The Collapse of the Web3 Gaming Industry: The Structural Crisis Indicated by 17 Projects Discontinued in 2025

In early 2025, the web3 gaming industry is facing an unprecedented wave of closures. It was announced that 17 blockchain games that once garnered high expectations, including Anterris, Blade of God X, and Nyan Heroes, would be shutting down one after another. These closures are not merely failures of individual projects but symbolize the structural issues confronting the entire web3 gaming sector.

Market Data Reveals Rapid Decline

According to the latest report from DappRadar, investments in web3 games in Q1 2025 plummeted by 71% year-over-year to $91 million. The user base has also contracted significantly, with the number of daily active wallets decreasing by 6% month-over-month to 5.8 million.

Footprint Analytics’ analysis is even more pessimistic. Despite the overall strength of the cryptocurrency market, the market capitalization of the web3 gaming sector has decreased by 19.3% to $22.3 billion, and trading volume has fallen by 12.4%. This divergence clearly indicates that investors are shifting their focus from web3 games to other sectors—particularly AI and real-world assets (RWA).

Chain Reaction Triggered by Capital Shortages

Among the 17 projects being discontinued, the most common factor is funding difficulties. Battlebound, the developer of Anterris, declared closure after four years of development, citing “extremely challenging market conditions” and lack of funds. Nyan Heroes, despite attracting over one million pre-alpha test players, ended due to failure to secure additional funding.

Derby Stars is a typical example of lingering effects from the Terra crash in 2022. Ham Sung-woo, CEO of HypeDream, stated that the project could not recover from losses of NFT revenue and substantial seed funding, and that attempts to relaunch on Polygon or migrate to Immutable failed to garner investor support, ultimately leading to service termination.

Strategic Shifts and Changing Priorities

In addition to funding shortages, changes in management strategies are increasingly leading to the discontinuation of web3 games.

Champions Ascension temporarily paused development so that the team could focus all resources on a new project, “REACH.” Rough House Games prioritized its game distribution platform, and while Champions Ascension announced it was “not canceled but under reevaluation,” its future remains uncertain.

Loot Legends shifted its corporate strategy to focus on its main platform, “HYTOPIA,” resulting in the complete shutdown of its game distribution division. Despite having over 25,000 active players, the project was a casualty of strategic reorganization by its parent company.

Return to Web2: Survival Strategies

Interestingly, not all projects are opting for complete discontinuation. Some teams are abandoning web3 elements and aiming to revive as Web2 games.

Jungle announced it would cease all web3 development and focus entirely on developing free-to-play mobile games. After a year of NFT sales and tournaments, it decided to move off-chain citing “sustainability of the project.” Mystery Society, facing funding difficulties, abandoned its web3 roadmap and is considering re-releasing a web2 version on Steam.

Blast Royale announced the shutdown of servers on June 30, 2025, but also revealed plans to fully open-source the project, choosing to bet on community sustainability.

Security Incidents and Trust Crisis

Some projects suffered critical technical blows. RoboKiden experienced a smart contract hack on Avalanche, resulting in the theft of approximately $38.7 million worth of $KIDEN tokens, after which game updates were completely halted. Blade of God X was embroiled in internal chaos following allegations by former Chief Marketing Officer Amber Bella, revealing abandonment of web3 development, unpaid salaries, and neglect of NFT benefits.

Structural Problems in the Industry

Analyzing these 17 closures reveals common structural issues in the web3 gaming industry:

Changing investor sentiment: Even as the overall crypto market trends upward, enthusiasm for investing in risk assets like web3 games is rapidly cooling. Especially as AI and real-world assets are viewed as more promising investment avenues.

Contradictions in user experience and economics: While play-to-earn models are idealistic, sustainable in-game economies are difficult to realize, leaving many projects struggling with token inflation and overhyped user expectations.

Uncertain regulatory environment: Concerns over tightening regulations on NFTs and tokens have led to the removal of web3 elements and project freezes.

Vulnerable player bases: Many projects, like Goombles with only 339 players, fail to secure even minimal user engagement, even if the game is completed.

Turning Point for the Web3 Gaming Industry

Q1 2025 is likely to be a turning point for the web3 gaming industry. The market cap of $22.3 billion and 5.8 million daily active wallets starkly contrast with the expectations during the early days of web3 gaming from 2017 to 2021, highlighting the significant gap.

Remaining projects and studios are being called upon to deliver not just blockchain integration but genuinely value-added game design. Meanwhile, some projects are choosing to return to Web2 or become open-source, seeking to maintain ongoing relationships with the web3 community in different ways.

The era of the “gold rush” in web3 gaming has definitively ended. The future of the industry depends on how well surviving projects can develop sustainable business models and redefine the core value of web3 technology.