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 blockchain will not return,” adding that blockchain gaming is dead.

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

Even the richest players are quitting the scene. Blockchain games previously served as the ace narrative with the most potential for the crypto industry to “break into the mainstream”—so has the era truly already reached its sunset?

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

In August last year, Proof of Play released an announcement that felt like it was confessing to the market, saying its full-chain pirate RPG “Pirate Nation” would shut down within 30 days. Two dedicated chain deployments went offline, token rewards went to zero, and community players could only destroy their assets to obtain so-called “certificates.” These certificates might be useful someday, but most likely they might not be—and yet this game studio raised $33 million two years earlier, pledging 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 been involved in. But the fact is that it could never become a breakthrough mainstream-market product.”

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

Lay out last year’s list of blockchain game shutdowns one by one. The Ethereum game “Ember Sword,” which had attracted $203 million through NFT land purchases, announced its closure in May last year, and developer Bright Star Studios said plainly that it lacked funding.

The third-person shooter battle royale “Nyan Heroes,” built on Solana, was once on the wish list of more than 250k PC platform 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 came to an end in July.

Also in July, an MMORPG under Gala Games—with an officially licensed The Walking Dead franchise—went offline. The NFT-based mechanized combat game “MetalCore” also vanished after shutting down its servers in March. The developer quietly shifted to launching a brand-new game on Steam with nothing to do with blockchain.

Most telling to the market recently was “Wildcard.” After its TGE in March this year, its market cap peaked at only $1.1 million. The community widely questioned whether the project was irresponsible, calling it a soft rug. According to crypto data platform RootData, Wildcard previously raised $46 million in funding, led by Paradigm.

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Its founder, Paul Bettner, previously worked on well-known games such as Words With Friends and Lucky’s Tale. But now, even with endorsement from top VCs and experienced game veterans at the helm, nothing can stop the collapse of the entire chain-game track.

Beyond that, there were also Deadrop, Blast Royale, Mojo Melee, Tokyo Beast, OpenSeason, and Captain Tsubasa Rivals—behind each project were investments of millions or even tens of millions of dollars, the accumulation of countless game users, and ultimately promises that turned to nothing.

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

Most founders have real game development backgrounds, and their fundraising pitch about their vision for on-chain games wasn’t entirely empty—so why did things still end up with project shutdowns or a return to Web2?

“Before Web3 games have verified what players actually want, they already build an entire investor-driven capital structure through tokens and NFTs.” In other words, the people who provide funding for these games from the start are not the same group as the people who ultimately need to stay inside the game.

When, during development, teams find that the on-chain player base is smaller than expected and more focused on short-term arbitrage; when tokens keep falling and development costs keep rising—studios are left with only shutting down or discarding their blockchain identity and shifting to the traditional market. No matter which path they take, the early Web3 investors and NFT holders are always the ones ultimately buying in.

“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 per box. Then in November 2025, the team announced they were leaving Web3 and relaunched on Steam as a paid PC game—no more NFTs, tokens, or any blockchain.

And just one day before the announcement, CEO Ric Moore was publicly discussing how to build “slow and meaningful Web3 games.” The reason the team gave was: “Web3 players want to make money; Web2 players just want a good game.” They spent three years and millions of dollars in real money before they finally saw the real rules.

The 2025 industry report by Blockchain Game Alliance (BGA) also confirmed the retreat in chain games: annual investment in blockchain games fell to about $293 million. That’s down dramatically from $4 billion in 2021 and $10 billion at the 2022 peak. DWF Labs describes the current stage as a “necessary reset.” And perhaps the biggest aftereffect left behind by failure in this sector is the credibility crisis across the whole chain-game industry.

The BGA report shows that 36% of respondents list “scam, fraud, or rug pull” as the biggest threat to the industry. Even though most shutdowns are not intentional scams, from the outside, the repeated cycle of “raising funds, issuing tokens, and going under” is almost indistinguishable from rug pulls. “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 the 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 industry practitioners remain optimistic about the next 12 months. That optimism is built on deliverable products and sustainable revenue models. At the same time, stablecoins handling large volumes of transfers, AI tools compressing game development costs to a fraction of what they used to be, and the fact that infrastructure and market conditions have never disappeared—many developers even point to several possible paths.

NEXPACE CEO Sunyoung Hwang, when discussing its “MapleStory Universe,” 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 real asset ownership and driving open economies—while players can simply focus on the game itself. “If infrastructure operations get absorbed into the game experience, 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 is true in the console era, it’s true in the mobile game era, and it’s still true in the crypto industry. Macedo notes that in mobile games, the typical benchmarks are D1 retention of 35–45%, D7 of 15–25%, and D30 of 5–10%. Most Web3 games don’t even reach those baseline healthy indicators.

Yield Guild Games co-founder Gabby Dizon believes the industry’s failure is because it “spent too long measuring the wrong things,” including outdated metrics like VC funding amounts, token prices, NFT sales figures, and the like. The real metric is simply whether players are willing to pay, because they see value in their game experience.

Finally, it’s the opportunities brought by stablecoins and AI.

The BGA report points out that more than a quarter of respondents view stablecoins as the key to success in the industry. Compared with highly volatile game tokens, stablecoins are friendlier to new users and easier to understand. They’ve increasingly been used for tournament prizes, in-game rewards, and cross-border payments. Sequence further notes that smart game developers are paying attention to stablecoin payments—whether for on-chain assets or other scenarios. With lower fees, instant settlement, and simpler revenue sharing, stablecoins have major advantages in many use cases.

And AI is changing the cost structure. Mighty Bear Games’ Simon Davis notes that AI-native teams are surpassing traditional studios in output using only a fraction of their cost and manpower. Animoca Brands agrees as well: in 2026, sustainability will hinge on AI-driven or AI-assisted development practices, which will fundamentally transform the economic model for producing high-quality game content.

Blockchain games aren’t dead; is this phase a necessary reset?

The core contradiction in the last cycle of chain games hasn’t changed: the investor-driven capital structure stayed ahead of player-demand validation. When retention can’t support token economics and development costs consume fundraising figures, studios’ endgame is reduced to shutdowns or de-blockchaining—while the ones paying the bill are always early holders.

But this reshuffling has also produced a more pragmatic consensus among game developers: make blockchain invisible, measure success by retention rate rather than token price, replace high-volatility tokens with stablecoins as the payment layer, and rebuild development costs with AI. The common thread in these directions is: first make a game that can pass traditional market metrics, and then let blockchain perform the real value it offers at the underlying layer.

Blockchain games may not be as dead as Lily Liu says—but the market is definitely saying goodbye to the old loop that used token-driven user numbers until development funds ran out, and then could only be recycled back into Web2.