Are Blockchain Games Dying?
According to data from CoinGecko, following Immutable’s (IMX) drop from rankings on Monday, there are currently no game tokens among the top 100 cryptocurrencies by market capitalization. Although some game tokens still linger at the bottom of CoinMarketCap’s rankings, the conclusion is almost unanimous: the performance of top game tokens continues to be sluggish.
Despite crypto games reaching a peak in mainstream markets and among player communities over the past year, related tokens have quickly retreated, and newly issued tokens struggle to gain attention.
Data from the Wayback Machine shows that just a year ago, there were six game tokens among the top 100 cryptocurrencies by market capitalization. At that time, the total market capitalization of CoinGecko’s game token category was $29.3 billion. However, despite more tokens being launched during this period, that figure has plummeted by 68%, leaving only $9.24 billion.
The Ethereum gaming platform Immutable was once a last bastion, but its token IMX has seen a significant decline over the past year.
According to CoinGecko, in December 2023, IMX was the 31st largest cryptocurrency by market capitalization globally. At that time, investment firm VanEck expressed strong confidence in Immutable, predicting that IMX would enter the top 25 in 2024. Even a year ago today, IMX was still ranked 34th.
However, since then, IMX has plummeted 87% in the past year, due to factors including the overall cooling of the crypto gaming market and an investigation by the U.S. Securities and Exchange Commission (SEC), which Immutable recently stated has concluded.
In just the past week, IMX has dropped by 29%, while Bitcoin’s decline was just under 10%. IMX became the largest token loser in the CoinGecko top 100 list that week before sliding out of the rankings, currently placed at 103rd.
Other previously top 100 major game tokens have also faced severe setbacks over the past year. For example, Gala Games (GALA) has fallen by 80% (with a 19% drop this week), while The Sandbox (SAND) has declined by 64% over the same period (with a 16% drop in the past week).
Those once-glorious legacy game tokens have dramatically decreased since their peak in 2021. Even recently launched major game tokens have not escaped the predicament. The Pixels (PIXEL) token launched last year has plummeted 98% from its peak, Notcoin (NOT) has fallen 94%, and Hamster Kombat (HMSTR) is down 68%.
Last week, Gunzilla Games’ popular title Off the Grid and its Avalanche L1-based GUNZ network launched the GUN token, marking the largest game token issuance in months. However, even though Off the Grid has yet to integrate GUN into the game, the token has already dropped 62% from its peak.
Emergence of Higher Quality Games
Off the Grid was rated by Decrypt as the best blockchain game of 2024 (GG Game of the Year), with its significant success last fall boosting the market’s positive perception of current crypto game quality.
This stands in stark contrast to the 2021 “Play-to-Earn” craze, which was represented by the simplistic monster-battling game Axie Infinity.
“The crypto gaming market in 2021 was driven almost entirely by narrative, with hardly any real products, except for a few exceptions like Axie,” said Loopify, the founder of Treeverse, to Decrypt. “Now, a few years later, there are indeed more products, but they still need time and have not truly entered the mainstream market.”
At that time, Axie Infinity was a runaway success, but its in-game economy, token value, and player base suffered a severe blow in early 2022. Now, a new wave of higher-quality games has emerged, some of which attract millions of players—though popularity and reputation do not always align.
For example, Hamster Kombat attracted 300 million players last summer through its “Tap-to-Earn” Telegram game, despite its simple and repetitive gameplay. However, after the token was launched in September, players exited en masse due to price issues, and the development team has been slow in launching subsequent seasons.
Off the Grid became one of the few success stories last October, with its public release being one of the most successful in the blockchain gaming sector, briefly topping the Epic Games Store’s free games chart, even surpassing Fortnite. Additionally, the farming simulation game Pixels and the card battle game Parallel received positive feedback from players and attracted a growing audience, while survival game Crypto: The Game gained niche popularity through viral marketing.
“I actually think the state of crypto games is quite solid,” said Jaxie, the community manager of the crypto gaming team GIA, to Decrypt. “We now have some excellent games starting to come online, which could bring millions of players into the crypto ecosystem.”
But There Are Missteps
Creating an excellent game takes time—just look at Rockstar Games, which has spent seven years developing Grand Theft Auto 6, backed by a massive team and funding. This explains why, despite the crypto gaming craze having emerged years ago, we are only now starting to see some results.
