GameFi Introduction

GameFi is a disruptive technology that is rocking the gaming industry. However, just a handful of people understand the concept. Therefore in this article, we will answer the major question, “what is GameFi?”

We will look at the core aspects of this concept, like its relationships with other components of the blockchain industry. Also, we will see its future, how you can make money from it, and its pros and cons.

What Is GameFi?

It is a combination of Gaming and DeFi. It is the junction where blockchain elements like crypto, NFTs, and P2E (play to earn) gaming models meet. This meeting point shows up in two major ways;

• Gaming with DeFi elements.
• DeFi platforms with game-style tools.

Gaming with DeFi elements allows gamers to earn money while playing games. On the other hand, DeFi with gaming tools allows users to have fun while making financial transactions. DeFi platforms use gaming tools like challenges, rewards, avatars, badges, points, and scores.

The History of Gaming

Before now, we just had two gaming models, fee-to-play and pay-to-play. Today, we have a new gaming model called the play-to-earn model. Let’s look briefly at how the gaming industry has evolved.

Pay-to-Play Model

This gaming model started in the 70s with arcade games. The arcade games allowed users to pay before playing any game. As the name sounds, people made money by charging others for playing games. Players usually pay a small fee to enjoy rounds of gaming. The venture was very profitable to game owners.

As time went on, gaming developers started looking for better revenue models. This need was the birth of gaming consoles. So, gamers can now pay a huge one-time fee to acquire consoles and play whenever they want. Examples of these consoles were the Mario brothers and FIFA.

Later on, developers introduced subscription gaming. People will now pay a little subscription fee to access gaming platforms. Some examples of these games were World of Warcraft, Tibia, and Runescape. Furthermore, these games cane with extension packs. So, users can get in-game elements by spending a little more money to unlock premium features.

Free-to-Play Games (F2P)

This gaming model allows users to access every part of the game and premium features for free. However, the platform encourages them to buy enhancements like lives, digital currency, long playtime, etc. A very good example of this gaming model was Apple’s Angry Bird in 2008. Other examples are Temple Run, DOTA 2, Team Fortress, and Plants. With these gaming models and pay-to-play, it was almost difficult for players to earn money.

Play-to-Earn (P2E) 

This model was the beginning of GameFi. In 2017, Ethereum launched the first P2E game, CryptoKitties. After that, we saw several decentralized games launched on the blockchain network. For example, Pepe Farm, Ether Cartel, and Ether Shrimp Farm. These games provided gamers with the opportunity to earn from playing them.

However, until 2020, we did not see the P2E gaming model in the spotlight. The pandemic gave the P2E gaming model a tipping point. People locked in their homes earned rewards as digital tokens for playing games. Primarily, the publishers reward players with cryptocurrencies and NFTs for spending time playing games. Users can trade these items on third-party exchanges for fiat money. An example of these games is Axie Infinity.

How Does GameFi Work?

All games developed on blockchain technology have in-game digital currencies, a token economy, and a marketplace. Gamefi gaming platforms have no central authority controlling the game. Primarily, the games are governed and managed by the community. Therefore, every player is part of the decision-making body of the game.

Here are the features and how it works.

• It works on the blockchain’s shared ledger. So, players can track their assets and make sure that transactions are transparent.
• It rewards players with items that have value inside and outside the game. For example, cryptocurrencies and NFTs.
• The players can transfer their reward assets and even trade them for fiat money.
• Most GameFi games have inbuilt DeFi elements like staking, liquidity mining, and yield farming. So, players can earn passive income while increasing their assets in the game.

Play-To-Earn Games

Axie Infinity

Axie Infinity is a P2E NFT-based video game. The game is an online game developed by Sky Mavis studio. The platform allows users to play and get rewarded with NFTs. The game has over 2 million daily active players.

Decentraland

Decentraland is a P2E game developed by Esteban Ordano and Ariel Meilich. It is a virtual world built on the Ethereum blockchain. Players can buy plots of NFTs as plots of land using MANA. MANA is the in-game crypto, and they can sell their NFTs to other players in the game.

The Sandbox

This P2E gaming platform is a virtual metaverse. In this metaverse, players can own assets and build and use their virtual experiences. Furthermore, the platform gives users tools to create their 3D experiences. Then the users can rent out their works, sell, or exchange them for tokens. The in-game cryptocurrency of Sandbox is SAND.

