Blockchain Gaming Defies Web3 Downturn as DeFi Faces October Setbacks

In October 2025, the broader Web3 ecosystem saw a notable decline in activity, with daily unique active wallets dropping 3% to 16 million, according to DappRadar's industry report. This slowdown reflected global economic and political challenges, including massive layoffs and the ongoing US government shutdown, which fueled uncertainty across financial sectors.

Despite this, blockchain gaming emerged as the sole growth sector, dominating 27.9% of the market—the highest level in 2025—and maintaining over 4.5 million daily active wallets, a 1% month-over-month increase. Key games like World of Dypians and Pixudi drove engagement, with the former reaching 135 million wallets in Q3. However, the sector had seen a longer-term cooling trend, with gaming wallets dipping 4.4% quarter-over-quarter to 4.66 million in Q3, though this was an improvement from 4.44 million in Q3 2024.

In contrast, other Web3 sectors struggled. Social dApps experienced a 7% monthly drop in wallets, while artificial intelligence dApps declined 4%. DeFi faced significant headwinds, with daily active wallets falling 5% to 2.9 million and total value locked (TVL) dropping 6.3% to $221 billion, before plummeting further to $193 billion in early November. A market crash on October 10 led to roughly $20 billion in leveraged position liquidations, exacerbated by the $93 million loss at Stream Finance and an additional $284 million in exposure from similar DeFi protocols.

Regulatory pressure intensified, with Senate Democrats proposing know-your-customer (KYC) requirements for non-custodial wallets, prompting a coalition including Aave, Uniswap, Lido, Curve, and The Graph to form the Ethereum Protocol Advocacy Alliance to lobby for open-access blockchain networks. Meanwhile, NFTs saw a surge, with trading volume rising 30% to $546 million and 10.1 million sales—the highest monthly count in 2025—driven by utility-backed assets and gaming integrations. Leading dApps included Raydium, Pump.fun, and Jupiter, with Solana, BNB Chain, and Polygon as key blockchain contributors.