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 come back,” and added that blockchain gaming is dead.

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

Even the richest players have cashed out—blockchain gaming, which once served as the crypto industry’s most promising “breakthrough into the mainstream” narrative, is it already heading toward twilight exhaustion today?

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

In August last year, of Play released an announcement that felt like it was confessing to the market: its fully on-chain pirate RPG “Pirate Nation” would be shut down within 30 days. Two exclusive blockchain integrations went offline, token rewards went to zero, and community players could only burn assets in exchange for so-called “certificates.” Those certificates might be useful one day—but most likely might not. And two years earlier, this game studio had raised $33 million, vowing to build the future of on-chain games.

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

Pirate Nation is not an exception—it’s just a small snapshot of the massive chain-game collapse in 2025.

Lay out last year’s list of blockchain games announcing shutdowns one by one. The Ethereum game “Ember Sword,” which attracted $203 million through NFT land purchases, announced its closure in May last year, and developer Bright Star Studios directly cited a lack of 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 also ended operations last May due to a funding break. Its token NYAN fell by more than 99% from its peak. “Symbiogenesis,” the Ethereum-based chain game by Square Enix, the creator of “Final Fantasy,” also reached the end of the road in July.

Even the MMORPG licensed by Gala Games to “The Walking Dead” also went offline in July. The NFT-based mechanized combat game “MetalCore,” however, disappeared after shutting down its servers in March, and the developer quietly pivoted to launching a brand-new game on Steam with nothing to do with blockchain.

Most telling for the market recently is “Wildcard.” After its TGE in March this year, its market cap only peaked at $1.1 million, and the community widely questioned the project’s irresponsibility and a “soft rug.” According to RootData, a crypto asset data platform, Wildcard previously raised $46 million, with Paradigm leading the round.

Its founder Paul Bettner has also worked on well-known games like “Words With Friends” and “Lucky’s Tale,” but now, even with top-tier VC backing plus seasoned game veterans at the helm, it still can’t stop the collapse of the entire chain-game track.

Beyond that, there are “Deadrop,” “Blast Royale,” “Mojo Melee,” “Tokyo Beast,” “OpenSeason,” and “Captain Tsubasa Rivals”—behind every single project are investments of millions, even tens of millions of dollars, countless players’ accumulation, and ultimately promises that evaporated into nothing.

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

Most founders have real game development backgrounds, and their chain-game vision during fundraising is not entirely empty talk. So why did it still end with project shutdowns or a return to Web2?

“Web3 games build an investor-driven capital structure through tokens and NFTs even before player demand is validated.” In other words, the people who provide funding for these games are not the same group as the people who ultimately need to stay inside the game from the beginning.

When, during development, it’s found 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 climbing—the studio’s options basically boil down to either shutting down or abandoning its blockchain identity and shifting to the traditional market. No matter which path it takes, early Web3 investors and NFT holders are always the ones paying the bill at 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 over a year, and sold 1,833 NFT boxes at $150 each. Then, in November 2025, the team announced 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 discussing how to build “slow and meaningful Web3 games.” The rationale the team gave was: “Web3 players want to make money, while Web2 players only want a good game.” They spent three years and millions in real cash before finally seeing the true rules.

The 2025 industry report from the Blockchain Game Alliance (BGA) also confirms the chain-game downturn: annual investment in blockchain games dropped to about $293 million. Compared with $4 billion in 2021 and a $10 billion peak in 2022, the decline is staggering. DWF Labs describes the current stage as a “necessary reset.” And the biggest aftereffect left by failures in this track may be the broader chain-game credibility crisis.

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

Infrastructure and market conditions become an advantage; stablecoins and AI bring new opportunities

The collapse of the blockchain gaming narrative doesn’t mean the crypto industry’s consumer-grade applications have reached the end. The BGA report shows that 65.8% of industry participants remain optimistic about the next 12 months. That optimism is built on deliverable products and sustainable revenue models. Meanwhile, large-scale transfers handled by stablecoins, plus AI tools compressing game development costs to a fraction of what they used to be—all of this means infrastructure and market conditions have never disappeared. Even from many developers’ viewpoints, you can see several possible paths.

NEXPACE CEO Sunyoung Hwang proposed a key principle when talking about its “MapleStory Universe”: wallets, gas fees, and token economics are barriers for most players, not value-adds. The blockchain layer should do meaningful work behind the scenes—such as enabling real asset ownership and driving open economies—while players should just focus on the game itself. “If infrastructure operations penetrate into the gaming experience, then game design is a failure.”

Animoca Brands CEO Robby Yung and PLAY Network CEO Christina Macedo believe retention rate is the only real truth. D1, D7, and D30 retention data is the same in the console era, the same in the mobile-game era, and still the same in the crypto industry. Macedo points out that in mobile games, the standard benchmarks are 35–45% D1 retention, 15–25% D7, and 5–10% D30. Yet most Web3 games don’t even reach these baseline healthy metrics.

Yield Guild Games co-founder Gabby Dizon thinks the industry’s failure is 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 simply what players are willing to pay—because they see value in the gameplay experience.

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

The BGA report notes that more than a quarter of respondents see stablecoins as 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 are being used more and more often for tournament prize pools, in-game rewards, and cross-border payments. Sequence further points out that smart game developers are paying attention to stablecoin payments—whether for on-chain assets or other scenarios—because lower fees, instant settlement, and simpler revenue sharing provide significant advantages for a wide range of use cases.

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

Blockchain gaming isn’t dead yet—are we in a necessary reset phase right now?

The core contradiction from the last cycle of blockchain gaming has never changed: investor-driven capital structures are running ahead of player-demand validation. When retention can’t support token economics, and development costs consume the fundraising numbers, the project’s endgame is left with only shutdowns or going off-chain—while the ones who always foot the bill are the early holders.

But this reshuffling has also given game developers a more pragmatic consensus: blockchain should be invisible; success should be measured by retention rate rather than token prices; stablecoins should replace highly volatile tokens as the payment layer; and AI should be used to rebuild development costs. The common point across these directions is: first build a game that can pass the tests of traditional-market metrics, and then let the blockchain layer play the real value it was meant to deliver at the bottom.

Blockchain games may not be dead the way Lily Liu says, but the market really is saying goodbye to that old loop—where token-driven user numbers are used until development funds are drained, and the only option left is to recycle back into Web2.