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 claimed that blockchain gaming is dead.

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

Even the wealthiest players are quitting—blockchain gaming, which once served as the crypto industry’s most promising “breakout” narrative, has it now reached a point of fading glory?

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 felt like an apology to the market. Its full-chain pirate RPG Pirate Nation would shut down within 30 days. Two dedicated blockchains were taken 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, vowing to build the future of on-chain games.

After the announcement, the PIRATE token plunged 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 fact is, it could never become a breakthrough mass-market product.”

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

Unfolding last year’s list of blockchain game shutdowns one by one: the Ethereum game Ember Sword, which attracted $203 million in funding 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 and once on the wishlists of more than 250,000 PC players, also ended operations last May due to a funding break; its NYAN token fell by more than 99% from its peak. Square Enix’s Ethereum-based on-chain game Symbiogenesis likewise came to an end in July.

Even Gala Games’ MMORPG with the official licensed The Walking Dead franchise was taken offline in July. The NFT-based mechanized combat game MetalCore went silent after closing its servers in March, and the developer quietly pivoted to a new Steam game with nothing to do with blockchain.

Most recently, what has made the market most regretful is Wildcard. After its TGE in March this year, its market cap peaked at only $1.1 million. The community widely questioned the project for being irresponsible and a “soft rug.” According to crypto asset data platform RootData, Wildcard previously raised $46 million in funding, led by Paradigm.

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

Beyond that, there are also Deadrop, Blast Royale, Mojo Melee, Tokyo Beast, OpenSeason, Captain Tsubasa Rivals—behind each project are investments of several million to even tens of millions of dollars, an accumulation of countless game users, and ultimately promises that dissolve into nothing.

Web2 players want a good game, while Web3 players only want profits

Most founders have real backgrounds in game development, and during fundraising their vision for on-chain games was not entirely empty talk. So why did the outcome still end up being project shutdowns or a return to Web2?

“Before Web3 games have verified player demand, they have already built a complete investor-driven capital structure through tokens and NFTs.” In other words, the people who fund these games are not the same group as the people 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 more oriented toward short-term arbitrage—when tokens keep falling and development costs keep rising—studios’ options narrow to shutting down or abandoning their blockchain identity to move into traditional markets. No matter which path they take, the early Web3 investors and NFT holders are always the final payers.

Moonfrost, a farming simulation game, is a typical case. Developer Oxalis Games raised $6.5 million, ran a Play-to-Airdrop campaign for over a year, and sold 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—no NFTs, tokens, or blockchain.

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

The 2025 industry report from Blockchain Game Alliance (BGA) also confirms the downturn in 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 lingering consequence of this sector’s failure may be a crisis of credibility facing chain gaming as a whole.

The BGA report shows that 36% of respondents list “scams, fraud, or rug pull” as the biggest threat to the industry. Even though most shutdowns are not deliberate scams, from an outsider’s perspective, the repeating cycle of “fundraising, token issuance, collapse” is almost indistinguishable from a rug pull. “This industry needs real game developers and real users who truly want to play games—both are indispensable.”

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

The collapse of the blockchain gaming narrative does not mean crypto consumer applications have reached an endpoint. 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 down to just a fraction of what they used to be, show that infrastructure and market conditions have never disappeared. Even from many developers’ viewpoints, there are several possible paths forward.

NEXPACE CEO Sunyoung Hwang, when discussing its MapleStory Universe, proposed a core principle: 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 simply focus on the game itself. “If infrastructure operations seep into the gameplay experience, then the game design is a failure.”

Animoca Brands CEO Robby Yung and PLAY Network CEO Christina Macedo, meanwhile, believe retention rate is the only true truth. D1, D7, and D30 retention data are the same across console era and mobile gaming era; they are also still the same in the crypto industry. Macedo points out that in mobile games, the standard benchmarks are D1 retention of 35–45%, D7 of 15–25%, and D30 of 5–10%. Yet most Web3 games fail to meet these basic health metrics.

Yield Guild Games co-founder Gabby Dizon believes the reason this industry fails is that it “spent too long measuring the wrong things,” including outdated metrics like VC funding amounts, token prices, and NFT sales. The real metric is simply 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 volatile game tokens, stablecoins are friendlier to new users and easier to understand. They have increasingly been used for tournament prizes, in-game rewards, and cross-border payments. Sequence also 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 easier revenue sharing, all of which provide strong advantages across many use cases.

And AI is changing the cost structure. Mighty Bear Games’ Simon Davis points out that AI-native teams are surpassing 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 economics of producing high-quality game content.

Blockchain gaming isn’t dead yet—could this phase be a necessary reset?

The core contradiction of the last round of blockchain gaming has never changed: the investor-driven capital structure has always been running ahead of player demand verification. When retention can’t support token economics, and development costs consume the funding numbers, the project owners’ endgame is left with only shutdown or going off-chain—while the party paying the bill is always the early holders.

But this reshuffle has also produced a more practical consensus among game developers: keep blockchain hidden, measure 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: first make a game that can pass traditional market metrics, and then let blockchain play its real value at the underlying level.

Blockchain gaming may not be “dead” the way Lily Liu says it is, but the market is indeed bidding farewell to that old cycle—where token-driven user growth continues until development funds are exhausted, and the outcome is eventually returning to Web2.