Web3 Games Face an Upsurge in Closures – Axie Infinity Co‑Creator Warns More Studios Could ‘Die’ in 2026
By Ciaran Lyons
January 31 2026 – Cointelegraph Magazine
Overview
The crypto‑gaming sector is entering a painful correction phase. Jeff “JiHoz” Zirlin, co‑creator of Axie Infinity and co‑founder of the Ronin Network, told influencer Yellow Panther that 2026 is likely to see a wave of studio shutdowns. His warning follows a string of high‑profile game closures in 2025 and a broader cash‑flow crunch reported by developers across the industry.
Recent Shutdowns Highlight a Trend
During 2025, several blockchain‑based titles ceased operations, including:
- Ember Sword (Ethereum) – an open‑world RPG that struggled to retain a sustainable player base.
- Nyan Heroes (Solana) – a shooter that failed to achieve critical mass amid a shrinking Solana ecosystem.
- Deadrop – an extraction‑style shooter that could not secure enough ongoing revenue.
- Pirate Nation – a pirate‑themed role‑playing game that folded after an unsuccessful token‑omics redesign.
Yield Guild Games co‑founder Gabby Dizon echoed the sentiment, noting that “shipping a successful game is hard; games shut down all the time.” The cumulative effect of these failures underscores the fragility of many Web3 projects that depend heavily on speculative token economies and short‑term hype.
Funding Shortages Compound the Problem
A recent survey by the Blockchain Gaming Alliance (BGA) revealed that 32.6 % of developers identified insufficient cash reserves as the primary obstacle to continued operation. With venture capital allocations to crypto projects tightening and token prices remaining volatile, many studios are seeing their runways shrink dramatically.
Zirlin criticized a prevailing “it won’t affect us” mindset among developers, arguing that complacency about market cycles leaves teams unprepared for downturns. He added that the risk is not confined to a single blockchain: “Games on other chains will also feel the pressure, as will those built on Ronin.”
Axie Infinity’s Strategic Pivot
Reflecting on the past year, Zirlin admitted that Axie Infinity adopted a “too conservative” approach in 2025. In an X post he promised that 2026 will see the project take “much larger risks” in an effort to recapture the excitement that propelled crypto gaming to its 2021 peak. While specifics remain under wraps, the pledge signals a shift from incremental updates to bolder product experiments, token‑omics redesigns, or new cross‑chain integrations.
Broader Industry Signals
The challenges facing Web3 games are mirrored in other parts of the ecosystem:
- Traditional sports IPs – NBA legend Scottie Pippen is launching a Fortnite‑style title, Don’t Drop The Ball, that weaves subtle Bitcoin references into its design, illustrating an attempt to blend mainstream gaming appeal with crypto branding.
- Golf meets blockchain – The PGA Tour announced a partnership with SKALE on Base for the “PGA Rise” experience, a free‑to‑play golf simulation that lets players purchase in‑game assets with either crypto or fiat, hinting at a hybrid model that may offer more resilience against market swings.
These initiatives suggest that established brands are experimenting with crypto elements while trying to avoid the pitfalls that have plagued pure‑play Web3 studios.
Analysis
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Economic Realities Outpace Hype – The recent wave of closures demonstrates that token‑driven reward models cannot alone sustain long‑term player engagement. When token values dip, revenue streams falter, and studios that lack diversified income (e.g., fiat purchases, advertising, or traditional game sales) quickly feel the strain.
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Funding Environment Is Tightening – Institutional capital for crypto gaming has retreated as regulators scrutinize digital assets and macro‑economic conditions remain uncertain. Projects that have not secured multi‑year financing are now racing against dwindling token reserves.
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Strategic Diversification May Be Key – The emergence of hybrid titles like PGA Rise and Pippen’s Bitcoin‑themed game indicates a market correction toward models that blend crypto incentives with conventional game design. Studios that can attract non‑crypto players while retaining a token economy may achieve better runway stability.
- Risk Appetite Is Shifting – Zirlin’s admission that Axie Infinity will pursue larger risks could signal a broader industry move away from ultra‑conservative stewardship toward experimentation with novel mechanics, cross‑chain assets, or new monetisation tiers. The success of such bets will likely set a benchmark for other projects watching the sector’s recovery.
Key Takeaways
- More closures are expected – Industry leaders anticipate a continued attrition of Web3 studios in 2026 unless funding and business‑model fundamentals improve.
- Cash flow is the dominant challenge – Over a third of developers cite liquidity shortages as the main barrier to survival.
- Complacency on market cycles is dangerous – Ignoring downturns or assuming token price stability can leave studios unprepared for rapid shifts.
- Hybrid and diversified models are gaining traction – Projects that blend crypto mechanics with traditional gaming revenue streams may weather volatility better.
- Axie Infinity’s upcoming “larger risks” will be a litmus test – How the flagship Ronin title navigates 2026 could influence investor confidence and set new standards for risk‑taking in the space.
Outlook
The Web3 gaming landscape stands at a crossroads. While the sector’s early years were defined by rapid growth and speculative enthusiasm, 2026 is shaping up to be a test of resilience. Studios that secure robust financing, adopt sustainable tokenomics, and broaden their appeal beyond crypto‑only audiences will be best positioned to survive—and possibly thrive—in the coming year.
Cointelegraph Magazine continues to monitor developments across the blockchain gaming ecosystem. For deeper insight into funding trends and emerging hybrid models, stay tuned to our upcoming analyses.
Source: https://cointelegraph.com/magazine/axie-infinity-games-scottie-pippen-ball-foundation-psa-skale-labs-web3-gamer/?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
