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 won’t return,” and added that blockchain gaming is dead.

Her judgment is based on a Polymarket post: “Mark Zuckerberg’s Meta, after spending $80 billion, is gradually giving up on its metaverse vision.” Although Meta’s blueprint does not explicitly involve blockchain or crypto assets, its strategy overlaps strongly with the future that Web3 on-chain games have been depicting over the past few years: virtual worlds, digital asset ownership, and immersive online economies.

Even the wealthiest players are moving on—blockchain gaming, once touted as the crypto industry’s most promising “breakout” narrative, is it already reaching the end of its days today?

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

Last August, Proof of Play released a statement that looked like it was confessing to the market. Its full-chain pirate RPG, “Pirate Nation,” would shut down within 30 days. Two dedicated blockchains went offline, token rewards went to zero, and community players could only burn their assets in exchange for a so-called “certificate”—a certificate that might be useful someday, but probably might not. And this game studio had raised $33 million two years earlier, pledging to build the future of on-chain gaming.

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

Pirate Nation is not an isolated case—it is only a small snapshot of the massive collapse of chain gaming in 2025.

Now, let’s lay out last year’s list of blockchain games that announced shutdowns one by one. The Ethereum game Ember Sword, which attracted $203 million through NFT land purchases, announced it would close last May, with developer Bright Star Studios saying it lacked funding.

The third-person shooter battle royale Nyan Heroes, built on Solana, was once on the wishlists of more than 250,000 PC users—but it, too, ended operations last May due to a funding break, and its token NYAN plunged more than 99% from its peak. Square Enix, the creator of Final Fantasy, also saw its Ethereum-based on-chain game Symbiogenesis reach its end in July.

Even Gala Games’ officially licensed MMORPG based on The Walking Dead went offline in July. The NFT-based mechanized combat game MetalCore disappeared after closing its servers in March, and the developer quietly shifted toward a new game on Steam with no relation to blockchain.

Most recently, what made the market the most uneasy was Wildcard. After its TGE in March this year, its market cap peaked at only $1.1 million. The community broadly questioned the project’s irresponsibility and described it as a “soft rug.” According to RootData, a crypto data platform, Wildcard had raised $46 million in funding, led by Paradigm.

Its founder Paul Bettner has worked on well-known games such as Words With Friends and Lucky’s Tale, but now, even with top VC backing and seasoned game people running the show, it still cannot stop the collapse of the entire on-chain gaming track.

Besides that, there are Deadrop, Blast Royale, Mojo Melee, Tokyo Beast, OpenSeason, Captain Tsubasa Rivals—behind each project are investments of millions or even tens of millions of dollars, countless accumulated game users, and ultimately promises that vanish into thin air.

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

Most founders have real backgrounds in game development, and their “on-chain gaming” visions at fundraising time were not entirely empty talk. So why do things ultimately end with the project shutting down or reverting to Web2?

“Before Web3 games have verified what players actually want, they have already built a whole investor-driven capital structure through tokens and NFTs.” In other words, from the very beginning, the people funding these games are not the same group of people as those who ultimately need to stay in the game.

When, during development, it becomes clear that the on-chain player base is smaller than expected and leans more toward short-term arbitrage—tokens continue falling and development costs keep rising—the studio’s options shrink to only closing down or abandoning its blockchain identity to pivot toward the traditional market. No matter which path it takes, early Web3 investors and NFT holders are always the final ones to be paid.

The farm-simulation game Moonfrost is a typical example. Developer Oxalis Games raised $6.5 million, ran a Play-to-Airdrop activity for more than a year, and sold 1,833 NFT boxes at $150 each. Then, in November 2025, the team announced that it was leaving Web3 and relaunching 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 already publicly talking about how to build a “slow and meaningful Web3 game.” The reason the team gave was: “Web3 players want to make money; Web2 players only want a good game.” After spending three years and millions of dollars in real money, they finally saw the true rules.

The 2025 Blockchain Game Alliance (BGA) industry report also confirms the retreat of chain gaming: annual investment in blockchain games fell to around $293 million, down from $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 perhaps the biggest legacy left behind by this track’s failure is a credibility crisis for chain gaming as a whole.

According to the BGA report, 36% of respondents list “fraud, scams, or rug pulls” as the industry’s biggest threat. Even though most projects’ shutdowns are not intentional scams, from an outside perspective, the repeated cycle of fundraising, token issuance, and collapse is almost indistinguishable from rug pulls. “This industry needs real game developers and real users who genuinely want to play—the two cannot be separated.”

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

The collapse of the chain gaming narrative does not mean the end of consumer-grade applications in the crypto industry. The BGA report shows that 65.8% of industry practitioners remain optimistic about the next 12 months. This optimism is built on deliverable products and sustainable revenue models. At the same time, large-scale transfer volumes handled by stablecoins, and AI tools compressing game 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.

NEXPACE CEO Sunyoung Hwang proposed a core principle when discussing its MapleStory Universe: for most players, wallets, Gas fees, and tokenomics are obstacles—not value-adds. The blockchain layer should do meaningful work in the background, such as enabling true asset ownership and driving open economies, while players can focus only on the game itself. “If infrastructure operations seep into the gameplay experience, game design fails.”

Animoca Brands CEO Robby Yung and PLAY Network CEO Christina Macedo believe retention rate is the only truth. D1, D7, and D30 retention data were equally important in the console era and the mobile game era—and they remain just as important in the crypto industry. Macedo points out that for mobile games, the standard benchmarks are D1 retention of 35-45%, D7 of 15-25%, and D30 of 5-10%, while most Web3 games fail to meet these basic health indicators.

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

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

The BGA report states that more than a quarter of respondents view stablecoins as 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 significant scenario advantages.

And AI is changing the cost structure. Mighty Bear Games’ Simon Davis points out that AI-native teams are outperforming traditional studios with only a fraction of the cost and manpower. Animoca Brands also believes that in 2026, sustainability will hinge 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 yet; is this phase a necessary reset?

In the previous blockchain gaming cycle, the core contradiction never changed: the investor-driven capital structure stayed ahead of player-demand validation. When retention cannot sustain token economics, and development costs swallow up fundraising figures, the project’s endgame is reduced to shutdown or “de-blockchaining”—and the ones who ultimately pay are always early holders.

But this reshuffling has also produced a more practical consensus among game developers: make blockchain invisible, judge success by retention rather than token prices, replace high-volatility tokens with stablecoins as the payment layer, and use AI to rebuild development costs. The common thread is this: first make a game that can pass tests under traditional market metrics, and then let blockchain deliver its true value at the underlying layer.

Blockchain games may not be “dead” as Lily Liu says—but the market is indeed saying goodbye to that old cycle where token-driven user growth exhausts development funds, and ultimately forces a return to Web2.