However, hasty crypto games often end in failure. The Illuvium series is a typical example. According to CoinGecko, Illuvium’s token (ILV) was launched in 2021 and quickly soared to a peak of $1,749, generating enormous market expectations for the project. However, when the team launched three interconnected games in July 2024, the results did not meet expectations.
Illuvium’s actual performance has been disappointing, with co-founder Kieran Warwick admitting in February this year that criticisms regarding gameplay were “valid” and that they plan to overhaul the game. Now, the price of the ILV token has plummeted 99.4% from its all-time high, currently sitting at $10.60.
The Core Issue of Crypto Games: Game or Token?
“99% of crypto games are not fun,” said a member of the Munnopoly crypto gaming meme coin MLG team in an interview with Decrypt. “They seem like they have a token first and a game second. I feel they have been trying to bridge the gap with Web2 players.”
The various failures in the crypto gaming industry indicate that developing quality games requires time and patience, while projects that rush to launch and lack depth will only disappoint players, leading to a collapse in token value.
Once highly anticipated, Deadrop seemed poised to bridge the gap between traditional gamers and Web3. Developed by former developers of Call of Duty and Halo, along with renowned streamer Dr. Disrespect, the game attracted the attention of mainstream players. However, due to a fallout between the development team and Dr. Disrespect over allegations of inappropriate conversations with minors, the studio announced its closure after running out of funds in January this year.
“I think the cancellation of Deadrop is a significant setback for the field,” said content creator MayorReynolds. “This game was one of the few with the potential to stand on its own based solely on gameplay while integrating Web3 features in a way players could understand.”
However, the cessation of game projects due to funding shortages is not an isolated incident. Recently, the blockchain gaming ecosystem Treasure announced widespread restructuring and layoffs due to financial issues. According to a report from Blockworks last week, the developers of Shrapnel, Neon Machine, are also facing a funding crisis.
The development team of the Ethereum game The Mystery Society paused the development of this social deduction game in February this year, with co-founder Chris Heatherly candidly stating that the blockchain gaming industry is rife with destructive behaviors.
“Greed and stupidity are killing almost all participants before they can prove themselves in this field,” Heatherly told Decrypt. “We need to focus on building healthy on-chain business models, rather than continuing this fallacy of ‘token issuance as a Ponzi scheme.’ Every Web3 game founder I know is feeling frustrated and exhausted; everything they are doing now is just to survive, but the true belief is fading.”
Reshaping the Narrative: Shifting Investor Attention
According to Loopify, the recent issues with game tokens partly stem from investors’ focus shifting to crypto assets that are more likely to yield quick profits. He noted that since the last game token bull market, investor interest has gone through meme coins, SocialFi, and more recently, the AI sector.
With each wave of investment frenzy rushing towards new asset classes, the attention on game tokens has gradually declined. These tokens still exhibit high volatility in the market, but recent declines have been even more severe.
“The narrative of crypto games has long disappeared, and the number of willing investors has diminished as the crypto industry inherently follows trends,” Loopify said in an interview with Decrypt. “Even if these games are of higher quality and provide low-cost investment opportunities through NFTs, tokens, or equity, the market cannot immediately price them effectively. This takes time to reflect.”
Jaxie raised a more fundamental question: do crypto games really need their own tokens? He believes that what players truly care about is owning their skins via blockchain, rather than a game-specific token. Although these tokens can bring speculative hype to projects, once the tokens crash, the negative impact can shake the community and create unrealistic expectations.
“Most games shouldn’t even use their own tokens,” he stated. “Launching a token is more like a marketing tool or a means to please existing users—don’t get me wrong, I also go for the airdrop rewards—but it’s not a truly useful game function token.”
Recently, tap-to-earn games have sparked a wave of token issuances, with each game needing to incentivize players to click continuously through tokens. However, these tokens often lack practical use after issuance, leading to a rapid decline in value. Similar stories have played out repeatedly, from Hamster Kombat to Catizen and Zoo.
Additionally, the trend of play-to-airdrop, which became popular last year, again distributed tokens to players, but players have little incentive to hold these tokens long-term. Like the early Play-to-Earn craze, this model initially garnered significant attention and enthusiasm, but the eventual crash was equally painful for both the projects and the players.
“Most Web3 players are actually just speculators in the crypto space, and their goal is to make money,” Jaxie candidly stated. “The lifecycle of most crypto games is only 90 days, after which the player count significantly declines—so why contribute to an economy you know will drastically shrink in three months?”
This article is collaboratively reprinted from: Deep Tide