“Most Web3 games are not games. They are short-term Ponzi structures wrapped in Unity builds.”
The market has already voted with its wallet: over 99 percent of play-to-earn token economies from the 2021-2022 cycle lost more than 90 percent of their peak value. At the same time, venture funds still deployed billions into Web3 gaming, and a smaller group of teams are now rebuilding token models from the ground up. The big question investors keep asking is simple: can Web3 gaming produce sustainable, cashflow-positive businesses, or are we just repackaging the same Ponzi mechanics with better graphics and nicer pitch decks?
The answer sits in the unit economics. In the first wave, players did not behave like customers; they behaved like short-term yield farmers. Most “gamers” only joined when token emissions were high and exit liquidity looked safe. The moment new users slowed and token rewards dropped, the feedback loop broke. Revenue dried up, token prices crashed, and DAUs vanished. That is the classic pattern of a Ponzi-like structure: returns for early participants rely on capital from new ones, not on real demand.
Still, the experiment revealed something valuable for founders. People will pay for digital ownership if three conditions hold: the asset carries real status or utility inside a game loop, the supply is controlled over time, and secondary markets have enough liquidity for exits. The first generation nailed liquidity for a short window, then failed on supply control and long-term utility. The second generation is trying to flip that script, pushing toward revenue from spenders instead of emissions to speculators.
Investors look for a clear answer to one brutal question: “If token prices go to zero, does this game still make money?” If the business survives that scenario, the token is a growth amplifier, not the core engine. If the business falls apart without token appreciation, then the token is the product, and that product looks very close to a Ponzi. The trend is not fully clear yet, but the direction is moving toward more conservative token supply, more off-chain monetization, and simpler reward structures that can be modeled in a spreadsheet without magic.
Web3 game founders now sit at a crossroads. They can chase short-term token hype and fast TVL, or they can build slow compounding businesses with normal player LTV and predictable revenue. The market reward for each path is changing. Token casinos had a great run, but regulators, exchanges, and players are treating them with more skepticism. Teams that want to raise serious capital in the next cycle will need an economic design that passes a basic Ponzi test and a basic game design test at the same time.
What Went Wrong With First-Generation Web3 Gaming Economies
The first big Web3 gaming wave was driven by play-to-earn. Games sold a dream: “Play a game, earn a token, and the token pays more than your local job.” That pitch converted in markets with weaker currencies and low wages. Axie Infinity in the Philippines is the textbook case.
On paper, this looked like strong product-market fit. DAUs climbed quickly. Token prices spiked. NFT floor prices for in-game assets rose week after week. On-chain metrics made investors happy. In reality, almost all of the demand came from people trying to farm yield, not from people who wanted to play a good game.
“At one point, more than 60 percent of Axie Infinity players were scholars borrowing NFTs to grind tokens for sponsors. That is not a normal gamer profile.”
The fundamental problem: rewards were not funded by long-term revenue. They were funded by hope. New entrants were willing to buy in because they believed later entrants would pay more. When that belief broke, there was no floor.
The main structural issues:
1. **Emission-heavy reward systems**
Many games printed native tokens at high rates to reward early players and stakers. Emissions were seen as user acquisition. The whitepapers often talked about reducing emissions later, but by the time teams reached that stage, inflation had already crushed token prices.
2. **Weak or fake sinks**
Tokens need sinks: real reasons for players to spend and burn them. Cosmetic items, in-game boosts, tournaments, and access passes can all act as sinks. Early games created sinks that were either optional for real gameplay or only locked tokens temporarily without removing them from supply. The supply curve went up, not sideways.
3. **Speculation first, fun second**
Many projects launched tokens and NFTs before shipping a full game loop. Players came for speculation. When the game shipped and felt shallow, there was nothing left to hold them. Investors can forgive janky graphics; they do not forgive retention curves that collapse after week two.
4. **Ponzi-like user acquisition**
Marketing was essentially “join now and farm more tokens than the last cohort.” That is unsustainable by design. If your CAC is embedded in a token that everyone expects to sell quickly, you do not have a stable channel. You have a countdown timer.
“If your business model looks like: 1) sell token, 2) promise yield, 3) hope someone else buys higher, you are closer to a Ponzi than a publisher.”
From a business value perspective, the first generation solved one thing: rapid capital formation. Studios raised tens or hundreds of millions through token sales and NFT drops before they proved retention, ARPPU, or any traditional metric. The hangover is clear: liquid tokens with weak fundamentals make future fundraising harder, not easier.
