Web3 Gaming: Is the Play-to-Earn (P2E) Model on Its Last Legs?

Last updated on November 18th, 2025 at 11:11 am

The early success of web3 games like Axie Infinity attracted significant media attention to the sector and also lots of gamers and enthusiasts. The concept of Play-to-Earn (P2E)—rewarding gamers for active participation–contrasts what these players are used to in traditional gaming spaces. In these traditional gaming spaces, they spend significant amounts of time playing games, and yet they cannot generate profits like they do with web3 games.

However, it seems the Web3 gaming sector is on a downturn; the pioneers of the P2E model, such as Axie Infinity, Pegaxy, Crabada, and STEPN, are all experiencing a decline from their market peak values. The Blockchain Game Alliance (BGA) had initially suggested that P2E games would drive blockchain gaming growth in 2021, but the recent survey shows this figure has dropped to 22.5%.

To describe more vividly, back in 2021, players were reportedly earning approximately 4,500 $SLP per month for playing games on Axie Infinity, at $SLP’s peak, this translated to approximately $1886, not a bad deal for ‘playing online games’. However, the token’s value sharply declined after its 2021 peak and hasn’t regained its previous levels since then.

What Are the Reasons for This Massive P2E Decline?

In the early stages of 2022, the prospects for P2E appeared promising, as it offered gamers the enticing prospect of generating income while indulging in their preferred gaming pursuits. However, this optimism was quickly dimmed by a series of missteps made by P2E games in the aftermath of the COVID-19 lockdowns.

Let’s look at some of the reasons behind the P2E decline:

Too Much Focus on Tokenomics

Most traditional gamers (Web2 gamers) don’t pay much attention to or understand blockchain or token systems. They simply want games that provide engaging gameplay, captivating art, and interesting stories. Unfortunately, many P2E developers focus too much on tokenomics, prioritizing earnings over gameplay quality, art, and accessibility. Consequently, players who try these games often feel unwelcome, leading them to steer clear of games labelled as P2E.

Ironically, this focus on tokenomics has not fared well either. Most P2E games have ineffective in-game economies and lack motivating reward systems, which discourages player participation.

The P2E model’s viability dipped because it took too much from the game’s economy without putting enough back. Simply put, value has to be added for value to be taken out.

When Axie Infinity became popular in 2021, it gained value from new players. However, when the supply of its utility token exceeded demand, prices dropped due to basic economic principles. Additionally, in-game items often follow the volatile cryptocurrency market, causing late adopters to witness a rapid decline in the value of their in-game assets.

Some P2E games create difficulties for newcomers by imposing high financial requirements, acting as a barrier to entry. In essence, the rewards that attracted users became what chased them away.

An X (formerly Twitter) user explained this well in his criticism of these games’ reward system: “Games that give out tokens just for playing are not sustainable and create economic problems on a small scale”.

And when people see these games as purely financial tools, they leave in large numbers when profits go down. This, in turn, diminished the popularity of P2E games.

Lack of Engaging Gameplay

Play-to-Earn (P2E) games face a major issue of not being entertaining enough and lacking engaging gameplay. About 36.5% of respondents in a BGA survey believe that improving gameplay should be the primary objective for the industry.

Presently, blockchain games fall short in terms of content and gameplay compared to traditional games. Most players seek out games for the fun of it rather than solely for the purpose of earning money. Gamers crave engaging stories, exciting combat, competition, and, most importantly, fun, not just opportunities to earn or purchase items.

Unfortunately, most P2E games lack these elements, such as compelling stories, good graphics, and adequate content. This is partly because game developers often focus too much on profit-making, as mentioned earlier. They forget to prioritize the enjoyment of playing the game.

Poor User Experience

A game’s quality is determined by how easily a player interacts with it. Blockchain games often struggle with good user interfaces, making it challenging for players to fully engage. While these games excel in transparency and decentralization, they often lack user-friendly functionality and interfaces, resulting in a less-than-optimal user experience.

Also, registering for an account and navigating the application can be confusing because it involves complex processes. Tasks like withdrawing earnings, linking user wallets, and managing deposit and withdrawal wallets can also pose challenges, especially for traditional gamers.

