As Gaming Giants Crumble, Onchain Gaming Promises Remain Unfulfilled

The gaming industry, once seemingly invincible, is facing a period of significant upheaval. From the closure of prominent studios to widespread layoffs, the landscape is shifting beneath the feet of even the most established players. Factors such as unsustainable development costs, a lack of innovation, and changing consumer preferences are contributing to this decline. Amidst this turmoil, Web3 gaming emerged as a potential savior, promising to revolutionize the industry by empowering developers and granting players true ownership. Billions of dollars poured into this nascent sector, fueled by the allure of decentralized ecosystems and play-to-earn mechanics. However, the initial hype has faded, and the grand promises of onchain gaming largely remain unfulfilled. This article delves into the reasons behind the current state of the gaming industry, explores the initial promises of Web3 gaming, and examines why it has so far failed to deliver on its potential, ultimately analyzing the path forward for a truly innovative and engaging future for games.

Opinion by: Daryl Xu, co-founder and CEO, NPC Labs While gaming has been on a steady decline since the end of COVID-19 lockdowns, 2025 hit the industry especially hard, with layoffs and studio closur

The Decline of Traditional Gaming Powerhouses

The year 2025 has been particularly harsh for the gaming industry, witnessing a string of unfortunate events even after the initial post-COVID decline. Multiple factors have converged to create a challenging environment for both large corporations and independent studios.

hinese regulators announced on Friday a wide range of rules aimed at curbing spending and rewards that encourage video games, dealing a blow to the world's biggest games market, which

Unsustainable Development Costs

Developing AAA games has become increasingly expensive, with budgets often exceeding hundreds of millions of dollars. This financial burden puts immense pressure on developers to deliver blockbuster hits, limiting their appetite for risk-taking and innovation. The need to recoup these massive investments often leads to formulaic game design and a reliance on established franchises, stifling creativity and driving players away.

In recent times, the gaming industry has witnessed the downfall of some major players. These giants, once renowned for their innovative technology and cutting-edge games, now face a difficult path forward as they struggle to navigate a rapidly changing landscape.

For instance, the cost of developing a modern open-world game can easily surpass $200 million, requiring a large team of artists, programmers, and designers working for several years. These escalating costs make it difficult for smaller studios to compete, further concentrating power in the hands of a few major players.

Innovation Crisis

Many gamers feel that the industry has become stagnant, with a lack of truly groundbreaking and innovative titles. Sequels and remakes dominate the market, while original IPs struggle to gain traction. This lack of innovation is partly due to the financial pressures mentioned earlier, but also to a risk-averse culture within many large gaming companies. They prefer to stick to proven formulas rather than venturing into uncharted territory. Gamers are craving something fresh, something that challenges their expectations and delivers a truly unique experience, and the industry is failing to provide that on a consistent basis.

Changing Consumer Preferences

The rise of mobile gaming, streaming services, and esports has fundamentally altered the way people consume games. Traditional console and PC gaming are no longer the only options, and gamers are increasingly demanding more flexible and accessible experiences. They want to be able to play their favorite games on any device, at any time, and participate in thriving online communities. The old models of distribution and monetization are no longer sufficient to meet these evolving needs. Free-to-play games with in-app purchases, subscription services offering access to a library of titles, and live-streaming platforms where players can watch and interact with their favorite streamers have taken center stage.

The Promise of Web3 Gaming

Against the backdrop of these challenges, Web3 gaming emerged as a beacon of hope, promising to address the shortcomings of the traditional gaming industry and usher in a new era of player empowerment and developer autonomy.

Ownership and Control

One of the core tenets of Web3 gaming is the concept of true ownership. Unlike traditional games, where players only have a license to use in-game items, Web3 games allow players to own their assets as NFTs (Non-Fungible Tokens). This means that players can freely trade, sell, or transfer their in-game items, giving them true control over their digital possessions. This is a fundamental shift in power dynamics, moving away from a centralized model where game developers have complete control over the game's economy to a decentralized model where players have a stake in the game's success.

