GameFi projects have been for a while and feature a play-to-earn paradigm that lets users earn in-game tokens by winning battles, performing daily tasks, or mining resources.
These tokens are assets that can be traded on DEXs or other exchanges. Interestingly, they can also be bought and sold on these other exchanges. Plus, players can convert them into real money by trading them for popular stable cryptocurrencies, like Ethereum or Bitcoin.
Due to the obvious rise of Axie Infinity, GameFi has been quickly taking over the traditional gaming market. It draws in gamers because it gives them the chance to make money while having fun. GameFi: What is it, and how is it different from the video games we’ve played in the past?
GameFi, which is derived from two words “game” and “finance,” involves blockchain games that give you money if you play them, or “play-to-earn games.”
In most games, players can get in-game rewards by completing tasks, fighting other players, or progressing through different game levels.
A majority of the play-to-win games on the market now use what game designers call a “grinding mechanic,” which means that players have to spend a lot of time doing the same things over and over again in order to progress or get better prizes, or, in this case, crypto tokens.
As a bonus, rewards can also come in the form of in-game assets such as virtual land, avatars, weapons, or clothes (also known as skins).
In most cases, these assets are called “non-fungible tokens,” or NFTs, which are like “virtual deeds” that show who owns a piece of digital art or a piece of music. NFTs, which run on the blockchain, can be taken out of a game and traded or sold on a market.
There are different models and game economies in each game, and they all work in different ways. If you win a fight in a game and get crypto, for example, you get some money.
You can also sell an NFT you bought in the game or charge other players for staying on your virtual land. Virtual land ownership is a big part of popular games like Decentraland and The Sandbox. Players can buy digital pieces of real estate, build them, and then charge other players to stay there.
Some play-to-earn games even let players make money even when they don’t play the game at all, by mining for liquidity or lending their gaming assets to other players. Adding abilities like this not only makes the game more decentralized, but also allows players to have a say in the development of the game through DAOs.
For example, people who play Decentraland get to vote on in-game organizational policies based on how many relevant assets they have in their wallets that are linked to the DAO.
These are called tokens, or MANA, “names,” which let people trade tokens, and virtual land parcels that can be bought and sold. The idea is that the more MANA, names, and land a player has, the more they have a stake in the game, which gives them more power in the DAO.
This isn’t to say that tokenomics don’t change depending on the game. The supply and demand of a certain cryptocurrency can change. But a lot of the studios that make these games are raising money through token sales, which is a way to raise money.
How these tokens are given out, how they’re unlocked, and whether or not they’re limited or not varies from one game to the next one. Many of these games are built on Ethereum, Solana, and Polygon, which is a layer 2 chain on top of Ethereum that makes it faster and cheaper to buy and sell tokens for these games.
It all comes down to what kind of blockchain you are building on, Patel said. There are a lot of play-to-earn games that are almost virtual economies in their own right.
Brief history of GameFi
The word GameFi originated in November 2019 during a speech given by the creators of MixMarvel, a blockchain game publishing platform, during the Wuzhen World Blockchain Conference in China on how the technology behind cryptocurrencies has the potential to transform the video games industry.
It’s also possible that the term was first used by the founder of Yearn in a tweet in September 2020, but this is more well-known to people in the West. Since then, the term “GameFi” has been used more and more often to describe games that use blockchain technology to make money.
Despite the fact that the term “GameFi” has only become popular recently, the company has been around for almost as long as Bitcoin itself. When we talk about “GameFi,” we’re talking about things like early Minecraft servers that had integrations, the 2013 Gambit.com site, titles like Bombermine, and peer-to-peer services that let gamers make money with mainstream games they like. Later, projects like Huntercoin used blockchain technology for more than just payments. This allowed players to make money by mining cryptocurrencies.
How does GameFi work?
Virtual land, avatars, weaponry, and costumes are some of the in-game elements available in GameFi. Each GameFi project has its own model and economy. Most in-game assets are NFTs, which may be exchanged on NFT exchanges. In some circumstances, gamers must convert in-game assets into NFTs before trading or selling them.
