93% of Web3 game projects are dead | Chain play

Chain play reported today that 93% of GameFi projects (the merger of gaming and decentralized finance, or Web3 gaming) are dead.

But that doesn't mean the industry is bankrupt. Rather, a more complex narrative shows a roller coaster of growth and setbacks that are common to overly publicized startup and finance bubbles.

GameFi was the hottest trend during the 2022 cryptocurrency bull run, attracting billions of dollars of investment and money pouring into speculative tokens. We are currently in a similar bull run with Bitcoin surpassing $100,000 per coin.

However, the reality of its sustainability tells a much more shocking story, ChainPlay said. Working with Storible, the team analyzed over 3,200 GameFi projects to reveal the true picture of the GameFi domain.

Key information and methodology

The study shows that 93% of GameFi projects are dead. On average, GameFi projects have fallen 95% from their all-time high prices. GameFi projects only last four months on average. And 58% of VCs who invested in GameFi lost between 2.5% and 99%.

ChainPlay analyzed a total of 3,279 projects in its database. It decided that a project is considered “dead” if its price has fallen more than 90% from its all-time high price (ATH) and if it has fewer than 100 daily active users. Pricing information comes from Dune Analytics, while user data comes from DappRadar.

The date a project's token was created and the date it began meeting the aforementioned criteria determine its lifespan. Venture capital ROI and annual fundraising data is derived from ChainPlay's internal database, which is curated from multiple sources such as CryptoRank, ChainBroker. Data was collected in November 2024.

The Current State of GameFi

The GameFi industry is marked by a high failure rate, ChainPlay said. On average, 316 new projects are launched each year, but 262 projects disappear, indicating that a significant number of them struggle to stay afloat for more than a few months.

The 93% failure rate reveals the brutal reality of GameFi: the majority of projects simply don't pan out, highlighting the immense challenges of engaging investors and players. Short-lived projects and dashed hopes now plague what was once the darling of the 2022 bull run, ChainPlay said.

Around 88% of projects saw their token prices drop by more than 90% from their all-time highs (ATH). This sharp decline highlights the volatility and speculative nature of the sector, painting a dire picture of the extent to which hype has fallen.

On average, GameFi projects' token prices have decreased by 95% from ATH. This significant decline reflects the overall failure of the sector. Initial enthusiasm quickly turned to disappointment for most investors and participants, ChainPlay said.

The average lifespan of a GameFi project is only four months. This shockingly long-lived existence highlights the immense difficulties of creating sustainable gaming ecosystems in such a speculative environment. Compared to other crypto projects, such as memecoins with an average lifespan of one year and typical crypto projects with an average lifespan of three years, GameFi projects have an even shorter lifespan , highlighting their increased instability and inability to maintain momentum. This makes GameFi one of the riskiest and most transient areas in the crypto world, ChainPlay said.

ChainPlay said these statistics paint a bleak picture of the GameFi world, where projects often fail to deliver the long-term experiences gamers and investors dream of. The hottest trend of 2022 has quickly turned into a stark reminder of the speculative risks inherent in this space, ChainPlay said.

Profitability information

While GameFi's high failure rate is undeniable, profitability metrics reveal two distinct realities for retail investors and venture capitalists (VCs).

Retail investors in initial decentralized offerings (IDOs) have made an average profit of 15%, according to ChainBroker. However, risks associated with IDOs for retail investors include locked tokens, which may limit their ability to sell and make a profit, particularly during periods of high token value.

Given that many GameFi projects have disappeared and prices have fallen 95% from ATHs, the average profit of 15% might not be enough to cover these risks, especially when locked tokens become illiquid assets in the middle values ​​in free fall. For many, the aspiration to achieve financial success with GameFi has turned into a terrifying reality due to illiquid assets and rapidly declining values, ChainPlay said.

Return on venture capital

For venture capital firms, returns have been more polarized. Average venture profits are 66%, suggesting strategic bets can pay off despite broader market challenges, ChainPlay said.

And 42% of venture capital firms are profitable, with returns ranging from 0.05% to 1,950%. However, 58% of VCs suffer losses ranging from -2.5% to -98.8%.

Top-performing venture capital firms include Alameda Research: 713.15% return on investment; Jump Capital: 519.11% return on investment; Delphi Digital: 490.50% return on investment; Binance Labs: 338.52% return on investment; and 3Commas: 267.29% return on investment. These top performers are also the major backers of the crypto market. This suggests that careful venture capital investments can still generate profits, ChainPlay said.

On the other hand, Golden Shovel Capital (-97.4% ROI) and Infinity Capital (-97.1% ROI) are the worst performers, ChainPlay said. The volatility that once promised immense upside potential has now proven to be a double-edged sword, killing those who dared to believe the hype.

The future of GameFi

The hype around GameFi has died down, but there are still signs of lasting interest. Investment models reflect a more selective approach as the sector matures, ChainPlay said.

Fundraising trends are below peaks, but remain strong. In 2024, venture capital funding for GameFi projects totaled $859 million, down 13% from 2023 and a significant 84.6% drop from the peak of $5.56 billion of 2022 dollars. This drop indicates a more cautious investment approach, with an emphasis on projects with high potential, ChainPlay said.

So far in 2024, the GameFi sector has seen 221 fundraising rounds, an increase of 44% from the previous year. However, this number remains well below the 358 spins recorded in 2022, indicating tempered enthusiasm compared to the peak of the 2022 crypto bull run. This trend suggests that while interest in GameFi persists, investors are taking a more selective approach , focusing on projects with higher potential, ChainPlay said.

Conclusion

While the GameFi bubble has deflated, venture capital firms continue to place strategic bets on promising projects. Success in the coming years will likely depend on delivering strong gaming experiences and creating sustainable, value-driven ecosystems, ChainPlay said. It's worth noting that many projects now have millions of players, from Pirate Nation to Hamster Kombat on Telegram.

Compared to other crypto projects, which have an average lifespan of three years, GameFi's evolution from speculative hype to sustainable growth will require significant improvements to extend the lifecycle of its projects and retain players and investors, ChainPlay said.

GameFi's path to maturity remains uncertain but promising: the industry must evolve beyond the fleeting enthusiasm of 2022 if it hopes to build something lasting and meaningful.