Web3 Gaming Sees Sharp Decline as Focus Shifts to AI and Infrastructure

Web3 gaming saw a major pullback in Q2 2025, with daily unique active wallets dropping 17% quarter-over-quarter and funding plunging 93% year-over-year to just $73 million—the lowest in two years, according to a DappRadar report.

The decline reflects a broader market correction driven by flawed tokenomics, low player retention, and waning investor enthusiasm. More than 300 Web3 games have shut down as developers pivot to emerging trends like AI applications. Notably, the creators of Mojo Melee are now building an AI movie creation platform, while Realms of Alurya ceased operations following Treasure DAO's pivot to AI.

Of the $73 million raised in Q2, nearly 75% went to infrastructure projects rather than game development. Investors are focusing on foundational technologies like real-time engines, asset distribution layers, and blockchain-specific development tools—signaling a shift from play-to-earn titles to more sustainable platforms.

Despite the downturn, the sector is consolidating rather than collapsing. Active users are migrating toward top-performing games and studios. Established players like Sega and Ubisoft continue to support blockchain gaming, helping stabilize the space.

Chain-specific activity shows opBNB leading in unique active wallets, WAX in transaction volume, and newer networks like Aptos, Sei, and SKALE gaining momentum. While overall engagement is down, user interest is becoming more concentrated around robust ecosystems.

DappRadar analysts note that the fading hype around play-to-earn is giving way to more mature development focused on gameplay quality and ecosystem longevity. This marks a potential turning point as blockchain gaming shifts from speculation to substance, laying the groundwork for long-term growth.