Web3 gaming continues to face headwinds in 2025 as the once-hyped sector experiences significant decline in both user activity and investor interest. According to DappRadar’s Q2 2025 report, blockchain gaming saw a 17% drop in daily unique active wallets quarter-over-quarter, while funding plunged 93% year-over-year to just $73 million, the lowest quarterly total in two years.
This sharp downturn comes as part of a broader correction in the industry, with DappRadar attributing the slide to flawed tokenomics, weak user retention, and fading enthusiasm for play-to-earn (P2E) models. Over 300 Web3 games have reportedly shut down in the past year alone.
Teams and Investors Pivot Toward AI and Infrastructure
The data suggests not only a slowdown in Web3 gaming but also a strategic redirection. Many teams are abandoning P2E gaming to explore new frontiers, particularly artificial intelligence. For example, the developers behind Mojo Melee have pivoted to building an AI-powered movie creation platform, and operations for the game Realms of Alurya were suspended after its backer, Treasure DAO, shifted its focus toward AI development.

Investor behaviour mirrors this shift. Of the $73 million raised in Q2, nearly 75% was directed towards infrastructure rather than gaming studios. Instead of funding new consumer-facing titles, investors are backing foundational projects like real-time game engines, asset distribution platforms, and blockchain-specific developer tools.
Consolidation Over Collapse
Despite the grim numbers, DappRadar analysts suggest the situation is more of a consolidation than a total collapse. While many smaller games have folded or stagnated, user activity is becoming more concentrated around larger, more successful titles and ecosystems. Big-name Web2 publishers such as Sega and Ubisoft remain invested in the space, indicating long-term interest in blockchain gaming technology.

Moreover, the remaining user base is showing increased loyalty to top-performing titles, suggesting that games with strong fundamentals and engaging gameplay still have room to grow. The focus has clearly shifted from speculative hype to depth, stability, and quality.
Chain-Specific Trends Show Ecosystem Realignment
Blockchain activity data further supports the narrative of a maturing market. While overall engagement is down, a few ecosystems are gaining traction. According to the report:
- opBNB led in unique active wallets.
- WAX remained dominant in total transaction volume.
- Emerging chains like Aptos, Sei, and SKALE saw noticeable growth in user activity and project launches.
This redistribution suggests that developers and players alike are gravitating toward high-performance, scalable ecosystems rather than chasing short-term hype or unsustainable P2E models.
A Turning Point for Blockchain Gaming
While Web3 gaming’s rapid rise may have cooled, the industry appears to be evolving, not disappearing. The speculative play-to-earn frenzy is giving way to more sustainable strategies focused on gameplay innovation, infrastructure robustness, and long-term value creation.
DappRadar analysts conclude that while the market faces real challenges, these growing pains could lead to a more resilient and mature gaming ecosystem, one better equipped to attract and retain both players and developers in the years ahead.