Blockchain games lose to reality, Web3 doesn't believe in dreams

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Author: Chloe, ChainCatcher

Recently, Lily Liu, President of the Solana Foundation, said in an X post that “games on the blockchain won’t come back,” adding that blockchain gaming is dead.

Her judgment stems from a Polymarket post: “After Meta, led by Mark Zuckerberg, poured $80 billion into the metaverse, it is gradually abandoning its metaverse vision.” While Meta’s blueprint does not clearly involve blockchain or crypto assets, its strategy overlaps heavily with the future once depicted by Web3 on-chain gaming over the past few years: virtual worlds, digital asset ownership, and immersive online economic systems.

Even the richest players have walked away—blockchain games once served as the crypto industry’s most promising “mainstream breakout” narrative. So, has the day of reckoning already come and gone for this industry today?

The collapse of the entire track: are blockchain gaming projects shutting down one after another?

In August last year, Proof of Play issued an announcement that felt like a confession to the market. Its full-chain pirate RPG, “Pirate Nation,” would be shut down within 30 days. Two dedicated on-chain networks went offline, token rewards were reduced to zero, and community players could only burn their assets in exchange for so-called “certificates.” Those certificates might be useful one day—but they likely might not be. And the game studio had raised $33 million two years earlier, vowing to build the future of on-chain games.

After the announcement, the PIRATE token plunged 92% within just a few days. Co-founder Adam Fern admitted: “Shutting down Pirate Nation is one of the hardest decisions I’ve ever been part of. But the fact is, it could never become a breakout mainstream product.”

Pirate Nation isn’t an exception—it’s just a small snapshot of the massive meltdown of blockchain gaming in 2025.

Open up last year’s list of blockchain games announcing shutdowns one by one. The Ethereum game “Ember Sword,” which attracted $203 million in funding through NFT land purchases, announced it would close in May last year. Developer Bright Star Studios directly cited a lack of funding.

The third-person shooter battle royale game “Nyan Heroes,” built on Solana, was once on the wish list of more than 250,000 PC platform players, but it also ended operations in May last year due to a funding breakdown. Its token NYAN fell by more than 99% from its peak. “Symbiogenesis,” an Ethereum on-chain game by Square Enix, the creator of “Final Fantasy,” also reached its end in July.

Even the MMORPG under Gala Games, which obtained official licensing for “The Walking Dead,” was taken offline in July. The NFT-based mechanized combat game “MetalCore” went quiet after shutting down its servers in March; the developer has quietly shifted to launching a new game on Steam that has nothing to do with blockchain.

What has been most disappointing to the market recently is “Wildcard.” After its TGE in March this year, its market cap peaked at only $1.1 million. The community widely questioned the project for being irresponsible and a soft rug. According to crypto data platform RootData, Wildcard previously raised $46 million in funding, led by Paradigm.

Its founder Paul Bettner had worked on well-known games like “Words With Friends” and “Lucky’s Tale,” but now, even with top-tier VC backing and a veteran game professional at the helm, the collapse of the entire blockchain gaming track still can’t be stopped.

Besides that, there are “Deadrop,” “Blast Royale,” “Mojo Melee,” “Tokyo Beast,” “OpenSeason,” and “Captain Tsubasa Rivals.” Behind every project are investments of millions—or even tens of millions of dollars—accumulated from countless game users, and ultimately promises that turn into nothing.

Web2 players want a good game; Web3 players only want returns

Most founders have real game development backgrounds, and their on-chain gaming vision during fundraising hasn’t been entirely empty talk. So why does it still end up with projects shutting down or returning to Web2?

“Web3 games build a whole investor-driven capital structure through tokens and NFTs before player demand is even validated.” In other words, the people funding these games from the start are not the same group of people who ultimately need to stay in the game.

When, during development, it’s discovered that the on-chain player base is smaller than expected and more focused on short-term arbitrage—when token prices keep falling and development costs keep rising—studios are left with only two choices: shut down or abandon their blockchain identity and pivot to the traditional market. Regardless of which path they take, the ones ultimately footing the bill are always the early Web3 investors and NFT holders.

“Moonfrost,” a farming simulation game, is a typical case. Developer Oxalis Games raised $6.5 million, ran a Play-to-Airdrop program for more than a year, and sold 1,833 NFT boxes at $150 each. Then in November 2025, the team announced leaving Web3 and relaunched on Steam as a paid PC game—no more NFTs, tokens, or blockchain.

