The Crisis of Web3 Gaming: Project Collapse and Structural Limitations of the Industry

As the official release of MapleStoryN rekindles interest in Web3 gaming, numerous blockchain game projects are beginning to shut down their services starting in 2025. Once hailed as the future of the industry, Web3 games are now rapidly and quietly collapsing into a whirlpool of decline.

Large-Scale Closures of Web3 Games: Which Projects Disappeared?

In 2025, the blockchain gaming industry appears to be experiencing a chain reaction of collapses. Projects that once garnered high expectations have announced development halts one after another within a month.

Famous blockchain games like Tatsumiko, Nyan Heroes, Blast Royal, and Rumble Kong League have all decided to close their doors. The most shocking was the shutdown of the MMORPG project Ember Sword. Having raised over $200 million, this project suddenly ended its service, delivering a huge shock to the player community.

Ember Sword was a project that attracted investors such as Dr. Disrespect, Sebastian Borje (co-founder of The Sandbox), and Kevin Lin (co-founder of Twitch). Yet, it ultimately failed to secure funding to continue development.

Nyan Heroes is an even more surprising case. This cat-themed shooting game, well-known in the Solana ecosystem, attracted over 1 million players across four beta tests and had more than 250,000 players adding it to their wishlist on Epic Games Store and Steam. Despite these achievements and ongoing negotiations, the development team failed to secure funds to complete the game.

Why Is the Failure Rate of Web3 Games Over 80%?

The high failure rate of Web3 games is no coincidence. Statistical evidence supports this.

According to a report released by CoinGecko in December 2023, out of 2,817 Web3 games launched between 2018 and 2023, approximately 2,127 have failed. The average failure rate is a staggering 80.8%. Even more shocking is ChainPlay’s analysis: of 3,279 Web3 game projects analyzed, 93% have been discontinued, with an average lifespan of just 4 months.

Interestingly, this high failure rate is not unique to Web3 games. The entire gaming industry has a structurally high failure rate. A 2022 study by the ICT Institute found that only 25% of 100 funded video game projects were completed on schedule, and 40% failed to deliver promised content altogether.

The situation is even more severe for mobile games. According to SuperScale’s 2023 research, 83% of mobile games shut down within three years. Continuous innovation and high-quality service demands mean delays and budget overruns are common, ultimately leading to project failures.

Funding Shortages: The Direct Cause of Web3 Game Failures

Game development generally follows a “staged funding” model. After initial seed funding, development proceeds, and subsequent rounds (A, B, etc.) are raised to complete the project. For example, Black Myth: Wukong gained significant attention after its first gameplay trailer in August 2020, which helped it attract strategic investment from Tencent in 2021.

However, this model does not work effectively in Web3 gaming. ChainPlay’s statistics show that the token prices of GameFi projects have fallen an average of 95% from their all-time highs, and 58% of venture capital invested in this sector experienced losses ranging from 2.5% to 99%.

The investment environment for Web3 games is rapidly deteriorating. According to a DappRadar report, investment in Web3 games in Q1 2025 was about $91 million, a 68% decrease compared to the same period last year. This indicates that rising interest in AI and RWA (Real World Assets) has pushed Web3 games out of investors’ focus.

Token Incentives: Short-Term Gains, Long-Term Failures

Currently, Web3 games heavily rely on airdrops and token incentives to attract users. By promising future rewards to players early on, projects can quickly expand their user base and activate communities. The problem is that this strategy has little effect on long-term player retention.

Once tokens are issued and airdrops are completed, players’ expectations for rewards sharply decline. As a result, many gamers leave the game, daily active users plummet, and the game enters a vicious cycle. User attrition and falling token prices lead investors to doubt the sustainability of the Web3 game. These doubts accumulate, making it even harder to secure project funding, ultimately causing the game to lose its development capital.

Lessons from Ember Sword: The Gap Between Promise and Reality

Ember Sword is a symbolic case of the collapse of Web3 gaming. During the metaverse boom in 2021, the project attracted 35,000 players and sold NFT virtual land worth over $200 million to them.

However, when the closed beta gameplay trailer was released in July 2024, widespread disappointment ensued. The graphics’ simplicity and roughness were comparable to mid-1990s standards. One player commented, “If this had come out in 1995, I’d have been really happy at age 11.” Others criticized it as inferior to MMORPG RuneScape, released in early 2001.

