Blockchain 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 come back,” and stated that blockchain games are dead.

Her judgment comes from a Polymarket post: “After Meta of Mark Zuckerberg has poured $80 billion into it, it is gradually giving up on its metaverse vision.” Although Meta’s blueprint does not explicitly involve blockchain or crypto assets, its strategy overlaps heavily with the future depicted by Web3 on-chain game narratives in the past few years: virtual worlds, digital asset ownership, and immersive online economies.

Even the richest players are leaving the game—blockchain games once served as the industry’s most promising “breakthrough into the mainstream” narrative. Is it already at the end of its daylight today?

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

In August last year, Proof of Play released an announcement that looked like an apology to the market. Its full-chain pirate RPG “Pirate Nation” would be shut down within 30 days. Two dedicated blockchain networks went offline; token rewards went to zero. Community players could only burn their assets to obtain so-called “certificates.” These certificates might be useful someday, but they probably might not—and two years ago, this game studio raised $33 million, vowing to build the future of on-chain games.

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

Pirate Nation is not an exception—it’s just a small snapshot of the massive defeat that hit the on-chain game space in 2025.

Line by line, lay out the shutdown list from last year. The Ethereum game “Ember Sword,” which attracted $203 million by selling NFT land, announced it would shut down in May last year. The developer, Bright Star Studios, said directly that it lacked funding.

The third-person shooter battle royale game “Nyan Heroes,” built on Solana, was once on a wish list of more than 250,000 PC platform players, but it also ended operations last May due to a financing breakdown. Its token NYAN has fallen by more than 99% from its peak. Square Enix, the creator of “Final Fantasy,” another Ethereum on-chain game “Symbiogenesis,” also reached its endpoint in July.

Even Gala Games’ MMORPG licensed by “The Walking Dead” was taken offline in July. The NFT-based mechanized combat game “MetalCore” simply went silent after shutting down its servers in March. The developer has quietly shifted to releasing a new game on Steam with nothing to do with blockchain.

What has most made the market sigh recently 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 data platform RootData, Wildcard previously raised $46 million, led by Paradigm.

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Its founder, Paul Bettner, previously helped develop well-known games like “Words With Friends” and “Lucky’s Tale.” But even with top VC backing and a veteran game insider at the helm, nothing can stop the collapse of the entire on-chain game track.

Besides that, there are “Deadrop,” “Blast Royale,” “Mojo Melee,” “Tokyo Beast,” “OpenSeason,” and “Captain Tsubasa Rivals.” Behind every one of these projects are investments of several million, even tens of millions of dollars, the accumulation of countless game users, and finally promises that turn to nothing.

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

Most founders have a real game development background. When raising funds, the vision for on-chain games is not entirely a pipe dream. So why does it still end up with shutdowns of projects or a return to Web2?

“Web3 games, before player demand has even been validated, already build an entire investor-driven capital structure through tokens and NFTs.” In other words, the people providing funding for these games are not the same group of people who ultimately need to stay in the game.

When, during development, the on-chain player base turns out to be smaller than expected and more inclined toward short-term arbitrage; when tokens keep falling and development costs keep rising—the studio’s options are reduced to either shutting down or abandoning blockchain identity to shift to the traditional market. No matter which path they take, early Web3 investors and NFT holders are always the ones making the final purchases.

“Moomfrost,” a farming simulation game, is a typical case. The developer, Oxalis Games, raised $6.5 million, ran a Play-to-Airdrop campaign 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 relaunched on Steam as a paid PC game, with no more NFTs, tokens, or blockchain.

And just the day before the announcement, CEO Ric Moore was publicly talking about how to build “slow, 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 figure out the actual rules.

The industry report of the 2025 Blockchain Game Alliance (BGA) also confirms the retreat of on-chain games: annual investment in blockchain games fell to about $293 million. Compared with $4 billion in 2021 and a peak of $10 billion in 2022, the decline is staggering. DWF Labs described the current stage as “a necessary reset.” And the biggest lingering fallout left behind by failures in this track might be the crisis of credibility across the entire on-chain game space.

The BGA report shows that 36% of respondents listed “scams, fraud, or rug pulls” as the biggest industry threat. Even if most projects’ shutdowns are not intentional scams, from an outside perspective, the repeated cycle of “raising funds, issuing tokens, going under” is almost indistinguishable from rug pulls. “This industry needs real game developers and real users who actually want to play games—both are indispensable.”

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

The collapse of on-chain game narratives doesn’t mean consumer-level applications in the crypto industry have reached the end. The BGA report shows that 65.8% of industry practitioners still remain optimistic about the next 12 months. This optimism is built on deliverable products and sustainable revenue models. At the same time, large-scale transfers handled by stablecoins, and AI tools compressing game development costs to a fraction of what they used to be—these infrastructure and market conditions never disappeared. Even from many developers’ viewpoints, 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 tokenomics are obstacles—not value-adds. The blockchain layer should do meaningful work in the background, such as enabling real asset ownership and driving open economies; players should simply focus on the game itself. “If infrastructure operations seep into the gaming experience, the game design is a failure.”

Animoca Brands CEO Robby Yung and PLAY Network CEO Christina Macedo believe retention rate is the only truth. D1, D7, and D30 retention data have been the same in the console era, and the same in the mobile gaming era—and still the same in the crypto industry. Macedo noted that the standard benchmarks for mobile games are D1 retention of 35–45%, D7 of 15–25%, and D30 of 5–10%, while most Web3 games don’t even reach these basically healthy indicators.

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

Finally, it’s the opportunities brought by stablecoins and AI.

The BGA report states that more than a quarter of respondents view stablecoins as the key to industry success. Compared with game tokens that are highly volatile, stablecoins are more friendly to new users and easier to understand, and they’re 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 simpler profit sharing all provide major scenario advantages.

And AI is changing the cost structure. Simon Davis of Mighty Bear Games noted that AI-native teams are surpassing traditional studios in output with only a fraction of the cost and manpower. Animoca Brands also believes that in 2026, the key to sustainability lies in AI-driven or AI-assisted development practices, which will completely change the economic model for producing high-quality game content.

Blockchain games aren’t dead yet—at this stage, is it a necessary reset?

The core contradiction of the last on-chain game cycle has always remained unchanged: investor-driven capital structures ran ahead of player demand validation. When retention can’t support the token economy, and development costs consume the funding numbers, the endgame for project teams is reduced to shutting down or de-blockchaining. And the ones who keep paying are always early holders.

But this reshuffling also gives game developers a more pragmatic consensus: make blockchain invisible; measure success by retention rather than token prices; replace highly volatile tokens with stablecoins as the payment layer; and use AI to rebuild development costs. The common thread among these directions is: first make a game that can pass validation by traditional market metrics, and then let blockchain play its real value at the underlying layer.

Blockchain games might not be dead like Lily Liu said, but the market is indeed moving on from that old cycle where token-driven user counts continue until development funds are exhausted, after which the business can only loop back to Web2.