The crisis of the Web3 gaming industry in 2025: Structural decline apparent as 17 titles come to an end

Once expected to be the future of interactive entertainment, the web3 gaming market is facing a serious turning point throughout 2025. News of project closures that have been announced since the beginning of the year highlight fundamental industry-wide challenges, rather than just individual corporate management crises.

The decision to end 17 titles announced over the past year can be seen as a result of triple hardships: capital depletion, loss of investor interest, and shrinking user bases.

Investment Collapse and User Exodus: A Double Blow to the web3 Gaming Industry

According to the latest DappRadar report, investments in web3 games in Q1 2025 plummeted by 71% year-over-year, with investment amounts falling to $91 million. This figure alone conveys the severity of the market, but the issues extend beyond that.

Simultaneously, the user base is shrinking, with the number of active wallets per day decreasing by 6% month-over-month to 5.8 million, and the overall market capitalization dropping by 19.3% to $22.3 billion. Trading volume has also declined by 12.4%.

Behind these numbers lies a structural problem: despite the overall bullish trend in the cryptocurrency market, only the web3 game sector is uniquely declining. Intensified competition among multiple blockchains (Wax, opBNB, Aptos, etc.) and pressure for platform integration to improve efficiency are making it difficult for development studios to survive.

Investor Shift: Focus Moving from Crypto to AI and Real Assets

The primary reason for the decline in the web3 gaming market is that crypto investors’ interest has shifted toward AI technology and real-world assets (RWA). Investors who once found the potential of blockchain games attractive are reallocating funds to sectors with higher expected returns.

This deterioration in the investment environment is affecting all development studios, from startups to established projects, rapidly increasing the difficulty of fundraising.

From Capital Shortage to Strategic Shift: Common Patterns in Project Closures

Analyzing the reasons behind the closure of web3 games announced in 2025 reveals several typical patterns.

Direct Closures Due to Lack of Funds

Battlebound’s Antarris announced an indefinite hold after four years of development, citing funding shortages and “extremely challenging market conditions.” Similarly, Nyan Heroes, developed by 9 Lives Interactive, attracted over one million pre-alpha test participants but ultimately failed to secure additional funding and ended.

Valeria Studio also announced a temporary halt due to capital exhaustion. The Kryptomon (KMON) team has run out of funds and is now seeking new investors and potential acquirers to restart the project.

Strategic Shift from Web3 to Web2

Some studios have abandoned blockchain integration and returned to traditional game development. Void Labs’ Blade of God X, supported initially by crypto investors, abandoned the Web3 roadmap and shifted entirely to Web2.

Jungle (For The Win) also announced stopping all Web3 integration to focus solely on developing free mobile games. Prioritizing project sustainability, they decided to completely disconnect blockchain elements.

Mystery Society cited funding difficulties as the reason for temporarily halting development. The Web3 token ($MISTRY) project has been postponed indefinitely, and the team is considering releasing a Web2 version on Steam.

Resource Reallocation to New Projects

Rough House Games announced a pause on Champions Ascension development to focus all resources on their new platform “REACH.” Their comment, “REACH is a new big step for us,” indicates a strategic shift to concentrate limited resources on more promising projects.

HYCHAIN also decided to end titles like Loot Legends and Dragon Legends, and to focus management resources on developing their main platform HYTOPIA.

Security Incidents and Loss of Trust

RoboKiden was hacked on December 25, 2024, resulting in the theft of 38.7 million $KIDEN tokens from a smart contract on Avalanche. The attacker’s sale of stolen tokens at low prices caused the $KIDEN price to plummet. Due to the loss of trust, recovery is deemed difficult, and the project has effectively halted.

Case Study 1: Even Famous IPs and Major Titles Are Not Exceptions

Gala Games’ supported The Walking Dead: Empires, utilizing a popular TV IP, took over three years to develop and announced its end of service on July 31, 2025. Despite conducting over a year of public testing, the project was deemed unsustainable.

This decision was part of Gala Games’ strategic restructuring. NFT holders within the game are expected to receive alternative NFTs in other titles, but detailed redemption processes have not yet been disclosed.

Even more surprisingly, Rumble Kong League, supported by NFT sales and prominent figures like Stephen Currie, ultimately declared that the development team would “start from zero,” effectively abandoning the project. Industry insiders, including Star Platinum, expressed disappointment, saying “NFTs fell far short of expectations.”

Case Study 2: Common Challenges Across Various Game Genres

The diversity of titles that have announced closures illustrates the universality of the crisis facing the entire web3 gaming industry.

In RPGs, titles like Antarris (creature collection RPG), Kryptomon (NFT breeding RPG), and Tatsumeeko (Discord-integrated RPG) have ended. In action games, Blade of God X (AI-integrated RPG), MetalCore (mecha combat game), and RoboKiden (team action) have ceased. Strategy titles such as Champions Ascension (fighting game) and Valeria (strategy game) have also closed, along with sports titles like Rumble Kong League (basketball) and Derby Stars (horse racing).

Regardless of genre, facing common issues of capital depletion and shrinking user bases clearly highlights the structural problems of the entire web3 gaming industry.

The Future Outlook of the web3 Gaming Industry: A Difficult Road to Recovery

The experiences of 2025 demonstrate both the potential and limitations of blockchain technology in the gaming industry. Excessive expectations for play-to-earn models, the launch of many projects disproportionate to market size, and investors’ short-term return focus have made the market unsustainable.

For the industry to rebuild, the following elements are essential:

First, enhancing core gameplay. Blockchain features should be regarded as value-added rather than the core. Second, setting realistic expectations for investors. Establishing long-term business plans for fundraising and operations is crucial.

Simultaneously, the trends of surviving projects and titles that have completely abandoned web3 to switch to Web2 will provide important insights for the entire industry. The decline of the web3 gaming market is not just a market contraction but a fundamental reevaluation of how game development and blockchain technology are integrated.

From 2026 onward, exploring more realistic and sustainable web3 gaming business models could pave the way for the industry’s revival.