Play-to-earn games lose to reality, Web3 doesn't believe in dreams

Author: Chloe, ChainCatcher

Recently, Lily Liu, President of the Solana Foundation, posted on X saying, “Games on the blockchain will not return,” and stated that blockchain gaming is dead.

Her assessment comes from a Polymarket post: “Mark Zuckerberg’s Meta is gradually giving up its metaverse vision after pouring in $80 billion.” Although Meta’s blueprint does not explicitly involve blockchain or crypto assets, its strategy overlaps highly with the future that Web3 chain games have portrayed over the past few years: virtual worlds, digital asset ownership, and immersive online economies.

Even the wealthiest players have left the scene—blockchain gaming, once regarded as the crypto industry’s most promising “breakthrough into the mainstream” narrative, is it already headed for evening?

The collapse of the entire sector: are chain game projects shutting down one after another?

In August last year, Proof of Play released an announcement that looked like it was confessing to the market. Its fully on-chain pirate RPG, Pirate Nation, would shut down within 30 days. Two exclusive blockchains went offline, token rewards went to zero, and community players could only burn their assets to obtain a so-called “certificate.” That certificate might be useful someday, but most likely it won’t—and this game studio had raised $33 million just two years earlier, vowing to build the future of on-chain games.

After the announcement, the PIRATE token crashed 92% within days. Co-founder Adam Fern admitted, “Closing Pirate Nation was one of the hardest decisions I’ve ever been involved in. But the truth is, it was never going to become a breakthrough mainstream product.”

Pirate Nation is not an isolated case—it’s only a small snapshot of the massive chain-game rout in 2025.

One by one, here is the list of blockchain games announced last year as shutting down. The Ethereum game Ember Sword, which attracted $203 million through NFT land purchases, announced its closure last May, and developer Bright Star Studios directly cited a lack of funding.

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

In addition, Gala Games’ MMORPG with the official The Walking Dead license was also taken offline in July. The NFT-based mechanized combat game MetalCore disappeared after shutting down its servers in March, and the developer quietly pivoted to a new game on Steam with nothing to do with blockchain.

What has most recently made the market sigh is Wildcard. After its TGE in March this year, its market cap topped out at only $1.1 million. The community broadly questioned the project’s irresponsibility and “soft rug.” According to RootData, a crypto data platform, Wildcard had raised $46 million in funding, led by Paradigm.

Its founder, Paul Bettner, previously helped develop well-known games such as Words With Friends and Lucky’s Tale. Yet today, even with top-tier VC backing and seasoned game veterans driving the project, nothing can stop the collapse of the entire chain-game track.

Beyond that, there are also Deadrop, Blast Royale, Mojo Melee, Tokyo Beast, OpenSeason, and Captain Tsubasa Rivals. Behind every project are investments worth hundreds of millions or even tens of millions of dollars, the accumulation of countless game users, and ultimately promises that turn to nothing.

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

Most founders have real backgrounds in game development, and when raising funds, their visions for on-chain games were not entirely empty talk. So why, in the end, does it still lead to project shutdowns or a return to Web2?

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

When, during development, teams discover that the on-chain player base is smaller than expected and more oriented toward short-term arbitrage—when tokens keep falling and development costs keep climbing—the studio’s choices narrow to shutting down or abandoning blockchain identity and moving to traditional markets. No matter which path they take, early Web3 investors and NFT holders are always the final payers.

Moonfrost, a farming simulation game, is a typical example. 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 it was leaving Web3 and re-launched on Steam as a paid PC game, with no NFTs, no tokens, and no blockchain.

And just one day before the announcement, CEO Ric Moore was still publicly talking about how to build “slow but meaningful Web3 games.” The reason the team gave was: “Web3 players want to make money, while Web2 players only want a good game.” It took them three years and millions of dollars in real money to finally understand the actual rules.

The 2025 industry report from Blockchain Game Alliance (BGA) also confirms the retreat of chain games: annual investment in blockchain games fell to about $293 million, down dramatically from $4 billion in 2021 and the 2022 peak of $10 billion. DWF Labs describes the current stage as a “necessary reset.” And the biggest legacy of the sector’s failure may be a credibility crisis for the entire chain-game industry.

The BGA report shows that 36% of respondents list “scams, fraud, or rug pulls” as the biggest threat to the industry. Even if most project shutdowns are not deliberate scams, from an outside perspective, the repeated cycle of fundraising, token launches, and eventual collapse is almost indistinguishable from rug pulls. “This industry needs real game developers and real users who actually want to play—both are indispensable.”

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

The collapse of the chain-game narrative does not mean the end of consumer applications in crypto. The BGA report shows that 65.8% of industry practitioners remain optimistic about the next 12 months, and this optimism is built on deliverable products and sustainable revenue models. At the same time, large-scale transfer volumes enabled by stablecoins, and AI tools compressing game development costs to a fraction of what they used to be, indicate that infrastructure and market conditions have never disappeared. In the views of many developers, several possible paths are emerging.

When discussing its MapleStory Universe, NEXPACE CEO Sunyoung Hwang proposed a core principle: for most players, wallets, gas fees, and token economics are obstacles, not value-add. The blockchain layer should do meaningful work behind the scenes—such as enabling true asset ownership and driving open economies—while players only need to focus on the game itself. “If infrastructure operations permeate into the gaming experience, game design fails.”

Animoca Brands CEO Robby Yung and PLAY Network CEO Christina Macedo believe retention rate is the only truth. In the console era it was like this; in the mobile game era it was like this; and in the crypto industry it remains so. Macedo points out that the mobile industry benchmarks are D1 retention of 35–45%, D7 of 15–25%, and D30 of 5–10%, while most Web3 games fail to meet even these basic health indicators.

Yield Guild Games co-founder Gabby Dizon believes the industry failed because “it took too long to measure the wrong things,” including outdated metrics such as VC funding amounts, token prices, and NFT sales figures. The real metric is simply whether players are willing to pay—because they saw value in the game experience.

Finally, opportunities from stablecoins and AI.

The BGA report states that more than a quarter of respondents view stablecoins as the key to industry success. Compared with highly volatile game tokens, stablecoins are friendlier for new users and easier to understand, and they are increasingly used for tournament prizes, in-game rewards, and cross-border payments. Sequence also further notes that smart game developers are paying attention to stablecoin payments—whether for on-chain assets or other scenarios—because of lower fees, instant settlement, and simpler revenue sharing, all of which provide major advantages in terms of use cases.

And AI is changing the cost structure as well. Mighty Bear Games’ Simon Davis points out that AI-native teams are surpassing traditional studios at a fraction of the cost and manpower. Animoca Brands similarly believes that in 2026, sustainability will depend on 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; is this a necessary reset right now?

The core contradiction from the last cycle of chain games has never changed: investor-driven capital structures always ran ahead of player demand validation. When retention can’t support token economics, and development costs consume the funding figures, the project’s endgame is left with only shutting down or going off-chain—and the ones footing the bill are always the early holders.

But this reshuffle has also produced a more pragmatic consensus among game developers: making blockchain invisible, judging success by retention rather than token prices, using stablecoins instead of high-volatility tokens as the payment layer, and rebuilding development costs with the help of AI. The common thread across all these directions is: first build a game that can pass the tests of traditional market metrics, then let blockchain play its real value at the underlying layer.

Blockchain games may not be “dead” as Lily Liu said—but the market is indeed bidding farewell to the old cycle of token-driven user growth, exhausting development funds, and ultimately looping back to Web2.