Web3 collapse accelerates as eight games fail this year

Eight web3 games have either shuttered, paused operations, or pivoted to web2 this year as the space continues to struggle amid a major funding drought.

The latest web3 games to be hit, 77-Bit and Pixel Heroes Adventure, delivered their bad news on Wednesday. 

Pixel Heroes Adventure says it laid off its entire team due to “unavoidable circumstances,” while 77-Bit paused its development, citing infrastructure issues “built with corners we cut trying to win time that couldn’t hold the scale we grew into.”

Before the dust from those two announcements had had time to settle, XOCIETY revealed on Thursday that it would be pausing its live service NFT game and web3 activities due to “ongoing profitability issues.” Its development team, NDUS, is considering selling or merging the firm.  

One of Moku’s social media team members, @EduMock noted that this year, Bloktopia, Pixiland, Forgotten Runiverse, GENSO Online, and KTTY World have all either shut down, paused their operations, or pivoted to web2. 

Web3 games typically involve some sort of element that incorporates blockchain technology, such as NFTs or some kind of token system. 

Earlier this month, Gunzilla Games, the firm behind Off The Grid and one of the biggest names in web3 gaming, was revealed to be struggling to pay its staff on time, with multiple staff members reporting that they hadn’t been paid after months of work. 

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The response from the company’s CEO spun the coverage as FUD. He claimed the salary delays were necessary, and framed the revelations as “a new narrative from haters.”

Web3’s woes stretch back further than the beginning of this year. Indeed, crypto poster “@StarPlatinum_” noted that, in May 2025, 18 different web3 studios and games had shuttered their operations across the first five months of the year.

Has web3 gaming funding dried up?

The downturn appears to stem from a lackluster demand in web3 games that has in turn, contributed to a lack of venture capital funding to keep supporting the development of these teams. 

Indeed, various web3 executives told Decrypt that funding was starting to dry up, many web3 games were reaching the end of their life span, and teams were pivoting away from the space entirely.  

The CEO of web3 game The Sandbox, Robby Yung, told Decrypt, “Venture capital funding in gaming has been dry for years,” adding that “most of them probably raised money in 2022, and this is just how long their runway has lasted.”

Even Gunzilla’s web3 director, Theodore Agranat, told Decrypt that there’s an “open” and “universal sentiment” about the lack of funds within his venture capital contacts.

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Chris Heatherly, who ran the development studio Great Big Beautiful Tomorrow, which suffered its own game closures, said investors thought crypto firms would make twice their return quicker than a regular fund, “so they wanted these redonkulous returns and had no patience.”

He added, “Towards the end of 2023, mid-2023, crypto funds stopped deploying and writing checks.”

There’s also been economic struggles across the mainstream gaming industry. Fortnite’s developer Epic Games, Ubisoft, and EA have made thousands of their employees redundant. 

Meta, the firm that rebranded its image from Facebook as part of the “metaverse” hype, announced in March that it was shutting down its virtual reality metaverse project, Horizon Worlds, this year.

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