Game of Silks

Silks is a metaverse horse racing game built on the blockchain. Every digital Silk Horse is an NFT replica of horses in the real world. So, whenever a breed of horse wins a race in the real world, the owner of the horse NFT in Silks will receive rewards in the game. The reward is the in-game currency STT. In addition, players can own assets like Land, Stables, and Avatars in the game. These items are tradable within the game. Lastly, players can stake their STT for passive rewards.

CryptoBlades

This game runs on the Binance Smart Chain, and Riveted Games developed it. The game rewards users with SKILL tokens for taking part in raids and defeating enemies. Also, players can bet their SKILL tokens to get more reward tokens or trade their in-game items in a marketplace.

How to Get Started With GameFi

Open a Crypto Wallet

Before storing crypto and NFTs or making transactions in GameFi, you must have a crypto wallet. There are many known wallets in the crypto ecosystem, like Binance, MetaMask, Trust Wallet, etc. However, some P2E games will demand some specific wallets. To be sure about the wallet to use, visit the platform’s real website.

Link the Wallet to the Game

While regular games require users to input passwords and usernames, the case is different for P2E games. The users are required to connect with their wallets. Furthermore, you can use any wallet or a special wallet if the platform demands that.

Fund Your Wallet

Before you can buy items in-game, you will need to fund your wallets with crypto. For example, the came can require that you buy starter items, its native currency, or characters.

What Is GameFi’s Relationship With Metaverse?

There has been a lot of emphasis on how vital the P2E gaming model is global. It is one way we can decipher the metaverse. It is a portal from which we can view the metaverse. Generally, the metaverse has a root in the gaming industry. So through GameFi, the metaverse will affect how we socialize, interact and carry out financial transactions.

What Is GameFi’s Relationship With NFTs?

NFTs are the in-game rewards that users get for participating in GameFi activities. Also, most platforms have their in-game elements like avatars, lands, and weapons as NFTS. So, through GameFi, many players can establish their ownership of digital assets. Moreover, they can trade them for money or crypto on other third-party exchanges.

What Is GameFi’s Relationship With Blockchain?

GameFi, being a combo of DeFi and gaming, runs on blockchain. Its first platform, CryptoKitties, ran on the Ethereum blockchain. So, the blockchain is the basis for most P2E games. It allows users to track their NFT ownership and enjoy the transparency of transactions.

What Is GameFi’s Relationship With DeFi?

Some platforms can also have DeFi features. For example, staking, yield farming, and liquidity mining. So, like DeFi platforms, players stake their in-game reward tokens to earn passively, access new levels and unlock special items.

Also, the DeFi elements in GameFi make the platform decentralized. It means that the people in charge of governance and decision-making are community members. So, as a player, you can vote for updates in the future via DAO. Players can participate in the voting system by staking their in-game crypto. The more they stake, the more power to vote and influence the game development.

How to Invest in GameFi?

Investing in GameFi means buying in-game digital currencies. However, its currencies are not as easy to buy as other digital currencies. They may not even be available on some exchanges. For example. Coinbase. So, here are steps to easily buy or invest.

• Go to CoinMarketCap to see where you can purchase your chosen GameFi currency. CoinMarketCap will show you their prices and how they perform in the market.
• Select the platform you would like to buy from based on the options provided by CoinMarketCap.
• Go to the platform, register, or open an account if you will need to do that. Then, go to its marketplace and buy the currency using fiat. Alternatively, you can swap other cryptos for it if you wish

How to Make Money From GameFi?

The major unique feature of P2e games is their model. These games are play-to-earn games. So, they are not like regular free-to-play games or pay-to-play games. The model allows users to buy in-game items like skins, weapons, etc. And these items have value even outside the games. Also, users can earn rewards assets that have real-world value.

These rewards are either NFTs or digital currencies. For example, lands, weapons, badge looks, in-game currencies, and avatars. You can trade your collections on third-party exchange sites and earn fiat money.

So, players can have multiple income streams by selling multiple items in one game or on different platforms. Moreover, players can stake their assets to get more tokens and trade them on third-party exchange sites.

Pros and Cons of GameFi

Pros

• It rewards players for playing games and having fun.
• It solves a major economic problem which is unemployment.
• Users can hold their in-game currencies and NFTs and sell them for higher prices later.
• It provides opportunities for multiple income streams.
• GameFi games are easy to play.
• Just anyone can make money with an internet-connected device.

