GameFi Cooling Trend: Why Are Web3 Encryption Games Falling One After Another?

The recent wave of closures in crypto games has raised concerns. Experts point out that, aside from the challenges of game development itself, flaws in the token economic model have put excessive pressure on startups, leading to the failure of many highly anticipated games. This article is derived from a piece written by Decrypt, organized, translated, and authored by Dong District. (Background: Web3 game "Seraph" experiences a 60% flash crash in its token! The official announces an emergency buyback of $SERAPH) (Supplementary Background: Apple approves Bitcoin! iOS game Sarutobi goes live on the App Store: players can purchase items and earn Sats using the Lightning Network) Recently, there has been a disturbing trend in the crypto gaming sector: many projects that have undergone years of promotion, token sales, and chaos are ultimately shutting down or being abandoned. Experts say that considering the challenges of game development, this is not surprising, stating that game tokens represent a flawed system that places too much pressure on projects in their infancy. While it's easy to say that all of this was expected, the truth is that many of the games that have recently ceased operations were once considered promising blockchain experiences. For instance, Deadrop, which was led by popular streamer Dr. Disrespect, garnered huge attention, but after the content creator was removed due to misconduct allegations in January, the studio collapsed. The Solana-based cat mech shooting game Nyan Heroes had over 250,000 players on various stores' wishlists but shut down in May due to depleted funds. Not to mention Raini: The Lords of Light, MetalCore, Blast Royale, Mojo Melee, OpenSeason, Realms of Alurya, etc., while The Walking Dead: Empires and Symbiogenesis are also set to close in the coming weeks. The current state of crypto games does not look optimistic. John Linden, co-founder and CEO of Mythical Games, told Decrypt: "Even in the traditional gaming world, 90% of games fail. This is basically what we see in the Web3 space — 90% will fail. I believe the issue is that everything is more public because, in traditional gaming, players don't invest and participate in game design until after a game has failed. You only see the failure after the game is launched." When traditional games face significant failures post-launch, the entire industry is thrown into chaos. In some cases, players can get refunds, as CD Projekt RED allowed for refunds after the disastrous launch of Cyberpunk 2077 in 2020. But more often, traditional games fail before the public spends money — for example, the multiplayer spin-off Factions of The Last of Us was canceled in 2023. This is not the norm in the crypto industry. Games typically issue tokens and NFTs before the full version is ready, often when there is just a team with an idea, and refunds for these assets are extremely rare. In the case of Deadrop, after the game studio went silent, players were forced to apply for refunds through banks and credit card companies. However, not everyone was successful, as it depends on the discretion of the financial institution. Nevertheless, the landscape of crypto games is changing, and securing investment funds is becoming increasingly difficult. Keith Kim, strategy director of Nexpace, the developer of MapleStory N, told Decrypt: "Three or four years ago, you had all sorts of blockchain games with tokens and NFTs — it was easier to get funding from various venture capitalists and easier to attract users. Because at that time, people didn't know much about... sustainability, revenue, and all these aspects." "The situation back then was a bit like: 'Hey, take my money. I'm sure it will pump 10 times or 100 times.'" he added. Nowadays, after countless examples of crypto games shutting down or failing to meet expectations, that hype has faded. Recently, the inability to secure additional funding has been a primary reason for the shutdown of blockchain games, as mentioned in many of the examples above. Linden of Mythical — whose studio has launched games like FIFA Rivals and NFL Rivals — agrees with this view, claiming that Web3 games have not focused on "the fundamentals" but have been overly fixated on "hype and speculation." Senior game producer John Smedley told Decrypt: "There just hasn't been a good enough game on the market to serve as a quality pioneer." Smedley, who co-created EverQuest, Planeside, and H1Z1, added that he believes too many crypto games have shut the door on traditional players, a group notorious for their hostility toward blockchain integration. He said that by ignoring this group, they are significantly narrowing their potential audience. That is why his upcoming crypto shooter game Reaper Actual will include a marketplace suitable for both traditional and crypto players, with in-game items offered as NFTs or through traditional in-game purchases on PC marketplaces. Similarly, one of the most successful blockchain games in recent years, Off the Grid, also allows play on non-crypto-supporting platforms like Steam, PlayStation, and Xbox to expand its potential audience. Notably, both games were launched after years of primarily behind-the-scenes development — Off the Grid even required Alpha testers to sign a strict NDA. This sharply contrasts with some now-closed games that announced and began issuing tokenized assets before being close to a playable state. Linden explained: "Making games takes a long time. A good friend of mine is one of the founders of the Grand Theft Auto series, right? His new game is only just about to launch now, and he started making it long before we founded Mythical... we've been around since 2018." Specifically, Deadrop allowed people to play the game in the Pre-alpha stage as long as they purchased a $50 founder's pass NFT. It ultimately shut down after nearly two years of development, seven years after Linden's GTA co-founder started his latest project. The pseudonymous co-founder of crypto battle royale shooting game OpenSeason, Krypticrooks, told Decrypt that having crypto tokens brought immense pressure during development. He explained that he worked 18 hours a day because he was forced to juggle between developing the game and supporting the tokens, while investors were frustrated that the token price wasn't rising fast enough...