A new report from market-making and trading firm Caladan reveals that more than 93% of Web3 gaming projects, often called GameFi, are now effectively dead. This comes after investors and studios burned through up to $15 billion chasing a token-driven future that gamers never really bought into.
The data shows token values in the sector have dropped about 95% from their 2022 peaks. Funding to game studios collapsed by 93% by 2025. Over 300 blockchain games have shut down entirely. The boom was fueled by venture capital, retail NFT buyers, and gaming guilds, but it failed to attract a lasting audience.
A structural mismatch
The report argues the failure wasn’t just bad timing or weak execution. It points to a structural mismatch between a model built around financial incentives and an audience that consistently wanted entertainment instead. At its core was play-to-earn, which turned gameplay into a financial loop where players bought tokens or NFTs, earned rewards, and cashed out as long as new users kept joining. When inflows slowed, token prices slumped and users walked away, dragging entire economies down.
Axie Infinity, once the sector’s flagship, saw daily active users drop from roughly 2.7 million at its peak to around 5,500 today, according to DappRadar data. Even the popular Telegram-based clicker game Hamster Kombat lost 96% of its users within six months of launch. The gaming guild token YGG trades 99.6% below its November 2021 high.
Capital destroyed at every layer
Individual project stories are brutal. Pixelmon raised $70 million in a 2022 NFT mint but still has no public game four years later. Ember Sword burned through $18 million over seven years before shutting down last May with no refunds. Gala Games is entangled in a lawsuit alleging its co-founder diverted $130 million in tokens. Square Enix quietly ended its Symbiogenesis experiment last July.
The problem was exacerbated by how capital was allocated. Studios raised tens or even hundreds of millions of dollars before shipping viable products, removing the pressure to build games that could retain players. Development timelines stretched three to five years, while tokens traded in real time and demanded constant momentum. By the time many projects launched, their tokens had already collapsed.
Where the money went instead
Gaming commanded 62.5% of all Web3 venture investment in 2022. By 2025, that share had dropped to single digits. Capital shifted into AI, real-world asset tokenization, and layer-2 infrastructure. Even Animoca Brands, the sector’s most prolific backer, has cut gaming to roughly 25% of its portfolio and is pivoting to stablecoins, RWAs, and AI.
According to a Coda Labs survey cited by Caladan, even at the height of the mania only 12% of gamers had tried a crypto game. The demand side never caught up with the flood of capital. What was once pitched as the future of gaming now looks more like a cautionary tale of financial engineering running ahead of product-market fit.
