Chain games are defeated by reality, Web3 does not believe in dreams

Author: Chloe, ChainCatcher

Recently, Lily Liu, president of the Solana Foundation, posted on X stating, "Blockchain games will not return," and declared that blockchain gaming is dead.

Her judgment stems from a Polymarket post, "Mark Zuckerberg's Meta is gradually abandoning its metaverse vision after spending $80 billion." Although Meta's blueprint does not explicitly involve blockchain or crypto assets, its strategy overlaps significantly with the future envisioned by Web3 blockchain games over the past few years: virtual worlds, digital asset ownership, and immersive online economies.

Even the wealthiest players are quitting; blockchain games, once seen as the most promising narrative to "break through" in the crypto industry, may now be at a dead end.

The Collapse of the Entire Sector: Are Blockchain Game Projects Shutting Down?

In August last year, Proof of Play released an announcement that seemed like a confession to the market, stating that its blockchain pirate RPG "Pirate Nation" would shut down in 30 days. Two exclusive blockchains went offline, token rewards were reduced to zero, and community players could only burn their assets for a so-called "certificate," which might be useful one day but likely won't be. This game studio had raised $33 million two years ago, vowing to create the future of blockchain gaming.

After the announcement, the PIRATE token plummeted 92% within days. Co-founder Adam Fern admitted, "Shutting down Pirate Nation was one of the hardest decisions I've ever made. But the fact is, it could never become a breakthrough mass-market product."

Pirate Nation is not an isolated case; it is just a small part of the massive collapse of blockchain games expected by 2025.

Looking at last year's list of blockchain game shutdowns, the Ethereum game "Ember Sword," which attracted $203 million through NFT land purchases, announced its closure in May last year, with developer Bright Star Studios citing a lack of funds.

The third-person shooter battle royale game "Nyan Heroes," built on Solana and once on the wish list of over 250,000 PC players, also ended operations in May last year due to funding issues, with its token NYAN crashing over 99% from its peak. The Ethereum blockchain game "Symbiogenesis," created by "Final Fantasy" developer Square Enix, also reached its end in July.

Additionally, the MMORPG licensed from "The Walking Dead" by Gala Games went offline in July. The NFT-based mechanized combat game "MetalCore" has been silent since shutting down its servers in March, with developers quietly shifting to launch a new game on Steam unrelated to blockchain.

Recently, the most lamented project in the market is "Wildcard," which peaked at a market cap of only $1.1 million after its TGE in March this year, with the community widely questioning the project's irresponsibility and soft rug. According to crypto asset data platform RootData, Wildcard had raised $46 million, led by Paradigm.

Its founder Paul Bettner had previously participated in the development of well-known games like "Words With Friends" and "Lucky's Tale," but now, even with top VC backing and seasoned game developers at the helm, the entire blockchain gaming sector is collapsing.

Moreover, there are "Deadrop," "Blast Royale," "Mojo Melee," "Tokyo Beast," "OpenSeason," and "Captain Tsubasa Rivals," each project backed by millions or even tens of millions of dollars in investment, countless gaming users, and ultimately unfulfilled promises.

Web2 Players Want a Good Game, While Web3 Players Only Want Profits

Most founders have real game development backgrounds, and their visions for blockchain games during fundraising were not entirely empty talk. Why then do they end up shutting down projects or reverting to Web2?

"Web3 games built an entire investor-driven capital structure through tokens and NFTs before validating player demand." In other words, those funding these games are not the same group of people who ultimately need to stay in the game.

When it became apparent during development that the on-chain player base was smaller and more inclined towards short-term arbitrage than expected, with tokens continuously dropping and development costs rising, the studio's options were limited to shutting down or abandoning their blockchain identity to turn towards the traditional market. Regardless of the path taken, early Web3 investors and NFT holders are always the ones left to foot the bill.

The farming simulation game "Moonfrost" is a typical case. Developer Oxalis Games raised $6.5 million and operated a Play-to-Airdrop campaign for over a year, selling 1,833 NFT boxes at $150 each. Then in November 2025, the team announced they were leaving Web3 and relaunching as a paid PC game on Steam, with no NFTs, tokens, or blockchain.

