e.g., landing pages, ads) to connecting their wallets

• Track how many proceed to sign messages, approve token use, and complete onchain transactions

• Understand the most common paths and where users fall off

This comprehensive view helps teams align around how users truly interact with the product or protocol.

2. Identify Drop-off Points

Funnel analysis shows where users stop progressing. This makes it easy to identify:

• Low wallet connection rates after landing

• Abandonment caused by bugs, unclear UX, or technical complexity

With precise data, teams can investigate and fix specific steps that cause friction.

3. Improve UX and Conversions

By identifying bottlenecks, teams can:

• Simplify onboarding and reduce cognitive load

• Improve wallet connection flows and streamline interactions

• Reduce unnecessary confirmations or transactions

Teams can A/B test and measure these changes in the funnel to directly improve conversion rates.

4. Boost Retention

Funnel supports both acquisition and retention analysis. Teams can:

• Measure how many wallets return after their first interaction

• Track repeat behaviors like stalking, claiming, or interacting with new features

• Analyze which steps drive long-term engagement

This data helps improve product stickiness and user lifetime value.

5. Measure Campaign Impact

Web3 growth strategies often involve token incentives, referral programs, or airdrops. Funnel analysis allows teams to:

• Identify the onchain attribute that campaigns or channels drive valuable actions and get revenue

• Compare conversion rates from sources like social, search, or community platforms

• Separate vanity metrics from true impact

You can double down on high-performing growth levers and reduce spend on ineffective channels.

How to Do Web3 Funnel Analysis

Running funnel analysis marketing in Web3 is different from Web2, but the goal is the same: to understand what drives users forward and what holds them back. 

Here's how to do it effectively:

Example of an onboarding funnel 

1. Define Key Funnel Steps

Start by identifying the core user journey specific to your product. These should be high-intent actions that relate directly to conversion, activation, or retention.

Funnel analysis example:

• Step 1: Sign in with a social account

• Step 2: Connect wallet

• Step 3: Transaction

• Step 4: Revisited product (retention)

• Step 5: Refer a friend

Keep it simple—too many steps make the funnel hard to interpret.

Tip: Funnel steps can include both onchain actions (e.g., stake, mint, swap) and offchain behaviors (e.g., clicked CTA, completed form, watched tutorial).

2. Track Wallet Events

Web3 behavior spans across multiple layers: frontend, backend, and blockchain. Use funnel analysis tools that allow you to unify those signals:

• Wallet events: Connect, sign, approve, and transactions

• Smart contract interactions: Mint, stake, claim, etc.

• Site behavior: Button clicks, scroll depth, form fills

• UTM or referral data: Campaign attribution

• Onchain events: Confirmed transactions and event logs

Popular web3 funnel analysis tools:

• Web3-native: Formo, Dune 

• Web2: PostHog, Amplitude, Heap (with custom onchain data pipelines)

The key of funnel analysis for onchain apps is to tie all data points to wallet addresses for a unified user view.

3. Build Open or Closed Funnels

There are two types of funnel structures depending on your user flow:

1. Closed Funnel (Specific Order)

Users must complete the steps in the defined order to be counted as converted.

Steps: A → B → C → D → E

Example:

• A = Connect Wallet

• B = Approve Token

• C = Stake Tokens

• D = Claim Rewards

• E = Share on Socials

Valid Paths:

1. A → B → C → D → E

2. A → B → X → C → D → E (extra actions in between are fine)

3. A → B → B → C → D → D → E (repeated steps are okay if the order is preserved)

Invalid Paths:

• A → C → B → D → E (step B comes after C, order is broken)

• A → B → C → E (step D is missing, funnel drops off at C)

• B → C → D → E (user didn’t start with A, not counted)

2. Open Funnel (Any Order)

Users must complete all the steps, but in any sequence.

