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What Is GameFi? A Beginner’s Guide
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?