Cons

• It has increased the level of Ponzi schemes on the internet.
• It has been a major route for scamming and phishing in the blockchain ecosystem.
• Some platforms still act centralized even when they claim they are decentralized. For example, they can block the tokens of players based on some misconduct.

What Is GameFi’s Future?

GameFi is gaining ground in gaming as an aspect of the blockchain and crypto niche. Currently, this niche is worth over $200 Billion. The rewards it brings into the industry while allowing gamers to have fun have gained serious traction. The ecosystem brings blockchain, DeFi, and gaming technology together. The coming together has made it and blockchain tech more interesting in the last few years.

In the future, P2E games will give gamers more power to utilize their imaginations and recreate experiences. With the combination of games and NFTs in the metaverse, people will have fun creating their in-game experiences in 3D.

As the niche keeps developing, we will see more adoption of the P2E gaming model. Now, more people and individuals are joining P2E games either by buying currencies or playing games to get rewards.

We expect massive and sustainable growth with the heavy influx of people and capital into the niche. Ultimately, it will be a world of unlimited possibilities for everyone.

Conclusion

In conclusion, the gaming industry is evolving, and we are the P2E point. In the future, people will no longer ask, “What is GameFi?” because it will be the gamers’ reality.

In the article, we have answered the major question, “what is GameFi?” Also, we have seen other intricate details of this P2E gaming model. Some of them include its relationship with metaverse, DeFi, blockchain, and NFTs.

Being able to answer fully “what is GameFi?”, and all other details will give you a headstart as a beginner. Finally, this technology is taking the gaming world by storm. So, if you are a game lover, the best time to earn from your passion is now via P2E gaming.

References

What is DeFi? A Beginner’s Guide

What is Metaverse? A Beginner’s Guide

What is NFT? A Beginner’s Guide

Where Is the Future of GameFi?

How to buy GameFi?

The post What Is GameFi? A Beginner’s Guide appeared first on Blockchain Doyen.

Introduction

There are many concepts every crypto beginner needs to know, and one of them is Decentralized Finance (DeFi). The Decentralized Finance system is growing so fast because of its effects on our regular banking systems.

Today, it is normal for people to go into banks to deposit their cash. Also, people go to banks to get loans for various reasons. The bank loan borrowers the cash deposit that other customers make. They attach interest to the loans, get the loan back and keep the interest. After that, they pay the depositors the actual money the customers deposited. Also, they charge the depositor for using their services.

So, the bank makes money off us by borrowing our monies. After taking the profits, they still charge us from our monies for using their service. Simply put, the banks rip others with your money and still rip you on your deposit. Moreover, if you save in the banks for a long time, you will get very little interest accumulation.

Many people know what banks do, so they do not even try banking. Currently, there are over a 1.7billion grownups in the world today who are unbanked. Even those who have bank accounts do not have control over their monies. Truly, they depend on the bank for any transaction they want to initiate.

These things are the financial problems we face with our financial institutions today. So, how do we tackle these issues? How will people get full control of their money and stop the banks from ripping them? The answer is Decentralized Finance.

DeFi, also known as Decentralized Finance, is the growing alternative to this inadequate traditional banking. Indeed, it is the connection between the banked and the unbanked. Primarily, anyone with a smartphone and internet access can access financial services. Also, they can put their money to work through DeFi and get lots of interest.

Hence, this article will discuss DeFi, its various components, terminologies, applications, and how to make passive income with it. Truly, by the time you finish reading, you will be smarter regarding DeFi and its uses.

What Is Decentralized Finance (DeFi)?

DeFi is a parent name for a set of blockchain finance tools. The idea allows people to carry out banking activities without the banks. So, people using these tools can borrow, lend, and save money for interest. All of these will happen in and through their phones and internet connections.

Decentralized Finance (DeFi) vs. Centralized Finance (CeFi) 

What Is Centralized Finance (CeFi)?

Before now, CeFi was the standard for crypto trading. DeFi crypto only just came into the scene recently. So, what happened in CeFi? Well, it was just like DeFi with little control by central authorities. In CeFi, all cryptocurrency transactions happen through a central exchange. Also, the management of the central exchange is in charge of the funds belonging to crypto traders.

Therefore, as a Cefi crypto trader, you will not have a private key to access your exchange wallet. In addition, the exchange takes on the responsibility of listing coins you can trade. Again, the exchange determines the transaction fees you pay for trading on the platform.

