Web3 Gaming Fails to Capture Mainstream Players Despite Billions in Investment

In 2024, the gaming industry faced significant challenges, with layoffs and studio closures affecting even the most prominent players. The decline in gaming, which began after the end of COVID-19 lockdowns, was exacerbated by unsustainable development costs and an innovation crisis. Web3 gaming emerged as a potential solution, promising to return power to developers and raising billions of dollars in investment. However, despite the rise in crypto adoption, Web3 gaming has failed to capture mainstream players’ attention or solve any of gaming’s fundamental problems. Early blockchains were designed for financial applications, forcing game developers to either build on blockchains not suited for gaming or create their own chains, leading to poor player experiences and an overemphasis on tokenomics. Many developers chose control over connectivity, resulting in walled gardens similar to those in traditional gaming.

Traditional gaming development is costly, often exceeding $100 million per title, making it difficult for indie developers to compete against large publishers who control funding and distribution. Blockchain seemed to offer a solution by providing new avenues for indie studios to raise funds and control distribution. However, early Web3 gaming platforms recreated the same enclosed systems that blockchain aimed to fix, with high player acquisition costs and limited Web3 gamers. As Web3 gaming developed, it introduced its own problems, such as the technological infrastructures of layer-1 blockchains like Ethereum and Solana not being aligned with gaming’s requirements. Game developers, attracted to Web3’s funding model and promises of ownership and user engagement, were forced to either build on existing blockchains and compromise gameplay or launch their own chain, diverting attention and resources away from game development.

While crypto-native players may find this tradeoff worthwhile, mainstream gamers seek engaging experiences. A January report showed that Web3 gaming had reached 7.3 million unique active wallets, but only a small fraction of these represented actual gamers. The thing that converts mainstream users onchain isn’t non-fungible tokens (NFTs) or decentralized finance, but meaningful ownership of in-game assets. Mainstream gamers have spent decades on various gaming platforms, and if combined with true ownership of in-game assets, that familiarity could create a compelling experience for developers and gamers. However, most Web3 games are led by crypto technology and tokenomics, competing for the same crypto-native users rather than bringing new players onchain. The industry lost sight of what’s important: making fun games that people want to play.

This misalignment also extends to game developers who want to enter Web3 to create better player experiences and sustainable revenue models. Game studios understand the potentials of Web3 but are hesitant to navigate crypto’s complex systems, which require technical skills to build protocols with sufficient liquidity and user bases while delivering seamless gameplay simultaneously. As major studios continue to struggle, Web3 has a second chance to deliver on its promise. This time, the focus should be on creating access for creators and players instead of building new walled gardens. This requires Web3 gaming-specific infrastructure that provides both developer control and cross-ecosystem collaboration. The path forward is clear: restore economic freedom to creators and put control back in players’ hands. That means revenue models that reward collaboration instead of isolation. Most importantly, it means returning to gaming’s roots — making games fun again. The future of gaming isn’t about better graphics or token incentives. It’s about creating an industry where creativity and collaboration can thrive. When developers can focus on making engaging experiences instead of building moats, everyone wins.