Blockchain Gaming Market Faces Challenges as Money Circulates, Not Grows — Gunzilla Exec

The blockchain gaming industry is grappling with a significant issue: a lack of new investment. Gunzilla Games Web3 director, Theodore Agranat, recently described the sector as a “game of musical chairs,” highlighting the challenge of stagnant capital. According to Agranat, the problem lies not in a shortage of funds but in the absence of fresh money entering the market, with existing capital simply circulating between various gaming projects.

Recycled Capital and Decreased Investment

Speaking at Consensus 2025 in Hong Kong, Agranat shed light on the state of blockchain gaming funding, noting that the industry had experienced a dramatic drop in investment. In January 2025, blockchain gaming projects attracted just $16 million in funding, which is a staggering 92% decrease compared to the $222 million raised in December 2024, according to analytics platform DappRadar.

The lack of fresh capital is a pressing concern for the industry, as it hinders innovation and long-term sustainability. Instead of attracting new investors, the capital that does flow into the space is recycled from one project to another, contributing little to the overall growth of the ecosystem.

Declining User Engagement and Unsustainable Practices

Agranat also pointed out a concerning trend in blockchain gaming: the decline in unique active wallets (UAW). From around 10 million last summer, the number of unique active wallets has fallen to 7.5 million today. He noted that the majority of growth in Q1 2024 has been driven by airdrop and farming campaigns, which he believes are unsustainable in the long run.

The term “play-to-airdrop” era, coined by DappRadar, refers to a time when blockchain games rely heavily on airdrops to attract users. Games like RPG Kuroro Beasts, fighter game AI Arena, and card strategy racing game MixMob saw significant growth through such campaigns. However, Agranat warns that this method is not conducive to developing a loyal user base or ensuring lasting success.

Agranat explained that many users are simply creating multiple crypto wallets to collect airdrops from various games, without any intention of becoming long-term players. He likened these users to professionals or speculators who are only interested in extracting value from the projects they engage with, without contributing to the game's growth or community.

A Temporary Boost in On-Chain Activity

Despite the challenges, blockchain gaming did see a notable uptick in on-chain activity in January 2025, with a threefold increase in activity compared to the same period a year earlier. However, this growth, driven by short-term airdrops and farming, may not be enough to sustain long-term industry momentum.

The Need for Sustainable Growth

The blockchain gaming sector's current reliance on short-term incentives and recycled capital is unsustainable in the long run. Agranat’s comments underscore the need for more strategic investment and genuine user engagement to build a stable, growing ecosystem. Without fresh money and a loyal player base, blockchain gaming risks becoming a cycle of temporary gains and fleeting interest, rather than a thriving and sustainable industry.

As the market matures, it will be crucial for developers and investors to shift their focus from speculative short-term gains to building lasting value, innovation, and engagement. Only then can blockchain gaming fulfill its potential and establish itself as a mainstream industry.