As blockchain games and NFTs become more entrenched in the game industry, many gamers ask, “What is Gamefi?”
GameFi is a portmanteau of the words game and finance. It is a new way of gaming that allows players to earn crypto whilst playing their favorite blockchain games. Routinely referred to as Play To Earn or P2E in the blockchain sphere, players can earn rewards in cryptocurrencies and NFTs. You earn rewards by playing games, doing tasks, and leveling up.
Distinct from regular video games, it allows you to move your in-game items and rewards in the form of NFTs out of the game ecosystem. This gives you the option of selling your rewards on NFT platforms and crypto exchanges or simply storing them in a crypto wallet.
Token Economics Drives GameFi Projects.
GameFi NFT projects build a complete ecosystem with their utility token. The token is used for all economic activity within the game. In, one-token economies, you can use your tokens as either the currency (utility token) or a Governance token. You use utility tokens to buy gaming character outfits, etc. They are also used to reward people in the game community.
A governance-based token grants holders voting rights on how the game economy grows. Some popular utility & governance symbols include Sandbox Sand, TLM, and LOA. However, unlike traditional video games, blockchain games sometimes use the same token for both purposes.
How Do Traditional Video Games and GameFi differ?
In regular video games, players can use their money to buy digital assets such as weapons, clothing, etc., that help their in-game character. For the most part, these items don’t hold any value outside the game. More often than not, players are banned from monetizing their digital items or trading them outside the game.
The opposite is true for blockchain games. In crypto games, you use crypto to buy digital items, which are usually in the form of NFTs. This gives gamers the option of cashing in their crypto rewards for FIAT on crypto exchanges. Furthermore, you can remove your NFTs to a wallet or sell them on an NFT marketplace for profit.
Apart from rewards for gameplay, many GameFi projects also incorporate aspects of Decentralized Finance (DeFi). These include yield farming, staking, and liquidity pools through which players generate passive income. Take staking, for instance, a player can use their in-game tokens to get rewards, access to special items, and open up new game options through staking.
Adding DeFi components also changes the dynamics of the game, as players with governance tokens have a say in how the game develops via DAOs, creating a more decentralized game not run by large corporations,
Ownership of Digital Assets
Blockchain technology is the engine behind the GameFi revolution, in gaming. The technology allows players to keep their in-game items as digital assets and have full control over their NFTs and gaming assets.
A player can give their avatar pets, homes, weapons, and other items, just like in regular games.
One of the main ideas in games like Decentraland and The Sandbox island is to let gamers make money using a virtual property.
The Rise of NFTs
2021 was a successful year for NFTs, with sales of$2.5 billion in the first half and $17 billion overall.
Because NFTs are used in games, GameFi projects use them. All of a player’s in-game assets, like heroes, weapons, and skins, are held in non-fungible tokens. Therefore, the underlying asset has limited units, the NFT makes it possible to verify this security on blockchains and gives easy access to the secondary market.
Play-to-Earn (P2E) Games Model
Play-for-Earning, or P2E, is a new way to play games at the heart of, all Gamefi projects. It’s a significant change from how most games work, where you pay to play.
Pay-to-go games require players to put up a small amount of money before they can play. Any items they acquire during gameplay are the gaming company’s property. At the moment, game developers have to buy licenses or renew subscriptions to make video games.
Most traditional video games don’t give players any money, and the company takes care of its assets.
Whereas, in the P2E model, the player has full rights to the item as they are in the form of NFTs. P2E games allow gamers full power, money, and earning opportunities.
Additional Benefits of GameFi Games
There are many good things related to DeFi principles like staking, liquidity mining, and yield farming which enhance GameFi games. Players bet their in-game funds to earn interest and other rewards that they can use to create new games or buy new in-game items. Players can secure game assets when lending. GameFi lets users make their own decisions, unlike traditional games.
The Future of Gamefi
If the last year and a half are anything to go by, the future of GameFi looks bright. With over 1400 games listed on Dapp Radar. The projects are spread out over several blockchains including, Ethereum, Solana, Polygon, BSC chain, and others.
The attraction of making money while playing your favorite computer game is bound to grow, in tandem, with the development and use of blockchain tech.
Since Bitcoin’s early days, users have played browser games to make BTC. Even though BTC games are still around, the rise of Ethereum and smart contracts have changed the blockchain gaming world. The technology can now offer much more complex and exciting experiences.
It’s easy to see how GameFi draws in gamers by offering fun and money-making opportunities. As blockchain games become more popular, more and more companies will likely build up the metaverse.
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