Blockchain games lose to reality; Web3 doesn't believe in dreams

Author: Chloe, ChainCatcher

Recently, Solana Foundation president Lily Liu said in a post on X that “games on blockchain won’t come back,” and added that blockchain games are dead.

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

Even the richest players are walking away—blockchain games, which once served as the crypto industry’s most promising “breakout” narrative, are they already running out of daylight today?

The collapse of the whole track: are 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 dedicated chains went offline, token rewards hit zero, and community players could only burn their assets in exchange for so-called “certificates.” These certificates might be useful someday, but most likely they might not—and two years earlier, this game studio raised $33 million, vowing to build the future of on-chain games.

After the announcement, the PIRATE token crashed by 92% within 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 fact is, it was never going to become a breakout mainstream market product.”

Pirate Nation is not an exception; it’s only a small snapshot of the massive failure of chain games in 2025.

Unfold the shutdown list of last year’s blockchain games one by one. The Ethereum game《Ember Sword》, which had attracted $203 million through NFT land purchases, announced it would close in May last year, with developer Bright Star Studios citing a lack of funding.

《Nyan Heroes》, a third-person shooter battle royale game built on Solana, was once on the wish list of more than 250,000 PC platform players, but it ended operations last May as well due to a funding break; 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 end in July.

Even the MMORPG under Gala Games that received licensed rights for《The Walking Dead》 went offline in July. The NFT-based mechanized combat game《MetalCore》, after shutting down its servers in March, went silent; the developer quietly pivoted to releasing a brand-new Steam game with nothing to do with blockchain.

Most telling to 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 whether the project was irresponsible and a soft rug. According to crypto data platform RootData, Wildcard had raised $46 million in funding, with Paradigm leading the round.

Its founder Paul Bettner previously helped develop well-known games such as《Words With Friends》and《Lucky’s Tale》, but now, even with top-tier VC backing and seasoned game veterans running the show, it still can’t stop the collapse of the entire on-chain game track.

Beyond that, there are《Deadrop》、《Blast Royale》、《Mojo Melee》、《Tokyo Beast》、《OpenSeason》、《Captain Tsubasa Rivals》—behind every one of these projects are investments totaling tens of millions of dollars, or even tens of millions, countless accumulations of game users, and ultimately promises that vanished into thin air.

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

Most founders have real game development backgrounds. When raising funds, their vision for on-chain games isn’t entirely just empty talk—so why did it still end with project shutdowns or a return to Web2?

“Web3 games have already built a whole investor-driven capital structure through tokens and NFTs before player demand has been validated.” In other words, the people providing the money for these games are not the same group of people as those who ultimately need to stay in the game.

When, during development, it turns out that the on-chain player base is smaller than expected and more oriented toward short-term arbitrage, and tokens keep falling while development costs keep climbing, the studio’s options shrink to either shutting down or abandoning blockchain identity to move into the traditional market. No matter which path it takes, early Web3 investors and NFT holders are always the ones ultimately paying the bill.

《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 box units at $150 each. Then in November 2025, the team announced they were 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 still talking publicly about 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.” They spent three years and millions of real dollars to finally understand the actual rules.

A 2025 industry report by the Blockchain Game Alliance (BGA) also confirmed the on-chain game downturn: annual investment in blockchain games dropped to around $293 million, down dramatically compared with $4 billion in 2021 and a peak of $10 billion in 2022. DWF Labs described the current stage as a “necessary reset.” And the biggest lingering aftereffect from failures in the track may be a crisis of credibility across all on-chain games.

The BGA report shows that 36% of respondents listed “scams, fraud, or rug pull” as the biggest threat to the industry. Even though most project shutdowns are not necessarily intentional scams, from an external perspective, the repeating loop of “raising funds, issuing tokens, and going under” is almost indistinguishable from a rug pull. “This industry needs real game developers and real users who actually want to play games—both are indispensable.”

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

The collapse of on-chain gaming narratives doesn’t mean the crypto industry’s consumer-facing applications have reached the end. The BGA report shows that 65.8% of industry participants 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 supported by stablecoin rails, 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 potential 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 behind the scenes—such as enabling true asset ownership and powering open economies—while players should just focus on the game itself. “If infrastructure operations permeate the gaming experience, then the game design fails.”

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 are the same as in the console era and the same as in the mobile game era—and they remain the same in the crypto industry. Macedo pointed out that in mobile games, typical benchmarks are 35–45% D1 retention, 15–25% D7, and 5–10% D30. Most Web3 games fail to reach these healthy baseline metrics at all.

Yield Guild Games co-founder Gabby Dizon believes the reason the industry failed 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 whether players are willing to pay, because they have seen value in the game experience.

Finally, it’s stablecoins and AI—opportunities they bring.

The BGA report notes that more than a quarter of respondents see stablecoins as the key to success in the industry. Compared with volatile game tokens, stablecoins are friendlier and easier for new users to understand, and they’re increasingly used for tournament prizes, in-game rewards, and cross-border payments. Sequence also further noted that smart game developers are paying attention to stablecoin payments—whether for on-chain assets or other scenarios—with far lower fees, instant settlement, and simpler profit-sharing, all of which offer major scenario advantages.

And AI is changing the cost structure, too. Mighty Bear Games’ Simon Davis said that AI-native teams can surpass traditional studios in output at a fraction of the cost and manpower. Animoca Brands similarly 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.

On-chain games aren’t dead yet—maybe the current stage is a necessary reset?

The core contradiction of the last on-chain game cycle has always stayed the same: the investor-driven capital structure stays ahead of player-demand validation. When retention can’t support token economics, and development costs consume funding figures, the endgame for project teams is reduced to shutting down or going off-chain—while the ones always paying are early holders.

But this shakeout has also given game developers a more practical consensus: make blockchain invisible, measure success by retention rate instead of token price, replace highly volatile tokens as the payment layer with stablecoins, and use AI to rebuild development costs. The common point behind these directions is: first make a game that passes validation by traditional market metrics, and then let blockchain play its true role at the foundation.

Blockchain games may not be “dead” the way Lily Liu said—but the market is indeed moving on from that old loop where user counts are driven by tokens, until development funding is exhausted, and the only outcome is to recycle back to Web2.