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 return,” and stated that blockchain games are dead.

Her assessment is based on a Polymarket post: “After Meta, led by Mark Zuckerberg, poured $80 billion into the metaverse, it is gradually abandoning its vision.” Although Meta’s blueprint doesn’t explicitly involve blockchain or crypto assets, its strategy overlaps heavily with the future envisioned by Web3 on-chain game narratives over the past few years: virtual worlds, digital asset ownership, and immersive online economies.

Even the richest players are quitting the space. Blockchain games—once touted as the crypto industry’s most promising “mainstream crossover” narrative—have they now reached a dead end?

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

In August last year, Proof of Play released an announcement that seemed like an apology to the market: its fully on-chain pirate RPG, 《Pirate Nation》, would be shut down within 30 days. Two exclusive on-chain blockchains went offline, token rewards went to zero, and community players could only burn assets to obtain so-called “certificates.” These certificates might be useful someday, but they probably won’t. Meanwhile, the game studio had raised $33 million two years earlier, vowing to build the future of on-chain games.

After the announcement, the PIRATE token plummeted 92% within a few days. Co-founder Adam Fern admitted: “Closing down Pirate Nation was one of the hardest decisions I’ve ever made to be involved in. But the fact is that it can never become a breakout mainstream-market product.”

Pirate Nation is not an isolated case; it is only a small snapshot of the massive collapse of on-chain games in 2025.

One by one, here are the shutdown lists of last year’s blockchain games. The Ethereum game 《Ember Sword》, which attracted $203 million by drawing in NFT land purchases, announced it would shut down in May last year. The developer, Bright Star Studios, directly cited a lack of funding.

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

Even Gala Games’ MMORPG that received an official 《The Walking Dead》 license went offline in July. The NFT-based mechanized combat game 《MetalCore》, after shutting down its servers in March, went silent; the developer has quietly shifted to launching a new game on Steam that has nothing to do with blockchain.

Most striking to the market recently is 《Wildcard》. After its TGE in March this year, its market cap reached a high of only $1.1 million. The community widely questioned the project for being irresponsible and a “soft rug.” According to the crypto asset data platform RootData, Wildcard previously raised $46 million, with Paradigm leading the investment.

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Its founder, Paul Bettner, had also helped develop well-known games such as 《Words With Friends》 and 《Lucky’s Tale》. But now, even with top-tier VC endorsement and seasoned game professionals at the helm, it still couldn’t 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 millions, even tens of millions of dollars; years’ worth of accumulation of countless game users; and ultimately promises that evaporated into nothing.

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

Most founders have real game development backgrounds. When raising funds, their vision for on-chain games wasn’t entirely just empty talk either. So why did it ultimately end in project shutdowns or a return to Web2?

“Before Web3 games even validate what players actually need, they’ve already built an entire investor-driven capital structure through tokens and NFTs.” In other words, the people funding these games and the people who ultimately need to stay in the game from the beginning are not the same group.

When, during development, teams find that the on-chain player base is smaller than expected and more oriented toward short-term arbitrage—when token prices keep falling and development costs keep rising—the studio’s options are reduced to either shutting down or abandoning the blockchain identity and pivoting to the traditional market. No matter which path they take, the early Web3 investors and NFT holders are always the ones that end up paying the bill.

《Moonfrost》, a farming simulation game, is a typical case. Developer Oxalis Games raised $6.5 million, ran a Play-to-Airdrop program 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 NFTs, tokens, or blockchain.

And just one day before the announcement, CEO Ric Moore was still publicly discussing how to build “slow and 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 of real dollars to finally see the real rules.

A 2025 industry report from the Blockchain Game Alliance (BGA) also confirms the retreat of on-chain games: annual investment in blockchain games fell to about $293 million—down sharply from $4 billion in 2021 and $10 billion at the 2022 peak. DWF Labs describes the current stage as a “necessary reset.” And the biggest lingering aftereffect left by the track’s failure may be a broader crisis of credibility across the entire on-chain gaming space.

The BGA report shows that 36% of respondents list “scams, fraud, or rug pulls” as the biggest threat to the industry. Even though most project shutdowns aren’t an intentional scam, from an outside perspective, the repeated cycle of “fundraising, token issuance, and going bankrupt” 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 advantages; stablecoins and AI bring new opportunities

The collapse of the on-chain game narrative doesn’t mean the crypto industry’s consumer-grade applications have reached the end. The BGA report shows that 65.8% of people in the industry still remain optimistic about the next 12 months. This optimism is built on deliverable products and sustainable revenue models. At the same time, things like stablecoin processing at massive transfer volumes and AI tools compressing game development costs to just a fraction of the past mean that infrastructure and market conditions have never disappeared. Even from many developers’ perspectives, 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 true asset ownership and powering open economies—while players should focus only on the game itself. “If infrastructure operations penetrate the game experience, the game design is doomed.”

Animoca Brands CEO Robby Yung and PLAY Network CEO Christina Macedo, meanwhile, believe retention rate is the only truth. D1, D7, and D30 retention data has been true in the console era, and it has also been true in the mobile game era—and it remains true in crypto. 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 fundamentally do not reach these baseline healthy indicators.

Yield Guild Games co-founder Gabby Dizon believes the industry’s failure reason is that “it spent too long measuring the wrong things,” including outdated metrics such as VC funding amounts, token prices, and NFT sales. The only real metric is what 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 notes 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 friendlier for new users and easier to understand, and they’re increasingly being used for tournament prizes, in-game rewards, and cross-border payments. Sequence also further points out that smart game developers are focusing on stablecoin payments, whether for on-chain assets or other scenarios. Lower fees, instant settlement, and simpler revenue-sharing all provide significant advantages for use cases.

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

Blockchain games aren’t dead yet—does the industry still need a necessary reset right now?

The core contradiction from the last cycle of on-chain games has never changed: the investor-driven capital structure stays ahead of the validation of player needs. When retention can’t support the token economy, and development costs consume fundraising numbers, the project owners’ endgame is reduced to shutdowns or going on-chain-less—while the ones always footing the bill are the early holders.

But this reshuffling has also produced a more practical consensus among game developers: make the 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 build a game that can pass traditional-market performance checks, and then let the blockchain play its true role at the base layer.

Blockchain games may not be dead the way Lily Liu said they are, but the market is indeed saying goodbye to the old loop: using token-driven user growth, burning through development funds, and ultimately ending up back to Web2 only.