Introduction to GameFi
What is GameFi
GameFi is a fusion of the words game and finance. It refers to play-to-earn blockchain games that offer economic incentives to players. The GameFi ecosystem uses cryptocurrencies, non-fungible tokens (NFTs), and blockchain technology to create a virtual gaming environment.
Typically, players can earn in-game rewards by completing tasks, battling other players, and progressing through the different game levels. They can also transfer their assets outside of the game to trade on crypto exchanges and NFT marketplaces.
GameFi has been rapidly taking over the traditional gaming industry since the rise of Axie Infinity. It attracts gamers by offering them an opportunity to make money while having fun.
How does GameFi work?
In GameFi, the reward can come in different forms, such as cryptocurrencies or in-game assets like virtual land, avatars, weapons, and costumes. Each GameFi project will adopt a different model and game economy. In most cases, the in-game assets are NFTs running on the blockchain, meaning they can be traded on NFT marketplaces. In other cases, however, the in-game assets need to be converted into an NFT before players can trade or sell them.
Typically, the in-game assets will provide certain benefits to the players, allowing them to make more rewards. But some games also feature avatars and cosmetics that are purely visual and have no impact on the gameplay and earnings (Like Fortnite skins in traditional gaming)
Depending on the game, players can earn rewards by completing tasks, battling with other players, or building monetized structures on their plot of land. Some games also let players generate passive income without playing the game, either through staking or by lending their gaming assets to other players. (Like we discussed in our staking and defi lessons)
What is the Play to Earn (P2E) model:
At the core of GameFi projects, we have play-to-earn (P2E) as a revolutionary gaming mode. It’s quite different from the pay-to-play model adopted by traditional video games. Pay-to-play requires gamers to invest before they can start playing. For example, video games like Call of Duty need players to purchase licenses or recurring subscriptions.
In most cases, traditional video games won’t generate any financial returns to players, and their in-game assets are controlled and held by the gaming company. In contrast, P2E games can give players full control over their in-game assets while also offering opportunities for them to make money.
Another thing to note is that P2E games can be free-to-play and still generate financial rewards to players, but some GameFi projects require you to purchase NFTs or crypto assets before you can play. As such, it’s always important to DYOR and evaluate the risks. If a P2E game requires a big investment to start and the rewards are small, you are more likely to lose your initial investment.
The benefits of using Blockchain for gaming:
As a distributed database, a blockchain-based system can be used to verify and secure all sorts of digital data, including in-game history, digital items, and tokenized assets. The main idea is to take away the power from the gaming companies and give it back to the players. Let’s take a look at some main benefits in brief detail below
Real ownership: As mentioned, blockchain-based games allow players to have permanent ownership and full control over their in-game assets. Typically, each asset is represented by a unique, non-fungible token (NFT), such as the ERC-721 tokens.
Decentralized marketplace: Gaming companies have the power to manipulate the drop rate and the economy of their games. They can also lock or bind in-game items, making them untradable. In contrast, games built on top of blockchain networks enable the creation of decentralized marketplaces hence removing these concerns.
Streamlining payments: Blockchain and smart contracts have the power to reduce fees and speed up financial transactions. They can facilitate all sorts of payments, not only for trades between players (peer-to-peer) but also between players and developers.
Fair playing ground: Depending on the implementation, blockchain enables the creation of open-source, distributed, and transparent gaming servers. In such cases, the gaming mechanics can only be changed if the majority of the network vote in favor of it.
Unlimited gaming: When a game exists on a centralized server, the developers can abandon the project or shut the game down anytime. With blockchain, players can continue playing a game even if the developers move away.
The drawbacks of using Blockchain for gaming
Although Blockchain technology has opened up new horizons for the gaming environment, it still has significant challenges to overcome. Some of them include:
(i.) Scalability. Blockchains tend to be much slower than centralized networks, which may prevent games from being adopted on a global scale. (ii.) Lack of adoption. Although there are hundreds of blockchain games available, the demand is still very low. Most games have a very small number of players. (iii.) Centralization. Not all blockchain-based games are fully decentralized. Some of them make use of ERC-721 or other blockchain tokens but are actually running on a centralized server.
Examples of Blockchain games:
Axie Infinity has become one of the most well-known play-to-earn games. The game requires an initial investment to purchase three Axies, or you can receive a free Scholarship from another player. Once you have a Starter Team and begin completing tasks and challenges, you can earn Smooth Love Potion (SLP), an ERC-20 token tradeable on exchanges.
Breeders use SLP to breed new Axies, creating an economy for the item. Axie Infinity became particularly popular in the Philippines, where many users started to live off its play-to-earn model. Many players are making between $200 to $1000 (USD) per month, and some even more than that depending on the market price and time invested, however there are many other games too let’s have a look at some others below:
Sorare is a fantasy football game with collectible, tradeable soccer players from real life. You create a five-player soccer team using either free cards for beginner players or purchasing tokenized cards. You can earn points to level up for every game you win, goal you score, or other events you complete.
Gods Unchained is a tradeable NFT card game on Ethereum similar to Magic The Gathering or Hearthstone. Gamers build decks with different powers and strengths to combat other players. As you win, you find in-game items to use or sell. If you win Ranked games, you can begin to earn Flux that lets you craft powerful NFT cards.
Decentraland is a 3D virtual world browser-based platform. Users may buy virtual plots of land in the platform as NFTs via the MANA cryptocurrency, which uses the Ethereum blockchain.
Common GameFi Terms:
NFT (Non-Fungible Token): This is a non-fungible token, or non-fungible asset encoded on the blockchain’s system. In GameFi, NFT is used to represent unique in-game items
Metaverse: This is a digital world developed from the Internet combined with augmented reality tools such as VR, AR, MR to help users have the most realistic experiences.
Quests/ Missions: These are the tasks that the player must complete in the game in order to receive the reward. The reward is usually items or tokens.
P2E: Play to earn
Roadmap: A roadmap is a way for developers or creators to inform players in their community about planned content that’s down the road.
PvP: PvP stands for Player vs Player, where players in-game either battle each other or are subject to attack from other players while roaming in the game.
How to make money with Gamefi: https://medium.com/@Bixin/play-to-earn-how-to-make-money-with-gamefi-33893e580a8b
GameFi video tutorial: https://www.youtube.com/watch?v=ItUHcnyq90k
10 GameFi projects: https://dappradar.com/blog/top-10-best-gamefi-projects-to-play-and-earn