The game industry has been growing rapidly in recent years and is expected to upgrade in the years to come massively.
The blockchain space has also grown exponentially. It is no surprise, as all these new processes have accelerated development in the new use cases within the blockchain space.
Decentralized technology and finance games, such as Sandbox, Decentraland etc., are gaining massive attraction and paving the way for the next generation of gaming. The game industry is also tapping into the power of Web3.
Developers are making countless studies using the power of Web3 to make games as appealing as real life, thanks to the advancements in graphics and computation. GameFi came to make playing games a full-time job for game lovers.
What is GameFi?
GameFi is a fusion or combination of two parts, Game and Finance. The game part involves traditional gaming, where players compete in a series of games to earn in-game currency. They use the currency to level up their characters by upgrading customs, weapons etc.
The financial part is the interesting part of GameFi. It runs on the blockchain and represents the player’s in-game assets. Characters are commonly represented as ERC721 NFTs; in-game currency is referred to as ERC20 Token, while costumes, weapons, and items are represented as ERC1155 NFTs.
GameFi is gaming using blockchain technology. The simplest way of looking at GameFi is to see it as a combination of video games and decentralized finance (DeFi).
Video games that are part of the GameFi use blockchain technology which lets buyers be exclusive and verify donors of the virtual elements of a game.
GameFi uses a deposit and withdrawal gateway to move assets from off-chain to on-chain and vice versa.
The major distinctive factor between GameFi and the traditional gaming model is the transition from a paid-to-play model to a play-to-earn model (P2E).
Rather than players having to invest their own money to upgrade their characters and in-game assets, they now invest their own time to gain an advantage.
These advantages may be rewarded in numerous ways depending on the game itself, but the general trend so far has been through NFTs and DeFi. In a nutshell, GameFi directs players to decentralized applications with economic incentives.
How it works
GameFi offers incentives to players, and they earn cryptocurrency and NFT rewards when they complete tasks, compete with other players and progress through several levels of the game.
To earn, first, you buy NFTs and tokens, then play the game and try to win more tokens to upgrade your character. The tokens or stablecoins can then be sold on cryptocurrency exchange platforms, while the NFTs can be sold on the NFT market to gain profit.
By obtaining NFTs, the players get proprietary ownership of their assets, meaning no game studio or centralized authority can take away or freeze their collected items.
These games can use smart contracts on the blockchain and issue governance tokens that work as in-game currency and how the users should participate and excel in the game and accumulate stronger positions which translates to the authority in the decision-making of the game’s future direction.
The rewards come in different shapes, such as cryptocurrencies or in-game assets like virtual land, Avatars, weapons and costumes, just to mention a few.
These in-game assets are NFTs on the blockchain and traded on the NFT marketplace.
The in-game assets may also need to be converted into NFT before trading or selling can be done with them.
Participating in GameFi
You must check the requirements to play a particular game as a player. Most GameFi projects require you to purchase their cryptocurrency token or in-game NFTs.
These requirements differ from game to game. As a player, one of the essential requirements will be a crypto wallet address compatible with the game chain (i.e. the blockchain the game is supported on).
This will often be used instead of the traditional username and password model. Players will also be allowed to interact with the game’s functionality and the opportunities to accumulate assets and trade with other users.
A typical video game uses the pay-to-win approach where you spend or invest money to upgrade or unlock some levels in the game, but you don’t earn any actual reward in real life.
GameFi differs as it lets players make money from playing video games due to their knowledge or invested time.
Aside from the obvious requirement of a PC, if you want to set out to play, there are three things you need to know to start playing a GameFi game; they include;
- Crypto Wallet: This enables you to host your crypto and NFTs and is essential for the players to carry out their digital affairs.
It is like storage for crypto and NFTs, and there are different types of wallets available, but you must first check how compatible the wallet is with the game you want to play.
For example, the blockchain game ‘Axie Infinity’ was created using the Ethereum protocol. Still, their team developed the Ronin network, and as such, the player needs to use the official Ronin wallet to interact with the Axie Infinity ecosystem.
- Secondly, some games do not allow the players to grind their first crypto because they need to have funds in their wallet before starting.
For example, if you want to play the Crypto blade, you will need a Metamask wallet containing the game’s cryptocurrency. You must also connect your wallet to the game.
- Thirdly, just like many play-to-win games, you may download a GamFi game for free but would only enjoy endless possibilities and adventures when you make an upgrade or purchase an asset.
In the Axie Infinity game, at the very least, a total of three NFTs that cost some money is required. Checking the requirements of the game you intend to play is important to avoid losing your rewards and asset because of your negligence.
GameFi Stakeholders
The gaming industry is maximizing the capabilities of Web3 by uniting gaming with finance. The ultimate purpose of GameFi is to establish an ecosystem of products and services that work together to give players the best gaming experience.
The key part of the GameFi ecosystem is the stakeholders, who might be an individual or a group/party that has an involvement in a project, either for the growth or downfall of that project. Let’s dive right into some stakeholders of GameFi.
Metaverse
The metaverse is the fundamental technology that makes the creation of GameFi certain. In a metaverse, users can create an ‘Avatar’, a virtual representation of themselves experiencing the virtual world and interacting with other users.
It creates a real-life-like experience accompanied by overwhelming sensations as if you are physically experiencing an activity in the virtual world.
The metaverse is the perfect space for GameFi due to the fact that it offers a shared virtual space for gamers and developers to communicate with each other.
Because the metaverse allows for the creation of virtual worlds, it offers and accommodates the developers of these games into its ecosystem to explore good options to create amazing games.