Typically, in-game assets help players earn additional incentives. But some games offer graphic avatars and cosmetics that have no effect on gameplay or revenue.
For example, accomplishing activities, fighting other players, or building structures on their piece of land might yield prizes. Some games allow users to earn money without really playing by staking or lending their gaming assets to other players. Let’s look at some typical GameFi features.
Play-to-earn model (P2E)
It is impossible to separate the Play-to-Earn (PE2) game mode from GameFi Projects since it is at the heart of every GameFi project.
It’s worth noting that this gaming mode is extremely different from the pay-to-play model that has been utilized by traditional video games in the past. Pay-to-play games, on the other hand, require players to make an initial financial investment before they can begin playing.
For example, video games such as “God of War” need players to acquire licenses or recurring subscriptions in order to continue playing. Play-to-earn allows you to both play and earn at the same time.
Player financial rewards from traditional video games are rare, and in-game assets are managed and retained by the gaming corporation rather than the gamers themselves. P2E games, on the other hand, may provide players with complete control over their in-game assets while simultaneously providing them with possibilities to earn money.
Keep in mind, though, that all of this is dependent on the model and game design that the GameFi projects choose to use.
Blockchain technology has the potential (and should have the potential) to provide players with complete ownership of their in-game assets, however, this is not always the case in GameFi. Before you start playing a P2E game, be sure you understand how it works and who is behind the initiative.
An additional essential characteristic of P2E games is that they can be completely free-to-play while yet generating cash benefits for their users. However, certain GameFi projects require you to acquire NFTs or cryptoassets before you can participate.
As a result, it is always a good idea to DYOR and assesses the dangers before picking and participating in any game. If you make a large initial investment in a P2E game and the benefits are insignificant, you are more likely to lose your money in the game.
Axie Infinity is one of the most popular play-to-earn games available today. It is a non-transactional token (NFT) game based on Ethereum that has been gaining in popularity since 2018. The employment of NFT pets (Axies) to earn SLP tokens by performing daily objectives and defeating other players is a new feature in the game.
AXS prizes are also available to them if they manage to attain a particular PvP ranking. Additional to this, the resources AXS and SLP may be used to produce additional Axies, which can then be utilized in-game or exchanged on the official NFT marketplace.
In addition to purchasing and selling Axies, players may lend their Axies to other players, providing owners with an option to make money without actually participating in the game. Scholarship is the term used to describe this type of financing strategy. It enables scholars to play games and earn prizes by borrowing Axies from other students.
Therefore, Axie owners may get passive revenue while academics can participate in the game without making any financial investments. The obtained incentives are subsequently divided between the scholars and the owners of the Axies.
In traditional games like Second Life and Fortnite, gamers have been trading virtual items for a long time. But these virtual economies were closed and controlled from one place. The players wouldn’t be able to trade their in-game assets for things like fiat money in the real world.
Popular metaverse games like Decentraland and The Sandbox are based on the idea of owning land. They allow players to make money from their virtual land. In The Sandbox, players can buy virtual pieces of land and build on them to make money.
For example, they can charge other players to visit their land, host content and events to earn token rewards, or rent out their custom land to other players.
GameFi is breaking up the centralized system so that players can trade value and get rewards for the time and effort they put into games. By adding blockchain to games, GameFi makes it possible for players to really own and control their assets.
So, players can trade items from the game on secondary markets as NFTs. They can move the NFTs from one chain to another without changing the value of the assets they represent.
Staking, liquidity mining, and yield farming are all DeFi goods and services offered by several GameFi ventures. Players may usually use their in-game tokens to acquire awards, unlock special goods, or get access to additional levels.
GameFi allows us to make money through staking by merging DeFi functionalities with blockchain games. Players may earn yield in some games by storing their in-game cryptocurrencies and NFTs in smart contracts. In-game tokens and NFTs can be staked in gaming guilds for interest.
Players who do not have enough tokens to continue playing can join gaming guilds and rent tokens in-game. For both participants and investors, this is a win-win situation. Yield Guild Games, a blockchain gaming guild, is the most appropriate platform for this case.