What Makes a Ponzi vs a Sustainable Web3 Game Economy
Investors do not care about labels; they care about cashflows and risk. Still, the Ponzi question is useful as a filter. A Ponzi scheme traditionally has these traits:
– Promises of high returns with little or no risk
– Returns for existing participants come from new participants
– Little or no underlying productive activity
– Collapse when new inflows slow
A Web3 game does not need to hit all of these points to raise red flags. A few questions help:
Key Economic Questions
1. **Where do returns come from?**
If players or NFT holders expect to “earn,” what is the source? Options:
– Ad revenue
– In-app purchases from spenders
– Licensing or IP deals
– Token emissions without revenue backing
The last one is the fragile one.
2. **What happens when user growth flattens?**
In a normal game, flat user growth can still support stable revenue if whales and core spenders stay. In a play-to-earn loop, flat growth often means the inflow of fresh money dries up, rewards shrink, and players exit.
3. **Is there real demand for in-game goods?**
A skin in Fortnite, a card in Hearthstone, or a champion in League has utility because it changes how you play or how others see you. If your NFT has no clear role in the game loop, then its value depends mostly on speculation.
4. **Does the token represent equity, utility, or yield fantasy?**
Many tokens tried to act like equity (share of the game’s value) without legal rights and like utility (needed to do things) without actual demand. That is a recipe for confusion in secondary markets.
“A sustainable Web3 game should be able to operate profitably with zero token price appreciation. If not, your core product is token speculation, not gameplay.”
For founders, this means your deck needs two separate narratives:
– A game business with old-school metrics: retention cohorts, ARPDAU, LTV, CAC, payback periods.
– A token layer that accelerates user ownership and trading without being the only reason people show up.
If either side is missing, smart capital will hesitate.
Comparing Web2 Free-to-Play and Web3 Play-to-Earn
To see where Web3 gaming is trying to go, it helps to compare the old guard with the new token-centric model.
Business Model Comparison
| Model | Primary Revenue Source | User Incentive | Risk Profile |
|---|---|---|---|
| Web2 Free-to-Play | In-app purchases, ads, sometimes subscriptions | Pay for convenience, cosmetics, progression | Lower regulatory risk, high UA cost |
| Web3 Play-to-Earn (Gen 1) | Token/NFT sales, trading fees | Play to earn tokens, speculate on assets | High token volatility, Ponzi-like growth risk |
| Web3 Hybrid (Emerging) | In-app purchases, NFT sales, trading fees, season passes | Play for fun, own assets, some yield mechanics | Medium token risk, higher design complexity |
Founders who grew up in free-to-play understand one thing very well: whales fund the game. Most revenue comes from a small percentage of players who spend a lot. The design task is clear: keep whales happy without breaking balance and without alienating non-spenders.
Web3 adds a second group: asset flippers. These are not long-term players or whales in the traditional sense. They want volatility and exit liquidity. If your economy caters only to flippers, you get a token casino. If you ignore them, you might leave money on the table.
The next wave of hit Web3 games will likely separate these cohorts more cleanly:
– Spenders buy items, skins, passes.
– Earners grind, but rewards are capped and tied to skill or contribution.
– Flippers trade, but liquidity comes from real player demand, not just yield farming.
Retro Specs: What 2005 Gaming Economies Looked Like
To understand where Web3 might land, it helps to go backward. The mid-2000s gaming market ran on straightforward economics. Buy a box, maybe pay a sub, play. Ownership was fake, but players accepted it.
“In 2005, if you told a gamer their digital sword could be sold on an open market for real cash, they would probably think you were describing an MMO gold farm, not a normal feature.”
Two products from that era show the gap neatly: the Nokia 3310 era mobile game and early iPhone generation mobile games that followed.
Then vs Now: Device & Monetization Context
| Feature | Nokia 3310 Era (circa 2000-2005) | iPhone Generation (2020s, eg iPhone 17 tier) |
|---|---|---|
| Typical Games | Pre-installed (Snake), paid Java games via carrier | Free-to-play, high-fidelity, live service Web2/Web3 hybrids |
| Monetization | One-time purchase via SMS billing or carrier portals | Microtransactions, battle passes, NFTs, tokens |
| Ownership Model | No tradable items; content locked to device | Skins, passes, and sometimes on-chain assets tradable in markets |
| Payment Friction | High; premium SMS, carrier charges, unclear pricing | App stores, wallets, on-ramp services, near-instant checkout |
| Player Expectation | Pay once, play offline | Play free, maybe pay; or earn and trade if on-chain |
In the Nokia era, the business model was simple: sell the game once, maybe upsell a sequel. LTV was short. Data on players was limited. The flywheel between content, metrics, and revenue was weak.
