Gaming's Reality Check: From $31B Market to Graveyard

@LayerOneXOct 8, 2025

The Spaces tackles Web3 gaming’s “epic face plant”—hundreds of projects shuttered, funding down 93%, and DAU softness—against counter-trends like Epic onboarding 81 Web3 titles and Ubisoft shipping on-chain. Host Cody convenes Kevin (Layer1X/Quantum DEX), Warp Chain (publisher), Sir Choice, Mr Console, Luca (Sashi), Ivan (Eldrem), Valenia (Valania MMO), and Henry (Pagram AI). The panel converges on a fun‑first, product‑led reset: better games, sustainable economics, and trust. Token‑first play‑to‑earn models failed when speculation faded; what’s needed is revenue-first design, limited supply and deflationary mechanics, retention and community, and seamless onboarding (email/OTP, no wallet friction). Distribution should meet players where they are: mobile for reach, plus browser/PC for instant access and social flow; security matters (pixel streaming for verifiable iGaming). IP strategy should span multiple games sharing tokens/NFT utility to stabilize demand. Kevin previews L1X Play—building gameplay around strong token communities and anti‑rug infrastructure—while Warp Chain stresses survival through monetization before tokenomics and shipping MMORPG/mobile experiences. Despite the slump, DAU remains above the 2021 peak, signaling enduring demand for on‑chain gaming once quality and sustainability improve.

X Talks: Web3 Gaming’s “Face Plant” — What Went Wrong, What’s Working, and What Will Win by 2034

Panel roster (real names and roles when stated)

Cody — Host of X Talks (Layer 1X community spaces).
Kevin — Founder of Layer 1X and Quantum DEX.
Warp Chain (publisher) — Speaker representing Warp as a games publisher.
Sir Choice — Builder/community leader; involved with The Citadel and Operation Safe Defense (NGO initiatives impacting youth in South Africa).
Mr. Console — Industry commentator; startup/gaming macro perspective.
Luca — Lead developer at Sashi (social casino entertainment platform).
Ivan — Founder of Project Eldrem (multi-game fantasy RPG ecosystem).
Valentina (project: Valenia) — MMO builder and community-focused creator.
Henry — Program AI; building AI tools/agents and livestream infrastructure for game studios.

Framing the problem

Cody set the tone with stark indicators:

“Gaming’s epic face plant”: reports of ~300 games shuttered, funding down ~93%, daily users falling (echoing 2022 vibes).
Yet contradictory signals: Axie still with ~1M followers; Epic has onboarded 81 Web3 titles; Ubisoft launched on-chain.
Big question: Is this a necessary cleansing/consolidation, or can Web3 gaming still reach a projected $183B by 2034? If so, what pulls the sector from its current “graveyard”: tech innovation, economics, or something else?

Core consensus: Game-first, not token-first

A recurring theme across speakers: the market is rejecting token-first, speculation-led designs and demanding genuinely fun, high-quality games.

Warp Chain: Web3 games have been “at the mercy of markets and extractors.” The remedy is straightforward—make good, playable games and spend capital on the right production priorities. Publishing discipline matters: support projects across their lifecycle, optimize budgets toward gameplay, retention, and launch readiness.
Henry (Program AI): The space is not dead; it’s shedding noise. The basics must come first—fun gameplay, clear community value—before token/economy complexity. Traditional hits (COD, Fortnite) built markets around games after players already loved them.
Luca (Sashi): Players don’t care about chains or wallets; they care about fun, aesthetics, community, and a compelling story. Focus on product quality; design experience-first and treat tokenomics as supportive (deflationary, not P2E-centric).
Kevin (Layer 1X): Web3 gaming introduced “earn while you play,” but success requires balancing three pillars: tokenomics, gameplay addiction, and community adoption. Token-first designs collapse when tokens do—sustainable gameplay must anchor any economic model.

Economics and adoption: wins attract developers and capital

Mr. Console: View studios as startups—most fail by default. Post-COVID free capital has corrected across tech. To drive ecosystem growth, studios need demonstrable wins; success stories invite developers, broaden genres, and attract investors.
Kevin: Daily active users fell ~17% QoQ to ~4.5M (lowest since early 2023), yet that’s still higher than 2021’s daily peak—demand persists, but tolerance for low-quality, token-first designs has evaporated.
Sir Choice: Sustainable wealth distribution can coexist with fun. 2021’s breakout came from transparent economic opportunities (e.g., Axie). The next wave requires sustainable revenue sources that empower communities and avoid extractive dynamics—users as ambassadors, not exit liquidity.

Design and onboarding: remove friction

Luca (Sashi): Chose Microsoft Azure + Pixel Streaming (Unreal Engine) to deliver video-in/video-out browser gameplay—no client code exposure, instant access, no installs, verifiable results. This improves trust and removes barriers.
Kevin: Prioritize frictionless onboarding—OTP/email sign-ups and free credits to test the game before wallets/tokens. Avoid forcing wallet downloads or pre-purchases; otherwise, you lose most prospects.

Monetization and tokenomics: revenue-first, scarcity-aware

Warp Chain: Don’t market before you have a product. Build revenue streams and monetization models first; tokenomics should support an already valuable game. Survivability matters—if you can ship “episode 2,” you’re on the right path.
Ivan (Eldrem): Free-to-play lowers barriers; don’t force blockchain. Limited supply of tokens/NFTs avoids inevitable price decay and is fairer to players. Learn from traditional successes (e.g., Baldur’s Gate 3’s massive launch); focus on fun, then layer ownership/utility. Multi-game IPs can improve retention by reusing tokens/assets across genres (TCG, RTS, casual), diversifying utility as player cohorts inevitably churn.
Kevin: Layer 1X’s Quantum DEX designs around trust (anti-rug protection). L1X Play will build games around communities/tokens already resonating (e.g., Biscuit, X Stock), without over-branding them as “Web3”—the draw is fun plus optional earning.