Additionally, Web3 gaming typically involves simple gameplay and 2D visuals, which is why serious gamers, accustomed to high-quality AAA graphics, may not find Web3 games to be impressive.

The quality of graphics, animations, and the level of engagement in the story play critical roles in determining whether web3 games can succeed in the long run. This UX issue, in particular, is a sector-wide problem, and it helps explain why many applications of blockchain technology, despite their potential, are still not widely adopted.

Uncontrolled Bot Activity

A recent survey revealed that 40% of Web3 gaming activity comes from bots. This is a big concern because bot activity can harm game economies. Bot creators generate in-game tokens using inflationary models and unlimited emissions, then flood the market with them, causing an oversupply and crashing prices.

For example, the game Sunflower Farmer on Polygon experienced a bot takeover in January 2021, causing its in-game SFF token to plummet from over $5 to nearly $0.

Bots not only disrupt the balance of Web3 games but also discourage regular players. They do this by creating an uneven playing field, conducting Sybil attacks, and spreading harmful airdrops that drain resources. Additionally, bots replace the live communication and shared interests that players seek with constant spam, making the gaming experience unpleasant.

Security Concerns

There’s a worrying trend where some games seem to work like Ponzi schemes. They depend on getting money from new players to pay the early ones. For example, when StepN first launched, people saw it as a Ponzi scheme. The reason why it was criticized as a Ponzi scheme was because users needed to have a good initial investment before they could start earning. Also, they were mandated to invite new users to the game to increase investment.

In addition to being perceived as scams, these games are also fraught with vulnerabilities that make them susceptible to attacks and malicious schemes. For example, Axie Infinity’s Ronin blockchain was brutally hacked in 2022, resulting in the loss of over $600 million in player funds. Since many P2E games share a similar model to Axie Infinity, they are also at risk of similar security breaches.

Regulatory Issues

The rules for Web3 gaming are still not well-defined. Dealing with issues like intellectual property, data privacy, and security requires expert legal advice and strategic planning to ensure that Web3 gaming can thrive in the long run.

For example, The Philippine police, specifically their anti-cybercrime unit, have cautioned residents about P2E blockchain games, noting some of these games to be scams, and may demand a significant amount of money to participate. The authorities are concerned that the Web3 gaming space lacks safeguards against criminal activities like money laundering, making it attractive to individuals with harmful intentions.

Also, South Korean regulators have instructed Apple and Google to remove Play-to-Earn (P2E) games from their app stores. This decision was based on South Korea’s new laws related to cryptocurrency and P2E games, as well as a Supreme Court ruling. The regulators have also asked these tech giants not to apply age restrictions to these games, which effectively prevents their release.

Reasons for the Massive P2E Decline

In Conclusion,

The consistent flow of investments into the crypto gaming sector indicates that it has a promising future. As the demand for stable, visually engaging, and immersive gaming experiences increases, Play-to-Earn (P2E) game developers are facing significant challenges in maintaining their position in the sector.

These challenges go beyond just technical improvements and require a reevaluation of their strategies and economic models. To remain competitive and relevant, developers must explore new approaches that align with the changing dynamics of the gaming ecosystem.

Developers should prioritize perfecting how their tokens work before revealing their projects to the public. Being the first with a new idea doesn’t guarantee success anymore. It’s crucial to prioritize creating high-quality games that people will enjoy for a long time. Achieving this requires dedication to innovation, creativity, and continually improving gameplay, graphics, and the overall user experience.

Furthermore, the industry should focus on taking care of and expanding its existing player base rather than always seeking new ones. A strong community of dedicated gamers can keep a game going and serve as a basis for expansion.

While acquiring new players is important, it’s equally important to create a sense of togetherness and involvement among existing users. Building and nurturing this community spirit can significantly boost a game’s success and longevity.

Ultimately, a game’s lasting popularity depends not only on its tokens but also on its ability to provide fun and rewarding experiences for players. Nevertheless, given the industry’s early stage, there’s room for positive improvements.

Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.

If you would like to read more articles (news reports, market analyses) like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.