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 stating “Games on the blockchain will not return,” and declared that blockchain gaming is dead.

Her judgment is based on a Polymarket post, “Mark Zuckerberg’s Meta, after investing 80 billion dollars, is gradually abandoning the metaverse vision.” Although Meta’s blueprint does not explicitly involve blockchain or crypto assets, its strategy closely overlaps with the future depicted by Web3 chain games over the past few years: virtual worlds, digital asset ownership, immersive online economies.

Even the wealthiest players are quitting, and blockchain games, once considered the most promising “breakout” narrative in the crypto industry, are now seemingly at the end of the road?

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

Last August, Proof of Play issued a confession-like announcement that its full-chain pirate RPG “Pirate Nation” would shut down within 30 days. Two dedicated blockchains went offline, tokens became worthless, and community players could only burn assets to receive a so-called “certificate,” which might someday be useful but probably won’t be. This game studio had raised $33 million two years prior, vowing to build the future of on-chain gaming.

After the announcement, PIRATE tokens plummeted 92% within days. Co-founder Adam Fern admitted, “Shutting down Pirate Nation was one of the hardest decisions I’ve ever made. But the truth is, it could never have become a groundbreaking mainstream product.”

Pirate Nation is not an isolated case; it is just a small example among the major chain game failures of 2025.

Here is a list of blockchain game closures announced last year. Ethereum-based game “Ember Sword,” which attracted $203 million through NFT land purchases, announced its shutdown last May, with developer Bright Star Studios citing lack of funding.

Third-person shooter battle royale “Nyan Heroes,” built on Solana and once a wishlist favorite for over 250k PC players, also ended operations last May due to funding issues, with its NYAN token crashing over 99% from its peak. Square Enix’s Ethereum chain game “Symbiogenesis,” created by the Final Fantasy developer, also ended in July.

Additionally, Gala Games’ MMORPG licensed officially for “The Walking Dead” was taken offline in July. NFT-based mechanized combat game “MetalCore” shut down its servers in March and has gone silent; the developer has quietly shifted to releasing a new non-blockchain game on Steam.

Most recently, “Wildcard” has caused market lamentation. After its TGE in March, the project’s market cap peaked at only $1.1 million, with community members questioning its irresponsibility and soft rug pull. According to crypto asset data platform RootData, Wildcard had raised $46 million, led by Paradigm.

Its founder, Paul Bettner, previously contributed to well-known games like “Words With Friends” and “Lucky’s Tale,” but now, even with top-tier VC backing and experienced game developers, the entire chain game sector cannot be stopped from collapsing.

In addition, there are projects like “Deadrop,” “Blast Royale,” “Mojos Melee,” “Tokyo Beast,” “OpenSeason,” “Captain Tsubasa Rivals,” each backed by millions or tens of millions of dollars, with countless gamers accumulated, only to see their promises vanish into thin air.

Web2 players want good games, Web3 players only want profits

Most founders have genuine game development backgrounds, and their visions for on-chain games during fundraising were not entirely empty talk. Why do many projects ultimately end up shutting down or reverting to Web2?

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

When during development, it becomes clear that the on-chain player base is smaller than expected and more short-term arbitrage-oriented, with tokens continuously falling and development costs rising, studios are left with only two choices: shut down or abandon blockchain identities and revert to traditional markets. Regardless of the path taken, early Web3 investors and NFT holders are always the final payers.

Farm simulation game “Moonfrost” is a typical example. Developer Oxalis Games raised $6.5 million and ran over a year of Play-to-Airdrop activities, selling 1,833 NFT boxes at $150 each. Then, in November 2025, the team announced leaving Web3 and relaunching on Steam as a paid PC game, with no NFTs, tokens, or blockchain.

Just a day before the announcement, CEO Ric Moore publicly discussed how to create a “slow and meaningful Web3 game.” The team explained, “Web3 players want to make money, Web2 players just want a good game.” It took three years and millions of dollars to realize the true rules.