By the time modern smartphones and app stores matured, the model flipped. Microtransactions made it trivial to charge small amounts often. Live ops teams tested events, offers, and content drops. This is exactly the phase Web3 needs to reach: on-chain assets as a normal part of the content funnel, not as a speculative event.
User Reviews from 2005: How Players Saw Value
Real player sentiment from that period sounds almost quaint compared to token chats today:
“I bought this Java game from my carrier store for $2.99. It was fun on the bus, but once I beat it in an hour, I felt a bit ripped off.”
“World of Warcraft’s monthly fee felt high at first, but my guild made it worth it. I do not own my stuff, but the time I spend raiding gives me memories I care about.”
“I bought two copies of the same game because my save was stuck on my friend’s console. I wish I could move my progress or items, but that is just how it is.”
None of these players talk about yield, token prices, or ROI. They talk about value in terms of time and experience. This is the mental model Web3 games have to reconcile with financialized gaming. If user reviews in 2025 sound like DeFi yield forums, then something in the design skewed too far toward finance.
Then vs Now: Economic Design Complexity
Web3 game designers now face a choice that mobile designers in 2005 never saw: do you financialize your entire game, or only small parts of it?
Economic Design Comparison Table
| Aspect | 2005 Era Games | Modern Web3 Games |
|---|---|---|
| Economy Scope | Basic: gold, XP, items; no real-money hooks | Complex: tokens, NFTs, in-game currencies, off-chain soft currency |
| Regulation Concern | Low; mostly consumer protection and ratings | High; securities law, gambling law, consumer protection, AML |
| Data Feedback | Limited server metrics, almost no behavioral segmentation | On-chain data plus in-game telemetry, fine-grained cohort tracking |
| Monetization Tools | Box price, sub fee, simple DLC | Primaries and secondaries for NFTs, token sales, passes, on-chain royalties |
| Economic Risk | Sales volatility tied to title launch success | Market volatility tied to token price and chain conditions |
Back then, a bad economy meant players churned because progression was boring or grindy. Today, a bad Web3 economy can wipe out millions in token value overnight and trigger class action lawsuits and regulatory heat.
For founders and investors, this changes the risk-reward balance. A hit Web3 game might produce strong trading revenue and attachment, but a misstep in token design can kill the whole studio.
Designing Sustainable Web3 Game Economies
To move away from Ponzi-like structures, Web3 game economies need three pillars:
1. Real game-first demand
2. Controlled and transparent supply
3. Predictable, non-reflexive revenue
1. Game-First Demand
The game must stand on its own. That sounds obvious, but many teams still treat tokenomics as the main hook. For a sustainable economy:
– Core loops should be fun without rewards.
– Progression should not depend on selling assets to other players.
– Earn mechanics should reward skill, contribution, or mastery, not just time spent.
Think of tokens and NFTs as upgrades to your existing monetization stack:
– NFTs can be rare skins, unique heroes, or land tiles with cosmetic flair.
– Tokens can act like loyalty points, earned through play and used for entries, discounts, or special events.
If these elements disappear, the game should still be playable and monetizable through more traditional means.
2. Controlled and Transparent Supply
Supply is where most early Web3 games failed. Supply controls demand expectations. If players think you will keep printing items or tokens, they will not pay premium prices.
Good practice looks more like:
– Hard caps on key asset classes (eg limited land, limited hero tiers)
– Clear emission schedules for tokens, tied to measurable milestones
– Real burns, not just staking locks
If you promise a max supply and then exceed it, your credibility is gone. Players will treat future promises as marketing, not policy.
From an investor perspective, the best decks show detailed token schedules, allocation charts, and scenario analysis: “Here is what happens to circulating supply under conservative, moderate, and aggressive user growth.” That helps separate thought-out designs from wishful math.
3. Predictable Revenue
Web3 can learn a lot from subscription MMOs and battle passes. These models created more stable, forecastable revenue:
– Season passes create a recurring content subscription.
– Cosmetic stores tap into status and creativity.
– Tournaments and premium queues can charge for access.