Just a day before the announcement, CEO Ric Moore was publicly discussing how to create "slow and meaningful Web3 games." The team's reasoning was, "Web3 players want to make money, while Web2 players just want a good game." They spent three years and millions of real dollars to finally understand the true rules.

The 2025 Blockchain Game Alliance (BGA) industry report also confirmed the retreat of blockchain games: annual investment in blockchain games dropped to about $293 million, a staggering decline compared to $4 billion in 2021 and a peak of $10 billion in 2022. DWF Labs described the current phase as a "necessary reset." The biggest aftereffect of the failures in this sector may be a crisis of credibility for the entire blockchain gaming industry.

The BGA report showed that 36% of respondents listed "scams, fraud, or rug pulls" as the biggest threat to the industry. Even though most project shutdowns were not intentional scams, from an external perspective, the repeated cycle of "fundraising, token issuance, and closure" is almost indistinguishable from rug pulls. "This industry needs real game developers and real users who want to play games; both are essential."

Infrastructure and Market Conditions as Advantages, Stablecoins and AI Bring New Opportunities

The collapse of the blockchain gaming narrative does not mean that consumer applications in the crypto industry have come to an end. The BGA report shows that 65.8% of industry practitioners remain optimistic about the next 12 months, with this optimism based on deliverable products and sustainable revenue models. At the same time, the large-scale transfer volumes handled by stablecoins and AI tools are compressing game development costs to a fraction of what they used to be; the infrastructure and market conditions have never disappeared, and from the perspectives of many developers, several possible paths can be seen.

NEXPACE CEO Sunyoung Hwang proposed a core principle when discussing "MapleStory Universe": wallets, gas fees, and token economics are obstacles for most players, not advantages. The blockchain layer should work meaningfully behind the scenes, such as achieving true asset ownership and driving an open economy, while players should focus solely on the game itself. "If the operation of the infrastructure permeates the gaming experience, the game design is a failure."

Animoca Brands CEO Robby Yung and PLAY Network CEO Christina Macedo believe that retention rates are the only truth. D1, D7, and D30 retention data were significant in the console era, in the mobile gaming era, and remain so in the crypto industry. Macedo pointed out 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 have not even reached these basic health metrics.

Gabby Dizon, co-founder of Yield Guild Games, believes the industry's failure is due to "spending too much time 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 gaming experience.

Finally, there are opportunities brought by stablecoins and AI.

The BGA report indicates that over a quarter of respondents view stablecoins as key to the industry's success. Compared to the highly volatile game tokens, stablecoins are friendlier and easier to understand for new users, and they are increasingly being used for tournament prizes, in-game rewards, and cross-border payments. Sequence further points out that smart game developers are focusing on stablecoin payments, whether for on-chain assets or other scenarios, as lower fees, instant settlements, and simpler revenue sharing have significant advantages.

Moreover, AI is changing the cost structure. Simon Davis from Mighty Bear Games noted that AI-native teams are surpassing traditional studios' output at a fraction of the cost and manpower. Animoca Brands also believes that sustainability in 2026 will hinge on AI-driven or AI-assisted development practices, which will fundamentally change the economic model for producing high-quality game content.

Blockchain Gaming Is Not Dead; Is This Phase a Necessary Reset?

The core contradiction of the past blockchain gaming cycle has not changed: the investor-driven capital structure has run ahead of validating player demand. When retention rates cannot support the token economy, and development costs consume funding numbers, the project's only outcomes are shutdown or de-blockchainization, with early holders always left to pay the bill.

However, this reshuffling has also led game developers to a more pragmatic consensus: to make blockchain invisible, measure success by retention rates rather than token prices, use stablecoins instead of highly volatile tokens as the payment layer, and leverage AI to reconstruct development costs. The common point of these directions is to first create a game that can withstand traditional market metrics, and then let blockchain play its true value at the underlying level.

Blockchain gaming may not be dead as Lily Liu stated, but the market is indeed bidding farewell to the old cycle driven by tokens that exhausted development funds, ultimately leading back to Web2.