And just a day before the announcement, CEO Ric Moore was still publicly discussing how to build “slow and meaningful Web3 games.” The team’s stated reason was: “Web3 players want to make money; Web2 players only want a good game.” It took them three years and a pile of real cash to finally see the true rules.

A 2025 industry report from the Blockchain Game Alliance (BGA) also confirms the retreat in on-chain gaming: annual investment in blockchain games fell to about $293 million. That’s compared to $4 billion in 2021 and a peak of $10 billion in 2022—an astonishing drop. DWF Labs describes the current stage as a “necessary reset.” And the biggest lingering legacy left by the industry’s failure may be the crisis of trust and credibility across the entire blockchain gaming ecosystem.

The BGA report shows that 36% of respondents list “scam, fraud, or rug pull” as the industry’s biggest threat. Even if most projects shut down without intentionally scamming, from an outside perspective, the repeated cycle of “raising funds, issuing tokens, shutting down” is almost indistinguishable from rug pull behavior. “This industry needs real game developers and real users who want to play—both are indispensable.”

Infrastructure and market conditions create advantages; stablecoins and AI bring new opportunities

The collapse of the blockchain gaming narrative doesn’t mean the end of consumer-level applications in the crypto industry. The BGA report shows that 65.8% of industry participants remain optimistic about the next 12 months. That optimism is built on deliverable products and sustainable revenue models. At the same time, stablecoins handling large volumes of transfers, AI tools compressing game development costs to just a fraction of what they used to be, and the fact that infrastructure and market conditions never disappeared—indeed, from many developers’ perspectives, several possible paths can be seen.

When discussing its旗下 “MapleStory Universe,” NEXPACE CEO Sunyoung Hwang proposed a core principle: for most players, wallets, gas fees, and tokenomics are barriers—not value-adds. The blockchain layer should do meaningful work in the background—such as enabling true asset ownership and powering open economies—while players should focus only on the game itself. “If infrastructure operations permeate the gaming experience, then game design is a failure.”

Animoca Brands CEO Robby Yung and PLAY Network CEO Christina Macedo, however, believe that retention rate is the only real truth. D1, D7, and D30 retention data are the same in the console era, the same in the mobile gaming era—and they still hold true in the crypto industry. Macedo points out that the standard benchmarks for mobile games are 35–45% D1 retention, 15–25% D7, and 5–10% D30, while most Web3 games don’t even reach these basic healthy indicators.

Yield Guild Games co-founder Gabby Dizon believes the reason the industry fails is that “it spends too long measuring the wrong things,” including outdated metrics like VC funding amounts, token prices, and NFT sales. The real metric is simply whether players are willing to pay—because they see value in their game experience.

Finally, there are the opportunities brought by stablecoins and AI.

The BGA report notes that more than one-quarter of respondents view stablecoins as the key to industry success. Compared with game tokens that are wildly volatile, stablecoins are friendlier to new users and easier to understand, and they’re increasingly being used for tournament prize pools, in-game rewards, and cross-border payments. Sequence further adds that smart game developers are paying attention to stablecoin payments—for on-chain assets or other scenarios alike. Lower fees, instant settlement, and simpler revenue sharing all provide significant advantages for real-world use.

And AI is changing the cost structure. Mighty Bear Games’ Simon Davis says that AI-native teams are surpassing traditional studios in output with only a fraction of the cost and manpower. Animoca Brands agrees as well: in 2026, the key to sustainability lies in AI-driven or AI-assisted development practices, which will fundamentally change the economic model for producing high-quality game content.

Blockchain games aren’t dead yet—so is this phase a necessary reset?

The core contradiction of the last blockchain gaming cycle has never changed: investor-driven capital structures stay ahead of player demand validation. When retention can’t support token economics, when development costs consume fundraising numbers, the endgame for project teams is only shutdown or going fully off-chain—while the ones always paying are early holders.

But this reshuffle has also given game developers a more practical consensus: let blockchain be invisible, measure success by retention rate instead of token prices; replace high-volatility tokens with stablecoins as the payment layer; and use AI to rebuild development costs. The commonality across these directions is: first build a game that passes traditional market testing metrics, and only then let blockchain play its true value at the infrastructure layer.

Blockchain games may not be “dead” the way Lily Liu said—but the market is indeed saying goodbye to that old loop: token-driven user growth, until development funds are exhausted, and the system can only circle back to Web2.