The Web3 gaming sector continues to face significant headwinds in 2025, with DappRadar’s Q2 report revealing a 17% quarter-over-quarter decline in daily unique active wallets and a staggering 93% year-over-year drop in funding. Total investment in blockchain games fell to just $73 million, the lowest in two years, marking a steep correction from the speculative boom of previous cycles.
This downturn comes as confidence in play-to-earn (P2E) models weakens, and questions mount over token sustainability, player retention, and long-term economic viability. More than 300 Web3 games have shut down in recent months, highlighting an industry-wide consolidation phase.
From Games to AI: Developers Pivot
Facing shrinking engagement and limited funding, many teams are rethinking their approach. Some are abandoning the P2E gaming space altogether and pivoting to artificial intelligence applications.
The creators of Mojo Melee, for example, are now developing an AI-driven movie creation platform, while Realms of Alurya suspended operations after its primary backer, Treasure DAO, redirected its focus toward AI.
This pivot reflects a broader trend, as enthusiasm shifts from blockchain gaming toward AI-based decentralised applications (dApps), which currently offer greater appeal for investors and developers alike.
Infrastructure Attracts Majority of Funding
Of the $73 million raised in Q2 2025, nearly three-quarters was directed toward infrastructure projects rather than new games. Investors are showing increased interest in underlying technologies like real-time gaming engines, asset distribution layers, and blockchain-specific developer tools.
Source: DappRadar
According to DappRadar, this marks a strategic shift away from flashy, consumer-facing titles and toward the foundational layers needed to support long-term scalability and performance. While small Web3 studios are struggling, major Web2 players like Ubisoft and Sega are maintaining investments in blockchain technologies, aiming to build future-proof ecosystems.
Consolidation, Not Collapse
Despite the declining activity, analysts describe the current moment as one of consolidation rather than collapse. As smaller projects shutter, users are gravitating toward the largest and most polished titles in the space. This trend is echoed in chain activity data.
opBNB led in unique active wallets, suggesting strong user engagement on that chain.
WAX continued to dominate in terms of transaction count, driven by its long-standing focus on gaming.
Emerging chains like Aptos, Sei, and SKALE also gained traction, indicating growing interest in newer, performance-oriented ecosystems.
Source: DappRadar
DappRadar analysts believe the fall in speculative projects and the migration toward quality experiences signals the start of a healthier market cycle. The focus has moved from quick returns to meaningful gameplay and economic sustainability, essential ingredients for the next phase of Web3 gaming.
A Market in Transition
While 2025 has been rough for blockchain gaming, the sector appears to be undergoing a necessary evolution. The fading hype around play-to-earn has opened the door for more grounded and technically robust experiences. Infrastructure investment is rising, the user base is consolidating around proven projects, and developers are exploring new frontiers like AI.