Imagine owning a legendary sword in a game and being able to sell it on a marketplace for real money. This is the promise of Web3 gaming: to create a more equitable and rewarding experience for players.

Decentralized Development

Web3 technologies enable developers to build games on decentralized platforms, fostering greater transparency and collaboration. This can lead to more community-driven development processes, where players have a say in the direction of the game. The concept of DAOs (Decentralized Autonomous Organizations) allows players to participate in governance and make decisions about the game's future. This reduces the reliance on centralized entities and promotes a more democratic and inclusive development process.

Play-to-Earn Mechanics

Another key feature of Web3 gaming is the introduction of play-to-earn mechanics. Players can earn cryptocurrency or NFTs by playing the game, creating content, or participating in community events. This incentivizes player engagement and creates new economic opportunities. This model has the potential to transform gaming from a purely recreational activity into a source of income for players around the world.

For example, a player could earn tokens by completing quests, defeating bosses, or crafting rare items. These tokens can then be exchanged for other cryptocurrencies or fiat currency, providing a tangible reward for their time and effort.

Funding Opportunities

Web3 gaming offered a new funding model for developers, attracting significant investment from venture capitalists and crypto enthusiasts. This influx of capital allowed developers to experiment with innovative game designs and explore new monetization strategies. Unlike traditional game development, which often relies on publishers or crowdfunding campaigns, Web3 gaming allows developers to raise funds through token sales or NFT offerings. This gives them more financial independence and creative freedom.

Why Onchain Gaming Promises Remain Unfulfilled

Despite the initial excitement and the billions of dollars invested, onchain gaming has yet to achieve mainstream adoption. Several factors have contributed to its failure to deliver on its promises.

Compromised Gameplay

To build on existing blockchains, developers are often forced to compromise on gameplay quality. Blockchain technology is still relatively nascent, and it can be challenging to create complex and engaging games within the constraints of the technology. Transactions on the blockchain can be slow and expensive, which can negatively impact the player experience. The focus on tokenomics and play-to-earn mechanics can also detract from the core gameplay loop, making games more about earning money than having fun.

For example, a game that requires frequent on-chain transactions, such as a fast-paced action game, may suffer from lag and delays due to the limitations of the blockchain.

Building Own Chains

Alternatively, developers can choose to launch their own blockchain, but this diverts attention and resources away from game development. Building and maintaining a blockchain is a complex and expensive undertaking, requiring specialized expertise and significant infrastructure. This can distract developers from their primary goal of creating compelling and enjoyable games, and ultimately hinder their success.

Recreating Closed Systems

Early Web3 gaming platforms often ended up recreating the same closed systems that blockchain was trying to fix. With high player acquisition costs and a limited number of Web3 gamers, these platforms deepened their moats to prevent users from moving away. This resulted in fragmented ecosystems and limited interoperability, hindering the potential of Web3 gaming to create a truly open and decentralized gaming world. The focus shifted from creating open and interoperable ecosystems to building walled gardens, similar to the existing app stores and game platforms.

For example, some Web3 games require players to use specific wallets or platforms, limiting their freedom and control over their assets.

Unsustainable Economics

The play-to-earn model has proven to be unsustainable in many cases. Many games have relied on attracting new players to sustain the rewards for existing players, creating a Ponzi-like scheme that eventually collapses when the flow of new players dries up. The value of in-game tokens can be highly volatile, making it difficult for players to rely on them as a source of income. The focus on financial incentives has also attracted bots and exploiters, who can manipulate the game's economy and undermine the experience for genuine players.

For example, if a game's token supply is not carefully managed, it can lead to hyperinflation, making the tokens worthless and rendering the play-to-earn model unsustainable.

