GameFi in crisis: Why blockchain games failed to meet expectations

​Solana Foundation President Lily Liu stated that blockchain gaming is dead. It’s hard to disagree: the GameFi industry has been in decline for several years now. So why has the Web3 gaming sector fallen into crisis, and does it have a chance to recover?

Why the crisis is being acknowledged now

Lily Liu’s comment on the state of GameFi did not come out of nowhere. It followed reports that Meta is shutting down Horizon Worlds — a metaverse project the company invested around $80 billion in. Despite heavy promotion and years of development, the project never achieved mass adoption.

Although Meta did not directly build crypto products, its strategy closely mirrored many ideas behind Web3 gaming. The goal was to create digital worlds where users could level up characters, own assets, and spend time — much like what many blockchain games promised.

The problem is that neither Meta nor most Web3 games have been able to answer a simple question: why would an average person want to spend time there every day? In the case of Horizon Worlds, the issue was made worse by a high barrier to entry — access required a VR headset and equipment that remained too expensive and inconvenient for mass adoption.

What happened to the biggest GameFi projects

The failure of metaverse platforms is part of a broader issue. A look at the largest GameFi projects of recent years tells the same story. Many followed a familiar pattern: rapid growth, an influx of users and capital — and then a sharp decline.

The most striking example is Axie Infinity. In 2021, the game became the face of the play-to-earn model and surpassed a $1 billion valuation. At its peak, some players earned around $1,000 per month — in certain countries, comparable to an average salary. However, the model proved unsustainable: the SLP token had an unlimited supply, leading to inflation and a collapse in price. As Bloomberg reported, by 2022 average player earnings had dropped to around $0.6 per day. For many, this meant the game was no longer a source of income, and recovering initial investments became nearly impossible. Still, some users continue to believe the project could make a comeback.

A similar story unfolded with Stepn — an app that rewarded users for walking and running. The project quickly attracted millions of users, with NFT sneakers selling for hundreds of dollars. Over time, however, activity declined: monthly user numbers dropped and earnings fell. Even efforts to simplify access — such as integrating Apple Pay and an in-app marketplace — failed to restore its former popularity.

Another example is The Sandbox metaverse. Around $300 million was invested into the project, and at its peak it attracted major brands and investor attention. Today, however, the platform suffers from low engagement: daily active users number only in the hundreds, with many accounts reportedly being bots. Against this backdrop, the company has carried out major layoffs, shut down offices, and changed leadership, while its SAND token has lost about 97% of its value from its all-time high.

Why Web3 gaming is stuck

The core problem of GameFi is its focus on earning rather than gameplay. Most projects were built around the idea of “earn while you play,” instead of “play because it’s fun.” As a result, users came not for the experience, but for income. Once rewards declined, they quickly left, because the games themselves weren’t engaging enough to retain them.

Another factor is unsustainable economics. In many projects, tokens had inflationary models and depended on a constant influx of new users. As long as new players kept joining, the system worked. But once growth slowed, selling pressure increased, token prices dropped, and with them disappeared the incentive to participate.

Finally, blockchain itself turned out not to be the “secret sauce” many expected. Even fast and low-cost networks failed to solve the core issue — creating a product people actually want to use every day. As a result, the approach is now shifting: developers are increasingly focusing on gameplay first, while blockchain moves into the background. Users may not need to interact with crypto at all, with Web3 becoming an optional feature rather than the foundation of the entire experience.

Does GameFi have a future?

Despite the current downturn, it’s too early to write off blockchain gaming entirely. More likely, the market is going through a painful phase of reassessment. Investors and developers are already moving away from the play-to-earn model and searching for more sustainable approaches that don’t rely solely on constant user growth.

Most likely, the future of Web3 gaming lies in a hybrid model. Games will remain traditional in terms of gameplay, while blockchain will serve as an additional tool — for asset ownership, trading, or in-game services. In other words, not “play to earn,” but “play because it’s engaging” — and only then interact with Web3 if needed. Whether the industry can recover will depend on its ability to deliver compelling gaming experiences without relying on financial incentives alone.

Source: https://tradersunion.com/news/editors-picks/show/1765392-gamefi-in-crisis/