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 will not return,” and added 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 its metaverse vision.” Although Meta’s blueprint does not explicitly involve blockchain or crypto assets, its strategy overlaps heavily with the future that Web3 chain games have portrayed in the past few years: virtual worlds, digital asset ownership, and immersive online economies.

Even the wealthiest players have cashed out—blockchain games, which once served as the crypto industry’s most promising “cross-over” narrative, are they already running out of road today?

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

Last August, Proof of Play released an announcement that felt like a confession to the market. Its full-chain pirate RPG Pirate Nation would be shut down within 30 days. With two dedicated blockchain networks going offline, token rewards were cut to zero. Community players could only burn their assets in exchange for a so-called “certificate.” That certificate might be useful someday, but it probably won’t—or maybe it won’t be. And two years earlier, this game studio had raised $33 million, vowing to build the future of on-chain gaming.

After the announcement, the PIRATE token crashed 92% within just a few days. Co-founder Adam Fern admitted: “Shutting down Pirate Nation is one of the hardest decisions I’ve ever been part of. But the truth is, it could never become a breakout mass-market product.”

Pirate Nation is not an exception; it is only a small snapshot of the massive chain-game meltdown in 2025.

Let’s lay out the full list of last year’s blockchain games that announced shutdowns one by one. Ember Sword, an Ethereum game that attracted $203 million through NFT land purchases, announced it would close in May. Developer Bright Star Studios directly said it lacked funding.

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

Gala Games’ MMORPG with official The Walking Dead licensing also went offline in July. The NFT-based mechanized combat game MetalCore disappeared after shutting down its servers in March, and the developer quietly pivoted to releasing a new game on Steam that has nothing to do with blockchain.

What has been most heartbreaking for the market recently is Wildcard. After its TGE in March this year, its market cap topped out at only $1.1 million. The community widely questioned the project for being irresponsible and for a soft rug pull. According to crypto data platform RootData, Wildcard had raised $46 million, led by Paradigm.

Its founder, Paul Bettner, had previously been involved in developing well-known games such as Words With Friends and Lucky’s Tale. But now, even with top-tier VC endorsement and experienced game professionals running the show, it still couldn’t stop the collapse of the entire chain gaming track.

Beyond that, there are Deadrop, Blast Royale, Mojo Melee, Tokyo Beast, OpenSeason, and Captain Tsubasa Rivals. Behind every one of these projects are investments totaling millions or even tens of millions of dollars, the accumulation of countless game users, and ultimately promises that evaporated into nothing.

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

Most founders have real backgrounds in game development, and when raising funds, their talk about the vision for on-chain games is not entirely empty. So why did things still end up the same way—project shutdowns or a return to Web2?

“Before Web3 games have validated player demand, they have already built a whole investor-driven capital structure through tokens and NFTs.” In other words, from the start, the people providing the funding for these games are not the same group as the people who ultimately need to remain in the game.

When development reveals that the on-chain player base is smaller than expected and more inclined toward short-term arbitrage—when tokens keep sliding and development costs keep climbing—studios are left with only two choices: shut down, or abandon their blockchain identity and move to the traditional market. No matter which route they take, early Web3 investors and NFT holders are always the ones footing the bill in the end.

Moonfrost, a farming simulation game, is a typical case. 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 relaunching on Steam as a paid PC game—no NFTs, no tokens, and no blockchain.

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

The 2025 industry report by Blockchain Game Alliance (BGA) also confirmed the retreat of chain games. Annual investment in blockchain games fell to about $293 million, down from $4 billion in 2021 and the $10 billion peak in 2022—an astonishing drop. DWF Labs described the current stage as a “necessary reset.” And the biggest legacy left behind by the failures in this sector may be the credibility crisis affecting the entire chain gaming industry.

The BGA report shows that 36% of respondents list “scams, fraud, or rug pulls” as the industry’s biggest threat. Even if most project shutdowns are not intentional scams, from an outside perspective, the repeated cycle of fundraising, token issuance, and eventual collapse is almost indistinguishable from rug pulls. “This industry needs real game developers and real users who truly want to play—without either, it won’t work.”

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

The collapse of the chain-game narrative does not mean consumer applications in crypto have reached their end. The BGA report shows that 65.8% of industry practitioners still feel 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 enabled by stablecoins, and AI tools compressing game development costs to a fraction of what they used to be—these infrastructure and market conditions have never disappeared. Even from many developers’ viewpoints, several possible paths can be seen.

NEXPACE CEO Sunyoung Hwang, when discussing its MapleStory Universe, put forward 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 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 has always held in the console era and in the mobile gaming era—and it remains true in the crypto gaming industry. Macedo noted that in mobile games, the standard benchmarks are 35–45% for D1 retention, 15–25% for D7, and 5–10% for D30. Yet most Web3 games don’t even reach these basic healthy indicators.

Yield Guild Games co-founder Gabby Dizon believes the industry failed because it “spent too long measuring the wrong things,” including outdated metrics like 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 the key to success in the industry. Compared with game tokens that are highly volatile, stablecoins are more friendly and easier for new users to understand, and they are increasingly used for tournament prizes, in-game rewards, and cross-border payments. Sequence also points out that smart game developers are paying attention to stablecoin payments—whether for on-chain assets or other scenarios—because of significantly lower fees, instant settlement, and simpler revenue sharing, all of which create strong advantages across many use cases.

And AI is changing the cost structure. Mighty Bear Games’ Simon Davis said that AI-native teams are surpassing traditional studios 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 fundamentally change the economic model for producing high-quality game content.

Blockchain games aren’t dead yet—does the current phase call for a necessary reset?

The core contradiction in the previous cycle of chain gaming has never changed: investor-driven capital structures have always been ahead of player demand validation. When retention can’t support token economics, and development costs consume the funding figures, the endgame for project teams is left with only shutdown or moving away from the blockchain—while the ones who pay are always early holders.

But this shuffle has also produced a more pragmatic consensus among game developers: make blockchain invisible, 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 across these directions is: first make a game that can pass the scrutiny of traditional market metrics, and then let blockchain deliver the real value it is meant to provide at the infrastructure level.

Blockchain games may not be dead like Lily Liu said, but the market is indeed saying goodbye to that old cycle—token-driven growth in user numbers, until development funds are exhausted, and then ultimately returning to Web2 again.