Platform choices: PC/browser vs mobile

Warp Chain: Mobile may be the best revenue base for Web3; MMORPGs are ideal fits (community/social, deeply engaging) for on-chain integrations. PC is still viable—focus on platform-specific strengths.
Kevin: Mobile compatibility is critical given market size; ensure gameplay and onboarding work seamlessly on mobile.
Luca (Sashi): Browser-first via pixel streaming delivers instant access and security for iGaming-like features.
Valentina (Valenia): PC/browser is convenient and social—jump in, play, alt-tab to X; choose what fits your habits. Browser/PC remains attractive for communities and discovery.

Project spotlights (brief)

Layer 1X + Quantum DEX (Kevin): Originated from Kevin’s PhD project; Layer 1X empowers multi-chain apps. Quantum DEX offers up to $2M liquidity per project and anti-rug smart contracts; processed millions of transactions; listed 60+ projects in ~125 days. L1X Play (Q4) integrates with the DEX, leveraging a high-performance VM; games built around thriving token communities.
Warp Chain (publisher): Aims to professionalize Web3 game publishing—pipeline discipline, budget focus, lifecycle support, and gameplay-first execution.
Sashi (Luca): Next-gen social casino entertainment platform—Unreal Engine + blockchain. Experience-first, deflationary mechanics, instant browser access via Azure pixel streaming; vision: a “digital Vegas” hub uniting iGaming, crypto, and gaming communities.
Project Eldrem (Ivan): Multi-game ecosystem; flagship is Eldrem—action RPG with dragon riding, kingdom building, AI companions, procedural content. Team pedigree (Ubisoft, Amber; titles like Assassin’s Creed, Call of Duty). Free-to-play, constrained supplies, cross-game asset utility, upcoming creature app.
Program AI (Henry): Building AI tools/agents and livestream infrastructure for studios; advocates gameplay-first path with community-defined economies post-fun.
Sir Choice: Community empowerment via sustainable economic opportunities; works with The Citadel and Operation Safe Defense to deliver gaming with real-world impact for youth in South Africa.

Data points and market context cited

~300 games shuttered; funding down ~93%; daily users falling (host framing).
Epic Games Store onboarding 81 Web3 titles; Ubisoft launched on-chain.
Axie Infinity still ~1M followers.
DAU declined ~17% QoQ to ~4.5M (lowest since early 2023), but still above 2021 daily peak (Kevin’s figures).
Traditional scene: ~80,000 games released annually across platforms (Warp’s comparison). Warp’s estimate that only ~15 true Web3 games have been built, with 90–95% failing—framed as his claim to highlight scarcity/quality gaps.

Differences in perspective (healthy tension)

Wealth distribution vs fun-first: Sir Choice emphasizes sustainable economic opportunities as a core driver (especially across geographies), while several panelists warn against P2E-first models that collapse when rewards slow. Common ground: opportunities and ownership can be powerful if the game is genuinely compelling and the economy is designed for longevity.
Platform prioritization: Warp and Kevin push mobile/MMORPG viability and reach; Sashi/Valenia highlight PC/browser strengths in access, social engagement, and trust for certain genres (e.g., casino-style experiences).

“Soapbox” advice: why keep supporting PC/browser Web3 games now

Warp Chain: Ask for help, make hard decisions, and build in sensible order. Focus on monetization before tokenomics; survivability to release future installments matters. MMORPGs and mobile will be big, but PC/browser remains valuable for deep community and social design.
Kevin: Revenue-first; ensure mobile compatibility; onboarding must be frictionless (OTP/email, free credits). Don’t force wallets/tokens at the door.
Valentina (Valenia): Browser/PC gameplay is socially rich and convenient; if that’s your preferred experience, keep supporting teams iterating there.
Luca (Sashi): Browser via pixel streaming delivers instant access and security—no installs, no client code exposure—ideal for trust-sensitive mechanics.
Henry (Program AI): This is a corrective phase; fun-first PC/browser titles that build authentic communities will form the foundation for mature economies later.

Key takeaways and highlights

The market is signaling a strong rejection of token-first, speculative models; game-first, revenue-first designs are essential.
Wins by a few studios can trigger developer adoption and investor confidence, multiplying genres and experiences.
Frictionless onboarding (no forced wallets, instant access) is vital for mainstream appeal.
Scarcity and utility design (limited supplies, cross-game IP reuse) can protect value and reduce churn.
Mobile and MMORPGs are likely strong bets for mass engagement, but PC/browser remains strategically powerful for certain experiences and communities.
Community empowerment and sustainable economic opportunities can coexist with fun if economies are designed for durability and transparency.
Demand persists (DAU still above 2021’s peak), but tolerance for low-quality, token-first projects is gone.

Open invitations and community notes

Cody invited all projects to the weekly 10-minute pitch show (Wednesdays, 8 a.m. EST) to present directly to the Layer 1X community without KOL bias.
Layer 1X ethos: unite all of crypto; foster seamless user experiences across chains, projects, and games.

Bottom line

The “face plant” is less an obituary and more a reset. To reach 2034’s ambitious projections, studios must ship games that are unambiguously fun, monetize sustainably, onboard frictionlessly, and treat tokens as supportive—not central—mechanics. Strong communities, disciplined publishing, and real, measurable wins will draw the developers, capital, and players needed to rebuild Web3 gaming on a solid foundation.