Finally, crypto traders in Cefi do not own their crypto assets. Moreover, the traders are subject to the rules governing the transactions in the exchanges. So, as a Cefi crypto trader, you do not have total control over your money and how you transact with it.

Decentralized Finance vs. Centralized Finance

Why is DeFi so Important?

Here are some of the positive features that make Decentralized Finance so important:

• DeFi removes our traditional finance institutions’ fees for using their platforms.
• You will be responsible for controlling your money fully.
• It allows you to save your funds in safe digital wallets rather than keeping them in banks,
• As long as you have an internet connection, you do not need consent to use it.

How Does the DeFi Work?

Decentralized finance makes use of smart contracts. These contracts remove the need for banks to confirm transfers. So, DeFi crypto traders can send funds to one another directly. This method is called a peer-to-peer method of transfer. Also, DeFi transactions get their security via the blockchain.

What are DeFi Products?

Decentralized finance products are platforms where users borrow and lend funds to each other. Also, they allow u to use derivatives to predict digital assets’ price actions. DeFi crypto traders can also use crypto to earn yields as you will in a normal savings account and insure risks.

DeFi Currencies 

In the world of crypto, DeFi currencies are also called coins or crypto. A DeFi crypto or coin is almost like a digital twin of fiat money. So, traders use DeFi coins to transfer value. DeFi coins are native tokens of certain blockchains, for example, Ethereum and Uniswap.

Components of Decentralized Finance

Decentralized Exchanges (DEX)

DEX are crypto exchanges that link crypto sellers and buyers. On the DEX, buyers and sellers can make P2P transfers.

Wallets

A Decentralized Finance wallet is a non-custodial crypto safe. They give users total control over their crypto assets. Also, their users take care of their assets and private key security.

Aggregators

In DEX, these elements are crypto finance platforms that give traders access to various trading pools. They can do all these via one dashboard, for example, Fire Salamander.

Markets

A DeFi market is a market that allows security sellers and buyers to deal with each other directly. In addition, they will need to meet in a regular exchange to transact.

Oracles 

An Oracle in decentralized finance is a third-party service that enables smart contracts to access real-world, external data. Moreover, oracles empower these contracts to access data live feeds that do not exist on the blockchain. For example, prices of assets in real-time.

Prediction Markets

These markets are for trading event outcomes. In other words, they are called exchange-traded markets. In addition, the prices in the market can always be an indication of what is on the crowd’s mind.

Layer 1

This term refers to the ground architectural layer of the blockchain. In other words, it is the basic structure. For example, Bitcoin.

Decentralized Finance Terminologies

DApp (Decentralized Application)

DApps are software programs that carry out special functions. Also, no individual controls the software.

Gas Fees

A gas or gas fee is an amount of Ether that a user will need to carry out transfers. Also, the fees are for paying miners who confirm these transfers.

Impermanent Loss (IL)

IL refers to the rise and fall of cryptos after a user has sent them to a pool of liquidity.

Passive Income

Decentralized finance passive income is one way to easily earn money in DeFi. To earn money passively, you will deposit your tokens to a platform. The platform will give you an Annual Percentage Yield (APY) for your deposit.

Automatic Market Maker (AMM)?

AMM is a base protocol that DEXs use. The protocol has an automated mechanism for trading. Again, AMM removes the need for mediators like CEX and other regular financial firms. So, with AMM, users can transact with one another without the need for a middleman.

What is the Total Value Locked in DeFi (TLV)?

TLV is the amount of funds users have transferred to a Decentralized finance platform. Also, users deposit these funds for various reasons. For example, liquidity pools, lending, or staking.

Liquidity Pool

Liquidity Pools are the total funds locked up in a smart contract.

Decentralized Finance Use Cases

Lending Platforms

These are platforms that give loans in crypto without mediators. Also, on these platforms, users can list their tokens for lending to others. You can borrow from these DeFi platforms via peer-to-peer lending if you need a loan.

Stable Coins

These coins are digital currencies that allow DeFi crypto investors to gain yields on their assets in the market. Also, these investors use these coins to hedge against crypto volatility.

Margin and Leverage

The sum of money a person invests plus the total pool is known as margins. However, the practice gives DeFi crypto traders the power to trade, known as leverage. Moreover, traders use margins to produce high leverage. In return, the high leverage can heighten profits as well as losses.

