GameFi stands as the combination of the words “game” and “finance”
In simple terms #GameFi brings together blockchain technology, including NFTs, cryptocurrencies and decentralization, and advanced gaming mechanics to create virtual environments where players can generate income from simply playing and enjoying their gaming experience. Typically, players are rewarded for completing game-related tasks like creating original content, mining resources, progressing through different levels and battling other gamers.
GameFi can be implemented using various models like Play2Earn, Play&Earn, Free2Own etc. P2E was pioneered by Axie Infinity, to make such a model sustainable we need proper number faucets and sinks for the in game tokens.
Unlike traditional video games, GameFi allows players to not only earn and collect in-platform assets, but also transfer them across different games and platforms. In doing so, gamers can also monetize their experience by selling or trading their items. In other words, beyond the economic rewards, GameFi presents the players with the chance of owning digital assets that can be part of transactions across different platforms.
How Does GameFi Work?
Almost all blockchain-based games are accompanied by a corresponding in-game currency, marketplace, and token economy. Unlike traditional gaming, there is no centralised authority in control. Instead, GameFi projects are usually managed and governed by the community, with players even able to participate in decision-making.
While the mechanics and economics of individual GameFi projects may differ, there are a few commonalities:
- Blockchain Technology: GameFi projects run on a blockchain’s distributed ledger. This keeps track of player ownership while ensuring that all transactions are transparent.
- Play-to-Earn Business Model: In contrast to traditional gaming, where users play to win, GameFi projects adopt a P2E model. These games incentivise players to play and progress within the game by offering rewards that have measurable value outside of the game. These usually come in the form of in-game cryptocurrencies or NFTs.
- Asset Ownership: In traditional gaming, in-game purchases are non-transferable investments locked within a single game. With P2E, players own their in-game tokenised assets. In most examples, they can exchange them for cryptocurrencies and, ultimately, fiat. Assets can range from a suit of armour to a plot of virtual land, which are tokenised on the blockchain.
- DeFi Solutions: Many GameFi projects may also include decentralised finance (DeFi) elements, such as yield farming, liquidity mining, and staking. These provide additional avenues for players to increase their token assets.
The Future of GameFi
With an estimated 3.24 billion gamers across the globe, there is a huge opportunity for growth in the emerging GameFi sector. In 2021 alone, investors poured over US$3.6 billion into crypto gaming startups, making 2021 a landmark year for the burgeoning industry.
For many industry commentators, gaming represents the most likely route to widespread blockchain adoption. This is an opinion supported by a DappRadar x BGA Games report, which found that blockchain games attracted 1.22 million unique active wallets (UAW) in March 2022.
With that said, there is resistance to blockchain-based games from the gaming community — particularly when it comes to game mechanics and NFTs.