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 judgment is based on a Polymarket post: “After Mark Zuckerberg’s Meta has spent $80 billion, it is gradually giving up on its vision of the metaverse.” Although Meta’s blueprint does not explicitly involve blockchain or crypto assets, its strategy overlaps highly with the future depicted by Web3 on-chain games over the past few years: virtual worlds, digital asset ownership, and immersive online economic ecosystems.

Even the richest players are quitting—blockchain gaming, which once served as the crypto industry’s most promising “breakout” narrative, has it truly reached a dead end today?

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

Last August, Proof of Play released an announcement that sounded like an apology to the market. Its full-chain pirate RPG, “Pirate Nation,” will be shut down within 30 days. Two dedicated blockchain networks go offline, token rewards drop to zero, and community players can only burn their assets in exchange for so-called “certificates.” Those certificates may be useful one day, but most likely they won’t—and two years ago, this game studio raised $33 million, vowing to build the future of on-chain games.

After the announcement, the PIRATE token fell 92% within a few days. Co-founder Adam Fern admitted: “Shutting down Pirate Nation is one of the hardest decisions I’ve ever made. But the truth is, it was never going to become a breakthrough mass-market product.”

Pirate Nation is not an isolated case; it is just a small snapshot of the massive breakdown of blockchain games in 2025.

Unfold one by one the list of blockchain games announced to be shutting down last year. The Ethereum game “Ember Sword,” which attracted $203 million through NFT land purchases, announced its closure in May last year, and the developer Bright Star Studios openly said it lacked 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, too, ended operations in May last year due to a funding breakdown, and its NYAN token plunged more than 99% from its peak. “Symbiogenesis,” an Ethereum chain game by Square Enix, the creator of Final Fantasy, also reached its end in July.

There was also a Gala Games MMORPG that received official The Walking Dead license, which was taken offline in July. The NFT-based mech combat game “MetalCore” disappeared after shutting down its servers in March, and the developer has quietly shifted to launching a new game on Steam with nothing to do with blockchain.

Most recently, the project “Wildcard” has left the market particularly disappointed. After its TGE in March this year, its market value rose to a high of only $1.1 million. The community widely questioned the project’s irresponsibility and accused it of a “soft rug.” According to crypto data platform RootData, Wildcard had raised $46 million in funding, led by Paradigm.

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Its founder, Paul Bettner, had previously worked on well-known games such as Words With Friends and Lucky’s Tale. But now, even with top VC backing and experienced game veterans driving the project, there is nothing that can stop the collapse of the entire blockchain gaming track.

Beyond that, there are also Deadrop, Blast Royale, Tokyo Beast, OpenSeason, Captain Tsubasa Rivals—behind each project are investments of tens of millions or even hundreds of millions of dollars, countless gamers’ accumulated attention, and ultimately promises that turn out to be nothing.

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

Most founders have real game development backgrounds, and their visions for on-chain games during fundraising were not entirely empty talk. So why do things ultimately end with projects shutting down or returning to Web2?

“Before Web3 games validate what players actually need, they have already built a complete investor-driven capital structure through tokens and NFTs.” In other words, the people providing funding for these games are not the same group as the people who ultimately need to stay inside the games.

When, during development, it becomes clear that the on-chain player base is smaller than expected and leans more toward short-term arbitrage, with tokens continuing to fall and development costs climbing endlessly, studios are left with only two options: shut down, or abandon their blockchain identity and move to the traditional market. No matter which path they take, early Web3 investors and NFT holders are always the final ones paying the bill.

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

And just one day before the announcement, CEO Ric Moore was still discussing publicly how to build “a slow and meaningful Web3 game.” The team’s explanation was: “Web3 players want to make money; Web2 players just want a good game.” It took three years and millions of dollars of real cash to see the real rules.

The 2025 industry report from Blockchain Game Alliance (BGA) also confirms the retreat in on-chain gaming: annual investment in blockchain games has fallen to about $293 million, down dramatically from $4 billion in 2021 and a peak of $10 billion in 2022. DWF Labs describes the current stage as a “necessary reset.” And the biggest aftereffect left behind by failures in this sector may well be an overall crisis of credibility for blockchain gaming.

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 intentional scams, from an outside perspective, the repeated cycle of “fundraising, issuing tokens, and going under” is almost impossible to distinguish from rug pulls. “This industry needs real game developers and real users who genuinely want to play games—both are indispensable.”

Stablecoins and AI as advantages: new opportunities ahead

The collapse of the blockchain gaming narrative does not mean that consumer-grade applications in crypto have come to an end. The BGA report shows that 65.8% of industry practitioners remain optimistic about the next 12 months. This optimism is based 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 just a fraction of what they used to be, show that infrastructure and market conditions have never disappeared. Even in many developers’ views, you can see several possible paths.

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-adds. The blockchain layer should do meaningful work behind the scenes, such as enabling true asset ownership and driving open economic systems, while players can focus only on the game itself. “If infrastructure operations seep into the game experience, the game design fails.”

Animoca Brands CEO Robby Yung and PLAY Network CEO Christina Macedo believe retention rate is the only true measure. D1, D7, and D30 retention data have been consistent across the console era, the mobile game era, and the crypto industry. Macedo points out that mobile game benchmarks are typically D1 retention of 35–45%, D7 of 15–25%, and D30 of 5–10%, and most Web3 games do not reach these baseline health indicators.

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

Finally, there are opportunities brought by stablecoins and AI.

The BGA report notes 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, easier to understand, and increasingly used for tournament prizes, in-game rewards, and cross-border payments. Sequence also further points out that smart game developers are paying attention to stablecoin payments—whether for on-chain assets or other scenarios. Lower fees, instant settlement, and easier revenue sharing all offer significant advantages in terms of use cases.

And AI is changing the cost structure. Simon Davis of Mighty Bear Games points out that AI-native teams are surpassing traditional studios at a fraction of the cost and manpower. Animoca Brands also 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 isn’t dead—could this stage be a necessary reset?

The core contradiction of the previous cycle of blockchain gaming has never changed: investor-driven capital structures have always moved ahead of player demand validation. When retention can’t support the token economy, and development costs consume the funding numbers, the only endpoint left for project teams is shutting down or going fully off-chain—while those who end up paying the bill are always early holders.

But this reshuffle has also produced a more pragmatic consensus among game developers: keep blockchain invisible, measure success by retention instead of 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 the tests of traditional market metrics, and then let blockchain play its true value at the infrastructure level.

Blockchain games may not be “dead” as Lily Liu said—but the market is indeed bidding farewell to that old loop where token-driven user growth continues until it drains development funds, after which projects can only roll back to Web2.