Why Are So Many Crypto Games Shutting Down? Experts Weigh In

Crypto gaming has seen a troubling trend of projects shutting down or being abandoned after years of hype, token sales, and chaos. Experts say it isn’t much of a surprise considering how challenging game development is, and pointed to gaming tokens as a flawed system that applies too much pressure to projects in their infancy. 

It’s easy to say that we all saw it coming, but in reality, a lot of the recently discontinued titles were once-promising blockchain experiences.

Deadrop, for example, was once led by popular streamer Dr. Disrespect and had substantial hype, before the studio crumbled in January following the content creator’s removal due to alleged misconduct. Solana cat-mech shooter Nyan Heroes was added to more than 250,000 wishlists across storefronts, but shut down in May when funding ran dry. 

That’s not to mention Raini: The Lords of Light, MetalCore, Blast Royale, Mojo Melee, OpenSeason, Realms of Alurya, and more, with The Walking Dead: Empires and Symbiogenesis both closing down in the coming weeks. It’s not looking good for crypto gaming lately.

“Even in the traditional game world, 90% of games fail,” John Linden, co-founder and CEO of Mythical Games, told Decrypt. “That’s kind of what we’re seeing on the Web3 side—90% are going to fail. I think the problem is it’s just more public, because on the traditional game side, you don’t have the players investing and being part of that game design before it fails. You see that after it comes out.”

When traditional games come out and they’re a major flop, the industry is in uproar—and in some cases, players get their money back, such as when CD Projekt RED allowed players to refund Cyberpunk 2077 after its disastrous launch in 2020. But more often than not, traditional games will fail before the public can spend money on it—i.e. The Last of Us: Factions, a multiplayer spinoff that was canceled in 2023.

That isn’t the standard in the crypto industry. Games routinely issue tokens and NFTs before the full game is ready, often when it’s little more than a team with an idea, and refunds on these assets are an extreme rarity. In the case of Deadrop, for example, players were forced to claim refunds through their bank and credit card providers after the game studio went silent. However, not everyone was successful, as it was up to the discretion of financial institutions.

However, the crypto gaming landscape is changing, and investment money is becoming harder to secure.

“Three or four years ago, you had your random blockchain games with tokens and NFTs—it was much easier for you to get funding from different VCs and also get traction from users,” Keith Kim, head of strategy at MapleStory N developer Nexpace, told Decrypt. “Because people were not too well-versed […] in the aspects of sustainability, revenue, and all these things.”

“It was sort of like: Hey, take my money. I’m pretty sure it’s going to 10x or 100x,” he added.

Nowadays, that hype has died down following countless examples of crypto games going bust or failing to live up to expectations. Lately, failing to secure additional funding is the leading cause of blockchain games closing, cited in many of the examples above.

Mythical’s Linden—whose studio has launched blockchain games like FIFA Rivals and NFL Rivals—echoed this sentiment, claiming that he believes Web3 gaming hasn’t been focused on the “fundamentals,” and has instead been fixated on “hype and speculation” instead.

“There just hasn’t been the right game out there to be sort of the vanguard of quality,” veteran game maker John Smedley, who co-created EverQuest, Planetside, and H1Z1, told Decrypt.

Smedley added that he believes too many crypto games are closing the door on traditional gamers, an audience notoriously hostile to blockchain integrations. He said that by ignoring this group of gamers, they are significantly narrowing their potential audience. 

That’s why his soon-to-launch crypto shooter Reaper Actual, will include a marketplace that works for both traditional and crypto gamers, with in-game items being offered either as NFTs or traditional in-game purchases via PC marketplaces.

Similarly, one of the most successful blockchain titles in recent years, Off the Grid, also allows the game to be played on non-crypto-friendly platforms like Steam, PlayStation, and Xbox, to widen its potential audience.

It’s also worth noting that both of these titles launched following years of production that were mostly conducted behind the scenes—with Off the Grid requiring alpha testers to sign strict NDAs. That’s a stark contrast to some of the now-shuttered titles that were announced and then started releasing tokenized assets before the game was anywhere close to playable.

“It takes a while to make games,” Linden explained. “One of my good friends was one of the original creators of the Grand Theft Auto franchise, right? His new game is just now coming out, and he’s been working on it since before we started Mythical… we’ve been around since 2018.”

To put that into perspective, Deadrop allowed people to play the game in a pre-alpha stage as long as they purchased a Founders Pass NFT for $50. It was in production for almost two years before it ultimately shut down, still seven years shy of the production time tapped by Linden’s GTA co-creator for his latest project.

Krypticrooks, the pseudonymous co-founder of crypto game studio Fractional Uprising, told Decrypt that having a crypto token applied immense pressure during the production of crypto battle royale shooter OpenSeason.

He explained that he would work 18 hours a day because he was forced to juggle developing the game with supporting the token, as investors fumed that its price wasn’t increasing fast enough. Now the game has ceased development amid a lack of funding, with the creators moving on to a simpler game without token integration.

“We had so many expectations for us to do things with the token from the community. People are like: ‘pump the token,’ this or that, and all they cared about was price,” Krypticrooks said. “Adding a token is just a fucking nightmare, really.”

In some sense, Linden agrees, despite Mythical Games having the MYTH token for its Mythos blockchain ecosystem.

He explained that tokens tied to small projects simply don’t make sense due to the demand for specific video game titles fluctuating throughout time. Linden said that eventually, demand will shift away from a game, which will make sustaining a token for it impossible. As such, Mythical Games doesn’t issue “single-game tokens,” he said—or any assets, in fact, before a game is ready to come out.

Conversely, Krypticrooks thinks more tokens are the way forward, and pointed to last year’s emergence of launchpad Pump.fun as the moment that changed everything.

“People don’t have the attention for individual tokens when you have 18,000 tokens being released, spreading liquidity every day,” he explained. “They opened up Pandora’s box.”

Pump.fun is the popular Solana meme coin launchpad that allows anyone to create a token in minutes for free. Since its January 2024 creation, according to Dune data, it has been responsible for the creation of more than 11.8 million tokens, and has even spawned rival launchpads that help launch thousands more coins each day.

Some traders have reacted negatively, pushing back against the flood of meme coins entering the market by claiming the oversaturation is negative for the industry. Still, the trend persists and hasn’t shown any signs of stopping.

Krypticrooks said that the launchpad trend has done more than oversaturate the trenches; it also shortened investors’ attention span—like TikTok, but for crypto degens. As a result, gaming tokens are bleeding out, as exemplified with not a single gaming token remaining in the top 100 cryptocurrencies by market cap.

“Attention spans [have] shrunk even shorter because people are trying to catch market cycles that are like 10-15 minutes now,” he said. “I think it fucked Web3 gaming hard.”