Steps: A, B, C, D, E

Example:

• A = Join Discord

• B = Connect Wallet

• C = Complete Quest

• D = Mint NFT

• E = Stake Tokens

Valid Paths:

1. A → B → C → D → E

2. E → C → A → D → B

3. C → A → E → B → D

4. A → A → D → C → E → B (repeats allowed)

Invalid Paths:

• A → B → C → D (step E is missing)

• B → C → E (only 3 out of 5 steps completed)

Summary Table:

Use platforms that support funnel analytics, such as Formo, GA4, or Amplitude.

4. Segment Your Wallets

To get deeper insights, break down your funnel by different wallet attributes:

• Acquisition source: Which campaign or platform brought them in?

• Chain behavior: Are they active across Ethereum, Base, or Solana?

• Frequency: Daily active, weekly active, or one-time users?

• Value: High-value wallets (based on holdings, spend, wallet age)

Comparing performance across segments helps identify high-performing cohorts and underperforming ones that need attention.

5. Take Action on Insights

The most important part: turn data into action.

Examples of insights → experiments:

• High drop-off at Token Approval → Add onboarding tooltips or auto-approve UX

• Low retention after initial mint → Launch re-engagement campaigns or token-gated quests

• High conversion from X influencer or community → Scale that partnership

• Better performance on mobile → Prioritize mobile UX improvements

Funnel analysis in digital marketing involves running informed experiments to unlock user growth and retention.

5 Web3 Funnel Examples to Unlock Growth Insights

Funnels in Web3 are about wallet actions, smart contract interactions, and retention across trustless journeys. Here are 5 critical funnel templates to help you analyze user behavior and improve conversion, activation, and retention in your dApp.

1. Marketing Funnel

Goal: Understand how wallet owners discover your project and eventually connect their wallet or sign up.

Marketing funnel template

Funnel stages:

• Impression stage: A user sees your campaign on X, Farcaster, or an aggregator like DappRadar.

• Landing page visit: They click through to your page.

• Engagement: They browse your content, docs, or FAQ.

• Call-to-action click: They hit “Connect Wallet” or “Join Waitlist.”

• Sign-up/Connect Wallet: The user successfully connects their wallet or completes a form with their wallet address.

By improving click-through and sign-up rates, you can boost new user acquisition while reducing wallet CAC (cost per acquired wallet).

2. Onboarding Funnel 

Goal: Track how new users experience and complete your onboarding flow—from connection to their first meaningful onchain interaction.

Onboarding funnel template

Example for a Web3 social app:

• Connects wallet

• Creates a profile onchain

• Follows 1–3 other users

• Mints a social badge or NFT identity

• Completes the onboarding quest or tutorial

Web3 onboarding is often a dealbreaker. Wallet friction, missing guidance, or unclear next steps can lead to drop-offs. The onboarding funnel helps you identify and optimize each step so users reach time-to-value faster.

3. Activation Funnel

Goal: Identify when a wallet achieves its first “aha” moment—whether it's swapping tokens, minting, or earning.

Activation funnel template

Activation stages vary depending on product type. Here’s one for a DeFi yield aggregator:

• Connect wallet

• Deposit funds

• Stake in a pool

• View first rewards earned

• Returns in 24h

Activation is the turning point from curiosity to commitment. Use this funnel to learn where users lose trust or momentum before they realize your dapp’s value.

4. Free Trial to Conversion Funnel

Goal: Track how wallets move from free usage (testnet, trial, airdrop) to full engagement, such as buying a token, staking, or minting a paid asset.

Free trial to conversion funnel template

Funnel stages for a pay-to-mint NFT tool:

• Connects wallet

• Uses testnet/mint preview

• Interacts with free features

• Initiates paid minting or staking

• Completes payment/signs tx

This is one of the leakiest funnels in Web3. Gas fees, wallet UX, unclear value, or slow onboarding can all stop wallets from converting. A smooth, measurable journey is key to maximizing revenue per wallet.

