Why Most GameFi Projects Fail

Back when GameFi first started heating up, it looked like a golden ticket. People could play games and earn tokens. Communities rallied. Discords blew up. Numbers went vertical. For a moment, it felt like the future of gaming had arrived. Then, most of those projects crashed hard. What went wrong?

Let’s get into it. And yes, we’ll touch on public and professional betting takes not in the gambling sense, but the speculator behavior that mirrors it, especially in how people backed these projects like they were sure wins.

The truth? Most GameFi projects didn’t fail because people didn’t want to play. They failed because the core loop was broken from the start. The incentive design was often short-sighted. The economies were bloated. And under all the crypto hype, most of the games just weren’t that fun.

You can’t slap a token on a dull game and expect people to stick around.

It started with Axie Infinity

Axie was the first big breakout. It brought millions into Web3, especially in places like the Philippines. People were earning more than local wages just by grinding matches. Scholars, guilds, and yields felt like something bigger than crypto.

But let’s be honest: the game itself wasn’t all that deep. People didn’t log in to explore rich lore or dynamic gameplay. They logged in to earn. And once token prices dipped, the whole thing unraveled.

The model was extractive. The value came in, but it didn’t stay. It left through sell pressure, daily. The inflation was constant. The player base was more like yield farmers than gamers. Once the "earn" dried up, so did the "play."

The "Ponzinomics" trap

A lot of early GameFi copied the same loop: buy NFT → play → earn token → sell token. Rinse and repeat. But without fresh money entering constantly, it collapses. That’s not sustainable gaming. That’s just musical chairs with pixel skins.

Gamers aren’t dumb. They can sniff out when a game’s economy is built on hype instead of substance. Once the speculation cools off, it’s game over.

And let’s talk tokenomics. Way too many of these games launched with dual-token models no one could explain clearly. One token for governance, one for rewards, none with real utility beyond speculative trading. Most in-game currencies had no sinks just sources. No reason to spend, only to cash out.

You don’t need a PhD in economics to know how that ends.

People come for profit, but they stay for meaning

The idea of earning while playing isn’t dead. It just needs to be reframed. People will pay and play in a Web3 world, just like they do in Web2, if the experience is worth it.

Look at traditional gaming: people spend billions on Fortnite skins, FIFA packs, and mobile gems. Why? Because it’s fun. Because the game gives them identity, status, and social connection. Crypto can enhance that, but it can’t replace it.

That’s where GameFi missed the mark. It prioritized financial incentives over the emotional ones that actually power games. The result? Shallow loops, empty worlds, and short lifespans.

So What Needs to Change?

First, let’s drop the "Fi" from GameFi for a second. Let's just talk about games, what do successful games do? They build deep, evolving worlds, they create mechanics that reward skill and strategy; they give players ownership not just of assets, but of stories and outcomes.

Blockchain is powerful because it allows for real digital ownership. But that ownership has to mean something in the context of the game. If my sword is an NFT, great but is it actually cool to use? Does it have a story? Can I trade it freely, or level it up, or risk it in battle?

Also, forget about daily grind-to-earn mechanics. No one wants a second job. Instead, let’s think about win-to-earn, risk-to-earn, or contribute-to-earn. Incentives that reward active, meaningful participation just showing up and clicking.

On-chain gaming is the wildcard

Here’s where things get spicy: fully on-chain games. These aren’t just games that use tokens they live entirely on the blockchain, every move, every rule, every outcome is encoded. It’s like if chess existed purely on Ethereum.

This opens up crazy possibilities. Games that are uncensorable, where players can fork new rules, where the code is the final authority, it is early, for sure; the UX is rough, but projects like Dark Forest, Loot Survivor, and Primordium are pushing the edge.

They’re not trying to compete with AAA studios just yet, they’re experimenting, they’re building communities that feel more like hacker collectives than passive player bases.

And that’s where the real potential lies giving players agency.

Guilds, DAOs, and Player-driven Economies

Here’s something Web3 can do that Web2 can’t touch: real shared ownership of the game world, not just buying tokens, but shaping rules. Building quests. Modding mechanics.

Some games are starting to open up governance to players, others are letting guilds become in-game factions with real power. Imagine a game where the dev team is just one of many competing forces, and the players can unionize, revolt, or even spin off new realms.

It’s messy, sure. But it’s organic. It’s alive.

Web3 gaming should feel less like an arcade and more like a living civilization, funding is part of the problem, too. Let’s talk about money for a sec. A lot of early GameFi raised millions from VCs who were chasing the next Axie. They wanted fast growth and token pumps. That led to rushed launches, bloated treasuries, and economies designed to serve investors first, players second.

Now, we’re seeing a shift. Projects are raising slower, focusing more on builders and communities. Grants from foundations like Arbitrum, Solana, or Immutable are helping devs build without the same pressure to “go to market” before the game’s even playable.

And players are getting smarter. They’re not aping in just because a project has a slick trailer. They want demos. Roadmaps. Real value.

The next wave looks better

There’s hope. There's a lot to be excited about. Games like Shrapnel and Illuvium are aiming for high production value and smart token design. Others, like TreasureDAO, are building whole ecosystems of games that share assets.

These new projects are slower, quieter, more thoughtful; they’re learning from the wreckage of 2021 and 2022. They’re prioritizing fun, community, and sustainability, and they’re thinking long-term, so if they can get the balance right between earning and enjoyment, between ownership and onboarding, we might finally see a GameFi ecosystem that doesn’t just pump but persists.

What Next?

Here’s the takeaway: Web3 gaming isn’t doomed, it is just going through its awkward teenage phase; the hype cycle gave us some bad habits like thinking token price equals success. But it also proved that there’s demand. People want to play, to own, to connect in digital worlds that feel meaningful.

The next generation of GameFi won’t just be about staking and earning, it will be about exploring, building, and belonging. Real games. Real stories. Real economies.