The 2025 industry report from Blockchain Game Alliance (BGA) also confirmed the decline of chain games: annual investment in blockchain games dropped to about $293 million, compared to $4 billion in 2021 and a peak of $10 billion in 2022. DWF Labs described the current stage as a “necessary reset.” The biggest legacy of this sector’s failure may be a crisis of credibility for blockchain gaming as a whole.

The BGA report shows that 36% of respondents see “fraud, scams, or rug pulls” as the industry’s greatest threat. Even though most project shutdowns are not deliberate scams, from an external perspective, the cycle of fundraising, token issuance, and collapse is almost indistinguishable from rug pulls. “This industry needs genuine game developers and genuine players who want to play, both are indispensable.”

Infrastructure and market conditions as advantages, stablecoins and AI bring new opportunities

The collapse of the blockchain gaming narrative does not mean the end of consumer applications in crypto. The BGA report indicates that 65.8% of industry practitioners remain optimistic about the next 12 months, based on deliverable products and sustainable revenue models. Meanwhile, large-scale transfer volumes handled by stablecoins and AI tools that reduce development costs to a fraction of what they used to be show that infrastructure and market conditions have never disappeared. From many developers’ perspectives, several possible paths are emerging.

Sunyoung Hwang, CEO of NEXPACE, emphasized a core principle when discussing “MapleStory Universe”: wallets, gas fees, and tokenomics are obstacles for most players, not advantages. The blockchain layer should do meaningful work behind the scenes, such as enabling true asset ownership and driving open economies, while players focus solely on the game itself. “If infrastructure operations penetrate into the gaming experience, game design is a failure.”

Robby Yung, CEO of Animoca Brands, and Christina Macedo, CEO of PLAY Network, believe retention rate is the only true metric. D1, D7, D30 retention data, which was critical in console gaming, mobile gaming, and remains so in crypto gaming. Macedo pointed out that the standard benchmarks for mobile games are D1 retention of 35-45%, D7 of 15-25%, and D30 of 5-10%. Most Web3 games do not meet these basic health indicators.

Gabby Dizon, co-founder of Yield Guild Games, believes the industry’s failure stems from “spending too long measuring the wrong things,” including outdated metrics like VC funding amounts, token prices, and NFT sales. The real metric should be whether players are willing to pay, because they see value in the gaming experience.

Finally, opportunities brought by stablecoins and AI.

The BGA report states that over a quarter of respondents see stablecoins as key to industry success. Compared to highly volatile game tokens, stablecoins are more user-friendly and easier to understand, increasingly used for tournament prizes, in-game rewards, and cross-border payments. Sequence further notes that savvy game developers are focusing on stablecoin payments, whether for on-chain assets or other scenarios, due to lower fees, instant settlement, and easier revenue sharing.

AI is also transforming cost structures. Simon Davis of Mighty Bear Games pointed out that AI-native teams are surpassing traditional studios at a fraction of the cost and manpower. Animoca Brands similarly believes that by 2026, sustainability will depend on AI-driven or AI-assisted development practices, which will fundamentally change the economics of producing high-quality game content.

Blockchain gaming is not dead; is this a necessary reset at this stage?

The core contradiction of the previous cycle of blockchain gaming has remained unchanged: investor-driven capital structures have outpaced player demand verification. When retention cannot support token economics, and development costs swallow funding, projects are left with only shutdown or de-blockchainization, with early holders always bearing the cost.

But this reshuffle has also fostered a more pragmatic consensus among game developers: making blockchain invisible, measuring success by retention rather than token prices, replacing volatile tokens with stablecoins for payments, and reconstructing development costs with AI. The common theme is: first, create a game that can withstand traditional market metrics, then let blockchain play its true role at the infrastructure level.

Perhaps blockchain gaming is not as Lily Liu said: dead. But the market is indeed bidding farewell to the old cycle of token-driven user growth, exhausting development funds, and ultimately reverting to Web2.