- The hype around Web3 gaming has significantly lost momentum since its peak in 2022, but it’s far from a dead niche.
- The Sandbox, Illuvium, and Shrapnel prove that, with the right approach, Web3 games can be both entertaining and rewarding.
Many say Web3 gaming is dead. Despite losing much of its momentum, it’s very much alive. It remains a niche sector that is undergoing a necessary, albeit painful, transformation.
Web3 games are a far cry from their peak in the early 2020s, but the industry is gradually transitioning from a speculative gold rush into a more mature and sustainable ecosystem.
What are Web3 Games?
Web3 games are like typical digital games. Unlike regular video games, though, developers built them using blockchain technology.
The feature provides players with “true ownership” of the in-game assets they farmed or purchased. Web3 games convert these assets to crypto or non-fungible tokens (NFTs), enabling holders to keep them in compatible crypto wallets or trade them with others in the marketplace. Even if the current version of the game shuts down, players who secured their assets in their digital wallets can reuse them in other supported games, convert them to compatible cryptocurrencies, or trade them for real-world value.
To encourage active player participation, Web3 games offer play-to-earn (P2E) mechanics. It enables them to earn crypto or NFTs as they play, especially when completing quests, finishing daily tasks, or winning matches.
Web3 games also operate within a player-driven economy. Players heavily influence their supply and demand curve by trading items with each other, rather than solely buying items, equipment, characters, and other assets from a central store.
What’s more, most of these types of games exist within Decentralized Autonomous Organizations (DAOs). These models allow players to participate in governance, giving eligible users the right to vote on future updates, rules, and other ecosystem changes.
Is Web3 Gaming Dead?
A perennial debate popping up every now and then asks, “Is Web3 gaming dead?” It stems from the continuous evolution of the space, which also changes consumer preferences and renders many projects obsolete.
One of the latest reports fueling the negative narrative was a study from Caladan (formerly AlphaLab Capital). According to the Singapore-based crypto market-making and trading firm, over $12 billion in capital went to Web3 gaming between 2020 and 2026. Almost 93%, or roughly $11 billion, of those funded GameFi (gaming finance) projects have already ceased operations.
Meanwhile, researchers found an average token decline of 95% from the projects’ all-time highs. By Q2 2025, funding rates to actual game studios have significantly declined to approximately $18 million.
The peak funding in Web3 gaming was in 2022, wherein it accounted for around 62.5% of all on-chain venture investments. The rate is a stark contrast to the sector’s single-digit share in 2025, as the displaced capital was routed into AI (artificial intelligence), RWA (real-world asset) tokenization, and stablecoin projects.
Additionally, the report noted that out of 300 million Telegram users who engaged in tap-to-earn schemes, 96% left within months. Animoca Brands, the largest game software company in the world, has reduced gaming to 25% of its portfolio from its core thesis.
The same study, citing ChainPlay data, claimed that 58% of crypto VCs (Venture Capitals) experienced realized losses ranging from 2.5% to 99% on their positions. The figures were based on the status of more than 3,200 projects analyzed in November 2024.
Overall, the pruning in the Web3 gaming industry exceeded the aftermath of the dot-com bubble. Nonetheless, the survivors it left behind signify its maturation rather than extinction, as they have realized by now what truly works long term and what only lasts due to hype.
Key Challenges
Among the problems inherent in the Web3 gaming sector is the unsustainability of most projects, especially in the first wave of game titles. Most criticisms center on the old P2E model, which places too much emphasis on monetization and makes gaming a chore rather than a form of entertainment. There are also issues arising from their outdated graphics and clunky gameplay, which further contribute to their low retention rates.
Moreover, Web3 games struggled to go mainstream due to their complex design. While traditional games only require a download and, in some cases, account creation, blockchain-based games usually require wallet setup, an initial investment, or gas fees for some in-game activities.
Likewise, the utility of their associated tokens is often limited to in-game use and speculation. Their failure to translate into real-world value eventually causes their economies to collapse when their virality subsides.
Top Web3 Games You Can Play in 2026
Amid the challenges, many have stood the test of time and continuously evolved to address ever-changing gamer needs and preferences. For those looking for the best Web3 games this year, which balance rewards, entertainment, and quality, here are titles worth adding to the list:
The Sandbox
The Sandbox is one of the longest-surviving Web3 games. It features a 3D metaverse where users can create, own, and monetize virtual experiences and properties.
The platform operates a decentralized user-generated content (UGC) gaming ecosystem similar to popular games such as Roblox, Fortnite, and Minecraft. It uses SAND cryptocurrency to facilitate transactions and incentivize builders within its ecosystem.
The UGC model expands The Sandbox experience to include role-playing games (RPGs), exploration, social hubs, educational interactions, virtual concerts, city builders, and more.
The platform operates primarily on the Ethereum (ETH) chain.
Illuvium
Iluvium is a franchise of interconnected games built around an AAA-standard interoperable blockchain game (IBG) universe. The series comprises three integrated worlds, namely Illuvium: Overworld (exploration), Illuvium: Arena (auto-battler), and Illuvium: Zero (mobile city builder).
The game lets players build a team of Illuvials, a diverse set of creatures with unique stats, skills, elemental affinities, and core synergies. The players’ goal is to dominate the battlefield by choosing from 150 Iluvial types to build a stack that lets them finish missions and excel in player-versus-player (PVP) battles.
Illuvium operates on the token of the same name, ticker ILV. It also operates under the Ethereum chain.
Shrapnel
Shrapnel is another AAA-grade first-person shooter (FPS) action game developed and published by Neon Machine. It’s still on early access after only releasing in March this year, but it has generally gained “Mostly Positive” to “Very Positive” reviews on Steam.
The game features an extraction shooter gameplay experience, blending dynamic graphics and an immersive environment. It stands out for its 4v4 player setup with customizable avatars called “Operators” competing for resources and control in a semi-futuristic setting within a 500 km radius.
The game uses SHRAP as a utility token to trade cosmetics, weapons, equipment, and other in-game items. It allows creators to monetize their creations on the platform.
Shrapnel operates on Avalanche’s (AVAX) subnet.