Web3 adds two extra revenue lines:
– Primary sales of NFTs or token drops
– Secondary market fees
The smart move is to treat the primary sales as a one-time boost, not the core business. Secondary fees and in-app purchases are more stable, but only if the game retains players over time. Token volatility hurts retention, so designs that depend on constant price appreciation will fight against stable revenue.
Where the ROI Actually Lives for Web3 Gaming
From a pure business view, Web3 gaming ROI should not come from wild token swings. It should come from:
– Lower churn among high-value players who like real ownership
– New revenue lines from secondary markets
– Marketing reach from on-chain communities that act as distribution
The market is still feeling out which of these are real vs theoretical.
ROI Drivers for Founders
1. **Higher ARPPU through asset ownership**
Some players will pay more if their purchases can be resold. They treat skins or characters as assets, not pure spend. If their risk of total loss is smaller, they might commit more capital upfront.
2. **Lower CAC through aligned communities**
Token holders and NFT collectors often act as promoters. They push content, bring in friends, and run guilds. This can reduce paid marketing needs. The catch: if their main motive is exit liquidity, they can also turn negative fast when token prices drop.
3. **Longer content tail**
User-generated content (UGC) combined with NFTs can extend a game’s relevance. Modders, creators, and guild leaders can earn from their work. This can reduce content costs at scale, though the tools and marketplace need careful design.
ROI Drivers for Investors
Investors evaluate:
– Equity value of the studio and IP
– Token value, if they hold it
– NFT value, if there are key collections
The cleanest structure lets equity holders win from both primary and secondary revenue, while token holders get utility and certain fee shares that do not cross into securities territory. In practice, many deals are messy. The next generation of funds will likely push for more standardized, lower-risk token terms.
Regulation, Exchanges, and the Shrinking Space for Ponzi-Like Games
Regulators around the world are watching Web3 closely. When a game promises yield or “guaranteed” returns, it looks a lot like an unregistered investment product. Centralized exchanges are also more cautious about listing pure play-to-earn tokens with weak fundamentals.
This pressure compresses the room for Ponzi-like games to run large cycles. The easy era of raising nine figures off a whitepaper and NFT presale is over. That is bad news for short-term speculators, but good news for real builders.
Founders now need to:
– Be careful with language around “earning” and “returns”
– Separate game rewards from passive yield promises
– Show sustainable revenue projections that do not rely on token inflation
If your pitch requires the token to 10x just to reach breakeven, serious funds will walk.
What Sustainable Web3 Gaming Might Look Like in 5 Years
Looking ahead, the likely shape of successful Web3 games is closer to “Web2.5” than full-on token casinos.
Traits you can expect:
– Free-to-play onboarding with optional on-chain upgrades
– Most casual players never touch a wallet; power users connect when they want to trade or invest more deeply
– Tokens, if they exist, act like loyalty points plus governance spice, not pure yield farms
– NFTs are mostly cosmetic or social, with a smaller class tied to competitive or creator functions
From a revenue standpoint, a healthy P&L might look like:
– 50-70 percent from in-app purchases and passes
– 20-40 percent from primary and secondary NFT markets
– 0-10 percent from token-related activities that are carefully structured
This looks more like a normal games business with extra legs, not a hedge fund running on top of an MMO.
Lessons for Founders: Avoiding Ponzi Traps While Keeping Web3 Upside
Pulling this all together, the trade-offs are clear.
If you lean too far into token speculation:
– You raise fast.
– You grow fast on paper.
– You crash faster when new money slows.
– You carry higher legal risk.
If you ignore tokens completely:
– You avoid tech and regulatory overhead.
– You look safer to traditional publishers.
– You miss some of the new monetization and community tools that Web3 makes possible.
The middle path has more work but better odds of long-term survival:
– Design a fun core game with Web2 metrics that make sense on their own.
– Add on-chain assets that players want to hold, trade, and show off.
– Keep token exposure small, clear, and secondary to the product.
– Model your economy assuming flat token prices and only mild secondary activity.
The market is slowly rewarding this approach. Big publishers are experimenting with NFTs framed as digital collectibles, not yield tokens. Web3-native studios are hiring veterans from Riot, Supercell, and Blizzard to fix game feel before tokenomics.
The trend is not perfectly clear yet, but one thing is: the projects that survive will be the ones where someone can play for six months, never touch a token, and still feel like they got their money’s worth. If that condition is true, then the economics has a shot at being sustainable instead of Ponzi-shaped.