Web3 gaming surges while DeFi faces October setbacks

Web3 games experienced an uptick in gaming and user activity in October, while DeFi struggled with a month marked by capital losses, protocol stress, and regulatory pressure.

New ecosystem data demonstrate that gaming is becoming the dominant force on-chain, striking a positive note as stalled DeFi projects have been unable to cope with an increasingly turbulent market and talks constrict around key jurisdictions.

The contrast also highlights a divide emerging within Web3, with entertainment-focused apps gaining traction alongside financial protocols that are under attack from both external and internal interests.

Web3 gaming gains momentum

Blockchain gaming also made inroads, despite a slight decline in Web3 use overall. However, the number of daily active wallets on Web3’s networks actually dropped by 3% to approximately 16 million. 

Meanwhile, gaming-based activity as a percentage of total activity increased its share to 27.9%, the highest of the year. These integrations will never stop with gaming, but will also include user onboarding, gameplay experience, and the expanding reach of multiple blockchain networks.

Solana, BNB Chain, and Polygon were the main contributors to this activity, with notable projects including Raydium and Pump.fun, JupiterExchange, OKX Dex, and PancakeSwap v2. These platforms could benefit from social trading, lower trading costs, and increased liquidity.

Trading in NFTs also surged. Overall NFT volume rose 30% to $546 million, with more than 10.1 million transactions — the most in any month in 2025. Gaming-related digital assets and utility-backed NFTs, integrated with gaming, loyalty programs, and virtual identity customization, were among the biggest volume drivers. This transition occurred from the world of speculative collectibles to that of active and interactive digital artifacts.

DeFi absorbs losses and responds

October was also a bad month for DeFi, which lost 6.3% of its TVL last month to end the period with $221 billion before tumbling further to start November at $193 billion. The drop occurred following a severe market crash on October 10, which led to massive liquidations. Roughly $20 billion in leveraged positions on large exchanges and lending platforms were erased within days.

The case itself worsened as the DeFi protocol Stream Finance lost $93 million. The episode has highlighted wider systemic risks that may be posed by stablecoins and lending against collateral. Analysts later identified at least $284 million more in exposure from similar themes in other DeFisystems.

Regulatory pressure compounded the stress. A group of Senate Democrats pleaded for non-custodial wallets to implement know-your-customer (KYC) requirements. News of the proposal was met with mixed reactions, and industry players speculated that requirements to identify customers who use self-custodied wallets could hinder property-like ownership among users and innovation in favor of less stringent rules across a more accommodating regulatory landscape.

Ethereum companies, in response, started banding together to lobby. A coalition of projects, including Aave, Uniswap, Lido, Curve, and The Graph, has formed the Ethereum Protocol Advocacy Alliance. The coalition advocates that decentralized infrastructure should be included in the conversation when discussing regulations and that blockchain networks should remain open-access.

Elsewhere, Oracle network RedStone has introduced a new platform called Credora, aiming to offer consistent risk and credit scores across decentralized finance (DeFi) lending markets. The system is designed to make trading more transparent and help reduce systemic risk, especially that inherent in over-leveraged credit markets.

Sign up to Bybit and start trading with $30,050 in welcome gifts