Opinion by: Tobin Kuo, founder and CEO at Seraph
The play-to-earn (P2E) model has largely collapsed, which promised a future in which anyone could grind digital gold and cash out for real-world income.
Funding for Web3 games dropped more than 70% in Q1 2025, major projects have shut down, and player engagement is declining at a staggering rate.
The crisis here exposes a fundamental error — rewarding play with volatile tokens turns every player into a speculator and every patch note into a market risk.
It tethered fun to fiat and viability to an ever-growing influx of new users willing to buy in. As soon as token prices stalled, the entire structure unraveled. Given this new reality, the industry must pivot to a model that prioritizes asset utility and long-term engagement: play-to-own (P2O).
Speculation was never a game
Critics may insist that P2E can still empower emerging markets or claim that token incentives are essential to player growth. Still, the data tells a different story — and so do the market outcomes.
The P2E model was built on token inflation, in which developers minted coins as rewards for in-game activity, hoping increased participation would absorb the selling pressure.
Sure, it worked temporarily; user counts grew and token prices rose. But exits accelerated once the price momentum stopped. A recent report showed that April 2025 had the lowest daily active wallets of the year: just 4.8 million, a 10% drop from the month before.
This isn’t a temporary correction; it’s a structural failure. Late adopters entering a mature P2E game often find reduced payouts, making participation less attractive. As they leave, liquidity dries up, token values drop and developers lose a key revenue stream. This cycle continues until both the player base and project treasury are depleted.
No conventional online game expects users to treat in-game currencies like financial assets. When they do, the experience becomes vulnerable to volatility that most players neither want nor understand.
Ownership, not income, creates demand
P2O offers a better path forward by decoupling gameplay from token emissions. Instead of flooding the economy with rewards, P2O treats digital items — skins, weapons, avatars — as fixed-supply assets players can trade on secondary markets. These items are collectibles with provable scarcity and value derived from in-game utility and aesthetic appeal.
Recent forecasts support this direction. The NFT gaming sector is projected to grow at nearly 25% compound annual growth rate (CAGR) through 2034, with demand driven by ownership rather than speculation. In traditional games, players already assign value to rare digital goods — blockchain simply makes that value portable and verifiable.
Related: How Web3 can change gaming without changing how gamers play
To be successful, P2O demands strong design choices. Developers must create engaging games where ownership is meaningful. Cosmetic items, land plots and upgrade components should be released in limited quantities, with carefully calibrated sink mechanics to control supply over time. This avoids the inflation problems that plagued P2E.
Critics argue that resale markets invite profiteering, but the rebuttal is two-fold. First, secondary trading is healthy when it mirrors physical collectibles, where prices fluctuate but are anchored to perceived cultural or aesthetic worth, not scheduled token emissions. Secondly, a well-designed sink mechanic that removes assets from circulation and stabilizes supply is required.
Ownership does not equal permanent inflation. Instead, it demands active stewardship.
Skeptics have also pointed to staggering failure rates in Web3 gaming, as over 90% of announced blockchain titles are already defunct. This includes figures like gaming finance (GameFi) projects dropping 95% from their all-time highs (ATHs) and lasting less than half a year before fizzling out.
The current market for Web3 gaming through the P2E model is bleak at best, with most casualties sharing the same flaw of promising cash extraction first and gameplay later.
Where tokens led, fun lagged, and players noticed. The handful of survivors that shifted to fixed-supply assets and strong sink loops show wallet activity trending upward even amid the broader funding drought seen throughout the industry.
Design rules for a P2O economy
P2E promised a revolution but only delivered a short-lived boom. Many of its most-hyped projects have faded, and even some survivors are pivoting toward fixed-supply economies and deeper gameplay loops. These changes recognize that the core P2E mechanic — earn-to-sell — is unsustainable at scale.
Projects that cling to emission-based reward models will likely face continued contraction, especially as user growth slows and capital becomes more cautious. In contrast, games that build economies around ownership, not extraction, may weather the current funding winter — and come out stronger.
The blockchain gaming sector doesn’t need more incentives. It needs better games and better economies. That begins by burning the token drip model and building systems players want to be part of long after the yield is gone.
Opinion by: Tobin Kuo, founder and CEO at Seraph.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
