GameFi – What’s that?

Blockchain games have become one of the hottest blockchain-based projects in 2021. Among them, the transaction volume of blockchain games such as Axie Infinity, Upland, etc. has set a record of more than $500 million in one month, which has attracted attention from all walks of life. Behind this wave is the GameFi (Game Finance) concept which has been a strong catalyst for bullish momentum. 

So what exactly is GameFi? What does it mean to attract blockchain users? How do users join this? We will unveil the mystery in this article.

What is GameFi?

Widely considered as the inevitable result of the development of Decentralised Finance (DeFi) and Non-Fungible Tokens (NFTs), this concept introduces elements of DeFi and NFTs into regular games to allow participating users to enjoy the thrill of the game, and at the same time, obtain and preserve real wealth through token rewards or NFT game equipments. This is undoubtedly a huge disruption compared to the traditional game player who pays the game studio to play the game, or even makes further in-game microtransactions to enhance his experience.

GameFi also gives NFTs more practical value through gamification. For example, NFT items are no longer just commodities to be sold on the NFT trading platform, but can also be directly traded on the in-game market. As long as all operations in the game process are completed on the chain, the assets of the game belong strictly to the user through the rules of smart contracts, and the platform has no right to interfere. Therefore, the convenience and longevity of this process far exceeds the experience in traditional games that leave users with nothing once the game servers are shut down forever.

GameFi elements can be integrated into the entire process of game development, from community fundraising through tokens or project NFTs, to monetization of in-game grinding via mined tokens and NFT game equipment. This greatly enhances the immersion, interaction and experience of players. At present, established projects such as Axie Infinity, Crabada, Crypto Raiders, DeFi Kingdoms, Upland and many more have been making waves in exploring the boundaries of GameFi. 

Games on the Blockchain and Earn while Playing

The biggest highlight of GameFi is P2E (Play-to-Earn), which enables players to earn a living and support themselves financially through carefully crafted tokenomics!

P2E allows users to mine and collect NFTs or cryptocurrencies that can be sold on the market in the game. Every game user can get token rewards or in-game items as long as they participate regularly, and sell them for income. In fact, many players have earned extra pocket money or even consider P2E games as their entire income source. However, P2E involves considerable risks. Users first need to invest money to purchase characters and items before they can participate in the game.

Blockchain helps ensure the collectability of these items and creates an efficient digital economy. Blockchain technology and NFTs can create digital products that cannot be replicated, giving rise to the concept of digital scarcity. To cash out, users need to deposit their NFTs or cryptocurrencies into the NFT market or a trusted exchange like MEXC to exchange them for stablecoins. After the sale of NFTs or tokens is completed, gamers can then exchange stablecoins to the desired fiat currency for subsequent cashing out. In addition, using stablecoins with cryptocurrency-based debit or credit cards can also solve this problem.

Practical implications of GameFi

Established Gamefi games have a complete economic system, a huge user base and real-world financial benefits. To a certain extent, GameFi “mining” and financial rewards have helped to relieve the economic pressure of people who have been affected by the pandemic by providing a source of income. Players can earn between $200 and $1000 per month by mining SLP in Axie Infinity, providing a low-risk way to generate income compared to trading NFTs or cryptocurrencies. This mining-plus-gaming entertainment has proven to be popular around the world, with Axie Infinity even becoming an alternative to unemployment benefits in the Philippines. As P2E continues to grow, GameFi will also become a strong catalyst for blockchain user growth.

However, the user experience of GameFi is bottlenecked by the limitations of blockchain network performance and transaction costs. With DeFi’s increasingly consolidated technical foundation, game developers have to make careful decisions to choose blockchains that can support cheap transactions and offer seamless user experience, such as Avalanche and Polygon.

GameFi and the Metaverse

2021 was the year of the explosion of the Metaverse and GameFi, but the current Metaverse comprises a collection of virtual reality ecosystems based on “play and earn” games. Maybe one day, people will collect, trade, manage money, save, and shop through games, and individuals will be able to create, play and socialize in the Metaverse. Current notable digital world games include Ember Sword (12,000 virtual plots sold and over $400 million generated), Treeverse ($71.8 million market cap), Somnium Space, CryptoVoxels and My Neighbour Alice, and it will be exciting to see how far future developments can go.

All in all, GameFi solves the fragmentation of multiple parties in traditional games, reshaping a shared value network world in the metaverse.

Summary

GameFi provides a seamless user experience for players, breaking through the barriers of traditional games to create new paradigms. Some particular trends and characteristics that bring disruption to the gaming industry are: Allowing players in the game to fully own their game characters, assets, and props, Governance and participation in the development direction of the game through token-led voting, and Participating in the operation and maintenance of blockchain-based games through its decentralised structure. These traits incentivise decision making and greater participation in the GameFi ecosystem, rewarding early players who help contribute to the success of the games.

Of course, GameFi still has its own shortcomings that need to be overcome, such as the bottleneck issue of underlying blockchain infrastructure. For greatest onboarding of users, the blockchain game should ideally be accessible with just the click of a link, without having to download anything. However, current games are limited by the overall TPS speed of the blockchain, and players may not be able to enjoy a smooth game experience when interacting directly with the chain. Moreover, the cost of getting started may be too much, restricting access for players without the financial ability, as games like Axie Infinity even require players to purchase 3 pets. In addition, if the player intends to start playing GameFi, he must have sufficient understanding of blockchain. It remains to be seen if GameFi can successfully reach the masses, but the future is bright.