DeFi-native Activities

This concept refers to being part of a liquidity pool. Majorly, as a liquidity provider, you can deposit a certain amount of money to a smart contract. In return, the decentralized finance platform will reward you with its native coins. The rewards are from profits that come in from transfers and trading fees on the platforms.

Decentralized Finance Risks

There are about five major risks in decentralized finance.

• Smart Contract Risks: It means that cyber thieves can attack smart contracts.
• Oracle Risk: These third-party services can fail due to network disruptions.
• Custodial Risk: People can lose access to their wallets and funds if they lose their private keys.
• Regulator Risks: Governmental authorities cannot control this tech. Hence they might have issues vetting it.
• Scalability Risk: Transaction processing speeds can be slow. For example, while Ethereum can process only 15 transactions per second, Visa can process 65,000.

How to Make Money (Passive Income) with Decentralized Finance?

There are four basic ways to make money through passive income in DeFi, and they are:

Staking

This method refers to DeFi crypto traders locking up their funds in a protocol for a long time. As a result, they get ROI on the tokens that they stake.

Providing to Liquidity

This method involves sending funds to decentralized finance and a DeFi crypto trader. The platforms will use the funds together with that of others for operations. As the platform uses your funds, you will get rewards in the protocols’ native decentralized fiance crypto.

Yield farming 

This concept refers to using decentralized finance to maximize returns. In this process, DeFi crypto traders can borrow and lend money and earn returns in crypto for their services.

Lending

This method involves lending individuals your crypto directly without an intermediary. As a DeFi crypto trader, you will receive interest on the payback of the crypto you loaned.

Is it safe to Invest in Decentralized Finance?

Although you may not believe it, Decentralized finance has flaws. Indeed, it can remove regular mediators. However, it might not give users the safety these mediators provide. For example, in 2021, the total amount people lost to Decentralized finance scams was $1.3 billion.

Also, here are some popular decentralized finance scams that exist today:

• Pump and dump scam: This scam is also called the rug pull scam. For this type of scam, a team of developers will launch a coin and use social media to hype the coin. Once many DeFi crypto investors buy their coins, the price will pump. Then, the developers will sell their holding at the pump’s peak, thereby crashing the price. An example of this DeFi crypto scam is the Terra rug pull scam.
• The Honey Pot Scam: This scam is easy. Developers produce a DeFi crypto, and investors buy, and the coin will peak to an ATH. Then the developers will restrict access from investors to sell their holdings.
• Wallet Dusting: In this type of scam, scammers send obscure coins to a DeFi crypto trader’s hot wallet. Once the person makes a transaction with the coin, the scammers trace other transactions to the trader’s cold wallets. Then launch a targeted phishing attack and clear the DeFi crypto trader’s holdings.
• Phishing Scams: These scams involve hackers creating fake websites that sell products. Then, they promise DeFi crypto traders services in exchange for their coins. When you pay, your money is gone. Another method is by posing to be a legit exchange asking you to verify your account. They will send you a link that will warrant using your private keys to access it. When you do, they will access your funds and steal everything from you.

The Future of Decentralized Finance

Defi is still in its early stages. For people who are just starting, the system is not regulated. So, for them, decentralized finance has many scams and hacks.

Also, many central bodies are trying to add rules to Decentralized finance. However, it is not easy because of its nature. Till now, some questions are still unanswered. For example, who will enforce these rules, and how will the people enforce them?

Other future concerns affecting Defi are carbon footprints, hardware failure, software maintenance, energy, and stability.

As long as some of these questions remain unanswered, there will be no safe use for Defi in the future. Also, financial institutions will find a way to get into the system if it succeeds. They are not going to let decentralized finance take their means of making profits. So, if they cannot control your money, they will find a way to make money from Defi.

Conclusion

You have seen Defi’s components, terminologies, risks, investment opportunities, risks, and future in this article. Decentralized finance is the fastest-growing arm of the blockchain. Currently, a lot of companies and individuals are getting into the system. So, knowing all there is in decentralized finance positions you for the future of finance and fintech.

References

What is Blockchain?

What is Cryptography?

A Beginner’s Guide to Cryptocurrency

FUTURE OF CRYPTOCURRENCY

What is NFT?

DeFi Coins and Tokens

Best DeFi Crypto Wallets

Role of DEX Aggregators in DeFi

Decentralized Market

Decentralized Prediction Markets

Blockchain Layer 1 vs. Layer 2 Scaling Solutions

The post What Is DeFi? A Beginner’s Guide appeared first on Blockchain Doyen.