Games may be distributed to users as stand-alone applications or as components of a metaverse. The term “metaverse” refers to a virtual world in which users can interact with one another, participate in activities such as gaming and event attendance, go shopping, and completely lose themselves in the environment. As a strategy for retaining users, GameFi has integrated a number of its platforms into a metaverse.
For the GameFi economic model to be successful, the connection between the metaverse and GameFi needs to be thoroughly explored and mapped out. The gaming community is attracted to GameFi for the experience it provides, and the metaverse encourages them to spend using gaming and ecosystem tokens.
Imagine yourself playing a racing game while your heart rate is skyrocketing. You triumph in the competition, claiming the large token prize. You leave the arena, and on your way out, you spot some merchandise bearing the name of a Formula 1 brand or a Formula 1 superstar.
Because of the experience, you will want to select “buy.” You worked hard to earn the tokens and put some of them back into the economy by spending them.
If users are drawn to and acquired by games, then the metaverse can help generate revenue from those users by providing them with various experiences. A couple of examples of metaverses that provide gaming options are Sandbox and Bullieverse.
Users can explore various real estate features and events in the metaverse known as Decentraland (MANA). Still, the participants in this metaverse are not given access to any gaming options.
Game Guilds
The vast majority of consumer-focused business models require some kind of distribution network. Gaming guilds serve as the distribution network for GameFi platforms and are platforms in and of themselves. Why are they necessary for P2E to function, and what exactly do they do in that capacity?
As P2E platforms began to scale, the cost of the NFTs that players required to participate in the game increased.
It is a significant investment for a player in Indonesia or the Philippines, both important markets for P2E, to spend $200 on an NFT to participate in a game. The scholar and NFT renting model provides a solution for the affordability problem faced by gaming guilds.
The NFTs are rented out to players by guilds, which purchase them from the GameFi platforms (scholars).
The rent money for the guilds comes from the spoils that the Scholars earn from playing PvE games. By renting out the NFTs that they have purchased, guilds are able to generate a return on their investments (ROI) over time.
A little over six months ago, guilds began to debut in the GameFi ecosystem. They have increased their ROIs by being selective about the players to whom they rent NFTs. This allows them to play a larger pool of customers.
Guilds offer scholarship programs to recruit new members. Because trained scholars typically earn more from efficient gameplay, these programs produce better investment returns for the guilds participating in them. Among the more well-known guilds are the Yield Guild Games, the Merit Circle, and the Avocado DAO.
Game Launchpads
Finding good investors and scaling or improving there is not as easy as it appears to be. Still, with the help of launchpads, upcoming GameFi platforms will learn how to survive and thrive in the ecosystem by learning how to find quality investors.
Launchpad is an exchange and token-based platform for launching new coins, tokens and blockchains.
GameFi launchpad aims to connect promising gaming crypto projects to potential investors, using the decentralized venture capital dynamic to increase the practicable benefactors and help finance more developments.
It rolls out into the mainstream group through an ‘Initial Game Offering’ (IGO). A few popular launch pads include; BullStarter IDO crypto Launchpad, GamesPad, Gamestarter Crypto Launchpad, Enjinstarter Gaming Launchpad, Seedify IGO Launchpad etc.
Game Studio
A studio here could be one person or a group that may have been around for years or just launched off. A studio might have one game or many games, either their original game or a licensed existing one. A studio needs to be ready to develop its games on the GameFi platform to get the GameFi project off the ground.
NFT Renting Platforms
This is a major key factor in the GameFi ecosystem as it provides and serves as a marketplace or distributor for NFTs.
Any player who wants to acquire NFT but is not equipped with the resources to do so can get some through the guilds.
So, while the guilds monetize their NFTs, the players are able to access NFTs that they weren’t able to get on their own.
The guilds purchase the NFTs from GameFi platforms and then rent them out to the players (otherwise known as scholars) who play the game and share the rewards with the guilds as ‘rents’.
Gaming Marketplace
The gaming marketplace here is like a hunter. It examines the territory, picks the best and most popular games among gamers, and then hosts them on their platform after testing them.
The gaming marketplace acts as a link to fill up the gap between Web2 and Web3 players by assisting them, thus offering curation services.
The best gaming marketplace prepares a means for gamers to connect/interact with each other; it might also have forums where gamers discuss, ask questions and give bits of advice about a game.
Gaming marketplace provides a service where players can select and enjoy the best gaming experience.
The Future of GameFi
Although its origins can be traced back to the earliest stages of the development of cryptocurrencies, the widespread adoption of blockchain technology did not begin until relatively recently. This point is driven home by the phenomenal success of Axie Infinity.
It is patently superior to the older, more conventional games currently available. Gamefi is still going strong with a wide variety of potential and possibilities. The passage of time, in our opinion, will inevitably result in the development of new models.
The various stakeholders, such as investors, influencers, and others, that were previously mentioned contribute to improving the overall quality of GameFi all over the world.
In contrast to traditional video games, in which players must pay to participate but receive no tangible rewards, GameFi allows players to earn money from their participation.
It is safe to say that the gaming and virtual reality (GameFi) industry will continue to grow with every step by gathering such a large fan base through the public’s interest and attracting the interest of large companies.
It is exciting to see how GameFi attracts gamers by combining entertainment with financial incentives with the growing popularity of blockchain games; many companies might likely invest in the overall growth and development of GameFi. GameFi is a decentralized gaming platform that uses blockchain technology.
GameFi brings together the best aspects of two different realms: the world of video games and decentralized finance. It provides players with a wide variety of opportunities to earn digital assets, which can be exchanged for actual money at any time.
GameFi is causing a revolution in the video game industry by offering rewards that are actually consumable and promising to go above and beyond our expectations in the years to come. If decentralization is the way of the future, GameFi is the way for gaming.