5. Feedback & Review Funnel

Goal: Turn your best users into public advocates across Farcaster, Lens, X, or review platforms like DappRadar, DefiLlama, and Messari.

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Feedback & review funnel template

Example funnel:

• User completes the NPS or feedback form

• User scores 9–10 (Promoter)

• Prompted to share feedback publicly

• Clicks link to Farcaster channel or review site

• Publishes feedback or a testimonial

In Web3, trust is social. Strong review funnels boost credibility, attract new wallets, and amplify your reach organically, especially when tied to incentives like NFT badges, roles, or allowlist access.

Case Study: Improving NFT Mint Conversion with Funnel Analysis

Project Overview

A Web3 game studio launched a new NFT collection as part of an onboarding campaign. The goal was to get new wallets to connect, mint a free NFT, and return within 7 days to play the game.

Despite a successful campaign launch, mint conversion was low (12%) and the return user rate was under 20%.

Funnel Setup

The team set up a closed funnel with the following steps:

1. Wallet Connected

2. Clicked “Mint NFT” Button

3. Signed Mint Transaction

4. Successfully Minted NFT

5. Returned to Site Within 7 Days

Tools used:

• Formo for wallet event tracking, click, and UTM source analysis

• Dunes for onchain mint status

Funnel Insights

Here’s what they discovered:

Key Drop-offs:

• Many users clicked "Mint" but abandoned before signing—likely due to friction or confusion about the transaction.

• Only a small portion of users returned to the site after minting, indicating a weak follow-up flow.

Optimization Actions

Based on the funnel data, the team implemented the following improvements:

1. Simplified Wallet Flow

• Replaced the multi-step minting process with a one-click batch transaction.

• Added an in-app modal explaining gas fees and confirming that the mint was free.

2. Improved Confirmation UI

• Enhanced messaging to clearly state “You’re about to mint a free NFT—no payment required” during the transaction step.

3. Automated Follow-Up Experience

• Redirected users to a “Welcome Quest” page post-mint.

• Sent automated emails and Farcaster messages 3 days after mint to prompt return visits (for users who had linked a wallet or provided an email).

Results After 2 Weeks

Mint conversion more than doubled, and the return rate increased by over 111%.

Web3 funnel analysis goes beyond simply tracking vanity data; The funnel focuses on gaining a deep understanding of user behavior, including what they enjoy and what they choose to avoid. By connecting insights throughout the entire user journey, Formo empowers Web3 teams to make data-driven decisions. With real-time product analytics and no-code tools, both technical and non-technical teams can test, iterate, and optimize for product-led growth without compromising performance.

Further sources: 

• Web3 Funnel Analytics: Optimize Your User Journeys for Growth

• Web3 Product Analytics: Best Practices and Benefits

• Web3 Behavioral Analytics: How to Track and Analyze

Follow us on LinkedIn and Twitter, and join our community to learn how Web3 teams turn insights into action with Formo!

Additional FAQs

1. What is Web3 funnel analysis?
Web3 funnel analysis is a way to track and analyze how wallet users move through your dApp—from landing page to onchain actions—so you can optimize for better conversions and retention.

2. How is it different from a Web2 funnel?
Web3 funnels can analyze both wallet events (connect, sign, mint, swap) and web events (pageviews, sessions, or logins). They rely on unified onchain and wallet data to capture the full user journey..

3. Why is funnel analysis important in Web3?
Funnel analysis helps product and growth teams understand user behavior, find drop-off points, and fix friction in the onboarding or transaction process.

4. What tools can I use for Web3 funnel analysis?
You can use Formo, PostHog, or custom dashboards with wallet tracking and onchain data pipelines to create and analyze Web3 funnels.

5. What can I do with insights from a Web3 funnel?
You can run experiments from the web3 funnel to improve user activation, boost retention, optimize marketing spend, lower Customer Acquisition Costs (CAC), and increase Revenue Per Wallet (RPW).