Flaws Behind the Play-to-Earn Model

Flaws Behind the Play-to-Earn Model

As the play-to-earn model fades, play-to-own emerges as a stable path in web3 gaming by focusing on asset ownership instead of speculative rewards.

The rise and fall of play-to-earn gaming has revealed a major issue in how games have been built around financial speculation. Once seen as a breakthrough in both gaming and online income, the play-to-earn (P2E) model has sharply declined. Major projects have shut down, player interest has dropped, and funding for web3 games fell by more than 70% in the first quarter of 2025. This collapse shows a deeper problem with the model itself - tying rewards to token prices made the fun of playing dependent on unstable markets.

Blockchain Gaming Trends: May 2025 DappRadar Report

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The Flaws Behind Play-to-Earn

The P2E system was based on the idea that players could earn tokens through in-game activity and then exchange those tokens for real-world value. In theory, this would grow the user base and raise token prices. But the model depended on a constant flow of new players to keep demand high. Once token prices slowed down, players began leaving.

Developers lost a key revenue source, and the value of the tokens dropped. This was more than just a market dip. It showed that the model wasn't built to last. In most cases, new players entered the game only to find that the payout wasn’t worth their time. As they exited, it triggered a cycle of falling demand, reduced token prices, and lower engagement.

In April 2025, daily active wallets dropped to just 4.8 million - the lowest figure for the year and a 10% decrease from the previous month. The system was too fragile, and the user experience too unpredictable. Unlike traditional games, which rarely treat in-game currency as a real-world asset, P2E pushed players into roles they didn’t ask for - traders instead of gamers.

Blockchain Gaming Trends: May 2025 DappRadar Report

Blockchain Gaming Trends: May 2025 DappRadar Report

Moving Toward Ownership

A growing number of developers are now turning to a different model: play-to-own (P2O). This approach moves away from rewarding players with inflationary tokens. Instead, it focuses on digital assets that players can actually own. Items like skins, weapons, and avatars are treated as limited-supply collectibles. These assets have value because of how they are used in the game and because they can be bought and sold on secondary markets.

This model has roots in how players already behave in traditional games. People value rare items and cosmetics. What web3 technology adds is the ability to prove ownership and scarcity. That gives these items lasting value beyond the games themselves. Analysts now expect the NFT gaming sector to grow by nearly 25% annually through 2034 - a sign that interest in ownership is rising, even as token speculation fades.

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Building Stronger Game Economies

For play-to-own to work, the game itself needs to be well-designed. Ownership has to matter. That means keeping items limited, making them useful, and designing systems to gradually remove some items from circulation. These "sink mechanics" are important to prevent the kind of asset inflation that caused problems in P2E.

Some critics argue that resale markets could bring back the same problems, but the dynamics are different. In a healthy system, players trade items the way people trade physical collectibles - based on what they like, not what they expect to earn. And as long as developers are thoughtful about supply and demand, the economy can stay balanced. Asset ownership doesn’t have to lead to unchecked inflation. It just requires careful planning and long-term thinking.

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Learning from What Didn’t Work

Many web3 gaming projects have already failed. More than 90% of announced blockchain games are no longer active. The GameFi category lost over 95% of its total value from peak levels, with many projects lasting only a few months. A common pattern among those failures was that they promised financial returns first and delivered gameplay later - if at all.

Some of the few remaining projects have shifted their focus to fixed-supply assets and deeper, more rewarding gameplay. These games have seen better retention and wallet activity even during a time of reduced investor interest. That’s a sign that players are more likely to stay when the game is fun and ownership has real meaning.

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Web3 Game Shutdowns in 2025

A New Direction for Web3 Gaming

The P2E model offered bold promises but failed to hold up under pressure. As the market adjusts, the future of web3 gaming appears to be moving toward more sustainable systems. Games that continue to rely on token emissions will likely see further decline. On the other hand, those that focus on ownership, limited supply, and strong gameplay have a better chance of lasting success.

Players no longer need financial incentives to enjoy a game. What they need are experiences that feel rewarding and items that have value because of how they are used - not how quickly they can be sold. Play-to-own offers a way to build game economies that don’t rely on hype. Instead of promising short-term profits, it creates lasting value through thoughtful design. That’s the direction many in the web3 space are now choosing to take.

Opinion, Educational

Updated:

July 9th 2025

Posted:

July 9th 2025

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