Chain game reported today that 93% of GameFi (the fusion of gaming and decentralized finance, or Web3 gaming) projects are dead.
But that doesn’t mean the industry is kaput. Rather, a more complex narrative shows the roller coaster of growth and setbacks that are common to overhyped startup/financial bubbles.
GameFi has been the hottest trend during the 2022 cryptocurrency bull run, attracting billions of dollars in investments and money poured into speculative tokens. We are in a similar bull run now, with Bitcoin climbing above $100,000 per coin.
However, the reality of its sustainability tells a much more shocking story, ChainPlay said. In collaboration with Storible, the team analyzed over 3,200 GameFi projects to reveal the true picture of the GameFi field.
Key insights and methodology
Study shows that 93% of GameFi projects are dead. On average, GameFi projects are down 95% from their all-time highest prices. GameFi projects last only 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 by more than 90% from its all-time high (ATH) and if it has fewer than 100 daily active users. Pricing information comes from Dune Analytics, while user data is obtained from DappRadar.
The date a project’s token was created and the date it began meeting the above-mentioned criteria determine its lifetime. Return on investment for venture capital 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 sector is characterized by a high failure rate, ChainPlay said. On average, 316 new projects launch each year, but 262 projects disappear, indicating that a significant number struggle to stay afloat for more than a few months.
The 93% failure rate reveals GameFi’s brutal reality: most projects simply don’t make it, highlighting the immense challenges in keeping investors and players engaged. Short-lived gains and dashed hopes now plague what was once the darling of the 2022 bull run, ChainPlay said.
Approximately 88% of projects saw token price declines of more than 90% from all-time highs (ATH). This sharp decline highlights the volatility and speculative nature of the industry, painting a dire picture of how far the hype has fallen.
On average, token prices of GameFi projects have decreased by 95% compared to ATH. This significant decline reflects the overall failure of the industry. Initial excitement quickly turned to disappointment for most investors and participants, ChainPlay said.
The average duration of a GameFi project is only four months. This incredibly short existence highlights the immense difficulties in building 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 greater instability and inability to sustain momentum. This makes GameFi one of the riskiest and most transitory areas of the cryptocurrency 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 that players and investors want. The hottest trend of 2022 has quickly turned into a stark reminder of the speculative risks inherent in this space, ChainPlay said.
Profitability insights
While GameFi’s high failure rate is undeniable, profitability metrics reveal two distinct realities for retail investors and venture capitalists (VCs).
According to ChainBroker, retail investors in initial decentralized offerings (IDOs) have made an average profit of 15%. However, risks associated with IDOs for retail investors include locked tokens, which can limit their ability to sell and make profits, especially during periods of high token value.
Given that so many GameFi projects have failed and prices have fallen 95% against ATHs, the average 15% profit may not be enough to cover these risks, particularly as locked tokens become illiquid assets amid plummeting values. For many, the aspiration of achieving financial success with GameFi has turned into a terrifying reality due to illiquid assets and rapidly declining values, ChainPlay said.
Risk capital returns
For VCs, returns were more polarized. Average VC profits are at 66%, suggesting strategic bets can pay off despite broader market headwinds, ChainPlay said.
And 42% of VCs are profitable, with returns ranging from 0.05% to 1950%. However, 58% of VCs experience losses ranging from -2.5% to -98.8%.
Top performing VCs include Alameda Research: ROI of 713.15%; Leaping capital: ROI of 519.11%; Delphi Digital: ROI of 490.50%; Binance Labs: ROI of 338.52%; and 3 commas: ROI of 267.29%. These top performers are also high-level supporters of the cryptocurrency market. This suggests that careful venture capital investments can still yield 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, felling many of those who dared to believe the hype.
The future of GameFi
The hype around GameFi has cooled, but there are still signs of lasting interest. Investment models reflect a more selective approach as the industry matures, ChainPlay said.
Fundraising trends are below peak but still strong. In 2024, venture capital funding for GameFi projects totaled $859 million, reflecting a 13% decline from 2023 and a significant 84.6% decline from the 2022 peak of 5.56 billions of dollars. This decline indicates a more cautious investment approach, focusing on high-potential projects, ChainPlay said.
In 2024 so far, the GameFi sector has seen 221 fundraising rounds, marking a 44% increase from the previous year. However, this number remains far below the 358 rounds recorded in 2022, indicating moderate enthusiasm compared to the peak of the 2022 cryptocurrency bull run. This trend suggests that while interest in GameFi persists, investors are adopting a more selective approach, focusing on projects with higher potential, ChainPlay said.
Conclusion
While the GameFi bubble has deflated, VCs continue to place strategic bets on promising projects. Success in the coming years will likely depend on providing robust gaming experiences and building long-lasting, value-driven ecosystems, ChainPlay said. It is worth noting that numerous 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 both players and investors, he said ChainPlay.
GameFi’s path to maturity remains uncertain but promising: the industry must evolve beyond the fleeting excitement of 2022 if it hopes to build something lasting and meaningful.
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