Ultimately, Ember Sword permanently shut down its service on May 23, 2025. The EMBER token plummeted 98.5%, from its all-time high of $0.45 to $0.006. YouTuber CAGYJAN claimed to have lost at least $30,000 from this project between 2021 and 2025, and many players shared similar experiences.

Ownership of Game Assets: Promises vs. Reality

A core selling point of Web3 games was “players truly owning their game assets.” Using NFT technology, assets like characters, weapons, and land would exist on the blockchain independently of game servers, allowing players to hold and trade them even if the game is discontinued.

The reality is harsh. So-called “decentralized assets” still depend heavily on centralized game servers and developer support. When a project ends or the developer withdraws, players’ NFTs and tokens lose their utility and value sharply declines.

When Nyan Heroes announced its closure, the NYAN token dropped about 40% in a single day, and its market cap shrank to around $900,000.

The Myth of Interoperability: Technical Limitations and Structural Industry Issues

Many industry experts point out that if players cannot use assets across different games, they do not truly own them. In theory, creating unified technical standards could enable asset interoperability. But in practice, fundamental structural problems make this impossible.

What practical use could an NFT character obtained in an RPG have in an FPS shooter? How would its value be reflected in a simulation management game? Game assets are designed with specific functions and attributes tailored to each game system, which vary greatly.

For developers, making NFTs from one game compatible with another would exponentially increase development complexity and maintenance costs. They would need to design new models, animations, UI interactions, and also prevent external assets from disrupting game balance. This is essentially an impossible illusion.

Therefore, the core issue of ownership of Web3 game assets is not the blockchain technology itself but whether they can be integrated into a living, evolving game ecosystem. From this perspective, current Web3 games are fundamentally no different from traditional games.

Deteriorating Investment Environment: Collapse of Trust

The pain felt by Web3 game investors is profound. They invest not only in game purchases but also directly in tokens and NFTs with real cash. When projects fail, losses are immediate and tangible.

In traditional game crowdfunding (Kickstarter, etc.), if an investor funds a failed project, the loss is limited to the cost of the game copy or related peripherals. There’s a tendency to see failure as supporting the developer, so psychological loss is minimal. But in the Web3 model, players and speculators spend real money on tokens and NFTs. When failure occurs, the sense of loss and betrayal is much greater.

This erosion of trust worsens the investment environment. Risk-averse investment institutions avoid poorly performing blockchain game projects. As a result, Web3 games struggle to secure necessary follow-up funding, leading to halted development.

Structural Realities of Game Development: Why Are Games Made This Way?

Consider why all famous games require massive capital and long development periods. High-quality games typically take 2–5 years or more to develop and demand very high expertise. Mobile game budgets often reach hundreds of millions of dollars, while console and PC titles can cost billions.

This far exceeds the funding typical for Web3 game projects. Duncan Mattis of Delphi Digital pointed out, “There are almost no ideally designed and economically sustainable Web3 games.” Because game tokens are driven by attention and changing narratives, steady growth is difficult.

The success of Star Citizen, which raised over $800 million through crowdfunding since 2012, is due to innovative technology, continuous progress updates, and trust in the game itself. Web3 games lack all these elements.

How Web3 Games Can Survive: Returning to Fundamentals

Carlos Pereira, partner at Bitkraft Ventures, emphasizes that Web3 game developers should prioritize game quality over early adoption of tokens or NFTs. Overemphasizing tokens and NFTs too early creates high expectations, and if studios fail to meet them, trust erodes.

Citi Mangani, COO of Find Satoshi Lab, pointed out, “Players care more about whether the game is fun than about owning game assets.”

A common mistake among Web3 developers is focusing on NFTs and ownership pursuits while neglecting core elements like characters, narrative, gameplay, and community interaction.

In conclusion, for Web3 games to escape crisis:

1. Prioritize fun and quality of the game. Focus on content development rather than tokens and NFTs.

2. Build transparent financial management and sustainable economic models. Consider long-term player retention strategies instead of short-term profit.

3. Follow industry best practices. Ensure sufficient capital, talented personnel, and realistic development timelines.

The Web3 gaming industry urgently needs to return to basics rather than rely solely on technological innovation. Blockchain technology is not a magic solution to save the industry; ultimately, the fundamental principle remains: the game must be fun. Without that, the future of Web3 games is bleak.