<p>Luke Barwikowski, founder of Pixels, one of the few Web3 games to hit one million daily active users, published a detailed post-mortem on Jan. 21 that explains why Web3 gaming's foundational assumptions were wrong.</p><p><a href="https://x.com/whatslukedoing/status/2014069314865823841">According to Barwikowski</a>, asset ownership cannibalized revenue for games with play-to-earn mechanics, attracting bot farms instead of players. Communities cared more about token prices than the actual game, while government votes involving players accelerated bad decisions.</p><div class="raw-html-embed">
        
    <blockquote class="twitter-tweet" data-theme="dark" data-dnt="true" align="center">
                
        <p lang="en" dir="ltr">
                        I've been sitting on this for a while, it has so much alpha and unique insights from our team that I honestly didn't think I should release it as I'm likely helping competitors or future competitors.
                        
            <br>
                        
            <br>
                        But I want the space to be better, so here it is.
                    
        </p>
                — Luke Barwikowski 🚜 (@whatslukedoing) <a href="https://twitter.com/whatslukedoing/status/2014069763954053356?ref_src=twsrc%5Etfw">January 21, 2026</a>
            
    </blockquote>
        <script async="" src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><h2>What Went Wrong for Play-to-Earn Games</h2><p>Play-to-earn games had a simple pitch. Players have always assigned real value to digital items. RuneScape, Diablo, andCS2 skins all had secondary markets mainly because users wanted liquidity.</p><p>Web3 games are technically built upon this formula with the mindset of “if you earn an item, you should be able to trade it freely. If you quit, you can sell what you earned.”</p><p>The Web3 gaming philosophy worked wonderfully at the beginning in 2021, but cracks began to show later when it was realised that game companies needed long-term revenue streams.</p><figure class="image image_resized" style="width:52.4%;"><img src="https://assets.funjible.games/Sleepagotchi_pixels_partnership_2_414923f801.jpg" alt="Sleepagotchi Pixels partnership screenshot" srcset="https://assets.funjible.games/Sleepagotchi_pixels_partnership_2_414923f801.jpg 226w, https://assets.funjible.games/Sleepagotchi_pixels_partnership_2_414923f801.jpg 500w" sizes="100vw"></figure><p>Barwikowski identifies the revenue problem with “If future players can buy everything they want from existing players, then future spending gets redirected away from the game developer.” Overall, asset ownership is and was a valuable idea, but the strongest form of it directly conflicts with game monetization.</p><p>Pixel founder also evaluated&nbsp;<a href="https://funjible.games/games/Axie-infinity">Axie Infinity</a>’s case, stating that the token incentives created a new class of gamers who played primarily to earn, not for fun. Despite achieving great success, Axie’s dual-token system eventually collapsed, leading to a significant drop in earnings. With reduced earning potential, Axie also lost a considerable number of players.</p><p>However, the Web3 gaming industry consistently tried to keep up and innovate as well.&nbsp;<a href="https://funjible.games/games/Pixels">Pixels</a>, for example, put its own spin on the monetization formula and rolled out with a play-to-earn system. This allowed Pixels to grow from 1,000 daily users to 100,000 daily users with essentially zero paid advertising.</p><h2>The Bot Farm Problem of Web3 Games</h2><figure class="image image_resized" style="width:53.22%;"><img src="https://assets.funjible.games/pixels_chapter_3_2_6583ab181a.jpg" alt="Pixels Chapter 3 screenshot" srcset="https://assets.funjible.games/pixels_chapter_3_2_6583ab181a.jpg 226w, https://assets.funjible.games/pixels_chapter_3_2_6583ab181a.jpg 500w" sizes="100vw"></figure><p>Pixels also tracked a metric called Return on Reward Spend. This would closely follow every dollar in rewards distributed and how much revenue came back into the game. Early numbers showed $1 out brought back $0.20-$0.30. While this is nowhere close to ideal, Pixels was drawing users at scale at the time, so the ends justified the means until bots came into the picture.</p><p>Barwikowski explains that traditional anti-fraud tools no longer work. Pixels experimented with fingerprinting, IP detection, and CAPTCHA, but none of them was sufficient against modern bot farms using anti-detect browsers, VPNs, and spoofed fingerprints. Pixels eventually found an optimal response by tracking user intent, but the process had already caused damage in its economy.</p><h2>What Comes Next</h2><p>Barwikowski also noted that when real money enters a game's core loop, player psychology fundamentally changes. Players stop asking if something is fun and start asking if they're making money. Additionally, Pixels discovered through ad testing that mentioning "crypto" performed 5-10x worse than framing rewards as regular real-money incentives.</p><p>Pixels is now launching two products: Chubkins, a Web2-first mobile virtual pet game, and Stacked, a B2B2C platform that helps game studios deploy rewarded play systems while handling fraud prevention and reward optimization.</p><p>Barwikowski believes that the next era of gaming will be less ideological and more operational, which may also shape&nbsp;<a href="https://funjible.games/news/funjible-games-report-2025-crypto-gaming-trends">crypto gaming trends</a> moving forward.</p><h2>Our Take</h2><p>We believe that crypto gaming happened to learn the hard lessons early as opposed to failing altogether. The Web3 gaming industry is already correcting its course too, with next generation focusing on gameplay first, and rewards second.</p><p>Instead of making crypto the selling point, developers are building genuinely engaging experiences where blockchain infrastructure runs quietly in the background, like <a href="https://funjible.games/games/off-the-grid">Off the Grid</a>.</p><p>Blockchains that prioritise gaming still organize competitions, like <a href="https://funjible.games/news/avalanche-launches-build-games-with-1m-prize-pool">Avalanche's Build Games</a>. Similar initiatives are likely to support sustainable growth and also real player engagement in the long run.</p><p>We believe that the next wave of crypto gaming will present itself simply as good games that take their in-game economies to the next level with blockchain technologies, and that would be a well-suited evolution for the entire GameFi industry.</p><div class="raw-html-embed"><iframe width="560" height="315" src="https://www.youtube.com/embed/NAy_sPYKcps?si=O7obA21bcRnr52FF" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen=""></iframe></div>

Pixels

Pixels is an open-ended world integrating 50+ NFT collections where players can create their own game worlds and adventure in those by other players.

Pixels Founder Says Web3 Gaming's Core Values Were Wrong

Pixels

Esports World Cup 2026 is Back with $75M Total Prize Pool

Team Secret Join Checkmate Eco with NFTs & CHECK Integration