Focus on Financialization

Instead of focusing on fun, accessible gameplay experiences, many Web3 games have prioritized financialization. This has alienated many traditional gamers who are simply looking for engaging and enjoyable games. The emphasis on earning money can overshadow the core gameplay loop, making games feel like work rather than entertainment. This focus on financial incentives has also attracted a different audience to Web3 gaming - investors and speculators who are more interested in making money than playing games.

The Path Forward for Onchain Gaming

Despite the challenges, the potential of onchain gaming remains significant. By addressing the issues that have plagued the sector so far, developers can create a new generation of games that are both engaging and empowering.

Prioritize Fun and Accessible Gameplay

The most important thing is to prioritize fun and accessible gameplay experiences. Web3 games should be enjoyable to play, regardless of whether or not players are interested in earning money. Developers need to focus on creating compelling gameplay mechanics, engaging storylines, and stunning visuals. The goal should be to create games that are first and foremost fun, and then to integrate Web3 elements in a way that enhances the experience, rather than detracts from it.

Focus on Collaborative Revenue Models

Developers should explore collaborative revenue models that benefit both players and developers. This could involve sharing revenue with players who contribute to the game's ecosystem, such as content creators or community moderators. The key is to create a symbiotic relationship where everyone benefits from the game's success. Collaborative models could also involve giving players a say in the game's development, allowing them to vote on new features or content updates.

Improve Scalability and Transaction Speeds

Blockchain technology needs to become more scalable and efficient to support the demands of complex and fast-paced games. This could involve using layer-2 scaling solutions or exploring alternative blockchain technologies. The goal is to reduce transaction fees and improve transaction speeds, making the on-chain experience seamless and enjoyable for players. Without these improvements, onchain gaming will continue to suffer from performance issues and a clunky user experience.

Education and Onboarding

One of the biggest barriers to entry for new players is the complexity of Web3 technology. Developers need to make it easier for new players to understand and use blockchain-based games. This could involve creating intuitive user interfaces, providing clear and concise tutorials, and offering support in multiple languages. The goal is to make Web3 gaming accessible to everyone, regardless of their technical expertise. Simplified onboarding processes, such as allowing players to create wallets directly within the game, can also help to lower the barrier to entry.

Rethinking Tokenomics

Developers need to rethink the tokenomics of Web3 games to ensure that they are sustainable and beneficial for all participants. This could involve implementing deflationary token models, rewarding long-term holders, and preventing the concentration of tokens in the hands of a few whales. The goal is to create a fair and equitable ecosystem where everyone has the opportunity to participate and benefit from the game's success. Well-designed tokenomics can create a thriving in-game economy and incentivize player engagement over the long term.

The Future of Gaming: A Hybrid Approach?

The future of gaming may not be solely Web3 or solely traditional, but rather a hybrid approach that combines the best of both worlds. This could involve incorporating blockchain technology into existing games to enhance certain features, such as item ownership or player rewards. Alternatively, it could involve creating new games that are built from the ground up with Web3 principles in mind, but that also prioritize fun and accessible gameplay. The key is to find the right balance between decentralization, financialization, and entertainment. By carefully considering the needs and desires of players, developers can create a new generation of games that are both innovative and engaging. The success of future games hinges on their ability to seamlessly integrate blockchain technology without sacrificing the core elements that make games enjoyable.

Conclusion

The gaming industry is at a critical juncture. While traditional giants face challenges, Web3 gaming, despite initial promise and significant investment, has yet to fully deliver. The key to unlocking the potential of onchain gaming lies in prioritizing fun, accessibility, and sustainable economic models. Developers must move beyond simply adding blockchain technology as an afterthought and instead focus on creating truly engaging and rewarding experiences. By embracing collaboration, innovation, and a player-centric approach, the industry can overcome the current hurdles and usher in a new era of gaming that is both empowering and entertaining. The future of gaming is not about forcing blockchain into every aspect of the experience, but rather about strategically leveraging its strengths to create new and exciting possibilities for players and developers alike. The path forward requires a focus on user experience, sustainable economics, and a commitment to building games that are, first and foremost, fun to play.