Decentraland players, for example, may use their governance tokens (MANA) to vote on in-game and organizational policies. Their voting strength increases as they lock more tokens. This allows gamers to connect directly with game creators and have an impact on the game’s development.
How to play GameFi games
You can play many different games on the Blockchain. Each one works in a different way, and there are a lot of them.
People who want to buy games should check out fake projects and scam websites first. It’s bad if you connect your wallet to a computer or download games from a website you don’t know, because these things can be dangerous.
The major steps involved in playing GameFi games are stated below.
- Get a crypto wallet
- Connect wallet to the games
1. Create a crypto wallet
To enter the GameFi universe, you need a suitable cryptocurrency wallet, such as Trust Wallet or MetaMask. Depending on the game you’re playing, you might need to utilize multiple wallets or connect to different blockchain networks.
To begin playing Axie Infinity, you need an Ethereum wallet such as MetaMask. MetaMask allows you to store and exchange crypto tokens and NFTs, as well as interface with other blockchain apps.
If you acquire tokens while playing Axie Infinity, you will need an Ethereum wallet to keep them. So, establish a MetaMask wallet account either using the desktop version or the mobile version. You need to set a password and save the seed phrase.
2. Connect the wallet to the games
To start playing any blockchain game, you need to link your wallet. Make sure you are going to their actual website and not a false duplicate. Head on to the game’s website and seek the option to link your crypto wallet.
Unlike conventional online games that require you to set up a username and password, most blockchain games utilize your crypto wallet as a gaming account, thus you will likely be asked to sign a message on your wallet before you can connect to the game.
3. Check game requirements
Every game comes with its own requirements. To get started, most GameFi initiatives need you to buy a cryptocurrency token or in-game NFTs.
While the criteria differ every game, you should constantly weigh the possible rewards and hazards. Estimate how long it will take to recoup your initial investment and start producing money.
Axie Infinity requires 3 Axies in your gaming wallet. They’re available on the Axie Marketplace. To buy Axies, you need WETH in your Ronin Wallet. You may buy ETH on Binance and then use the Ronin bridge to send it to your Ronin Wallet. See How to Use the Ronin Wallet for further details.
If you can’t afford it or don’t want to risk it, seek a scholarship program. You can borrow NFTs to play, but you must split your profits with the NFT owners.
What is the future of GameFi?
There are a lot of people who don’t know much about GameFi, even though its roots go back to the very beginning of cryptocurrency. This is one of the best ways to show how the niche has grown is to look at how well Axie Infinity has done.
Finally, in August 2021, Axie Infinity became the first game to sell tokens all at once. One-fifth of the tokens were sold in just a week, and they were all sold.
A lot of people are interested in new GameFi games because of the progress that has been made in both the technology and the way people understand it. Gameplay is thought to be the best way to get more people to use blockchain.
Practically everyone who knows about the internet already knows a lot about rare digital items, tokenization, and in-game money because they play video games.
People who play games can use blockchain technology to do things that are good for them both financially and in terms of how a game is made. So, it’s not hard to think of GameFi taking bigger bites out of the $175 billion global markets for video games, as it did in the past.
Apparently, the Blockchain Game Alliance, which wants to spread the word about GameFi, already has a lot of well-known members, like Ubisoft and AMD. The next Entrepreneurs Lab event will be called “GameFi.” That’s what Ubisoft said in May 2021: that it would be called that.
As a result of the success of Axie Infinity and the number of games being made on different blockchains, GameFi has a bright future. However, it’s hard to predict how this future will turn out because it’s hard to know how it will turn out.
Since blockchain technology changes so quickly, new ideas don’t come up very often. In the future, a lot of these new ideas will be used in video games. They will also bring with them new and exciting ways to make money from new things.
The convergence of DeFi and gaming has spawned a new breed of video games that are profitable for everyone. Anyone wishing to generate a passive income while gaming, from game developers to casual and competitive players, may utilize GameFi to do it.
Among the numerous various ways to make money in the crypto realm, GameFi is the ultimate way to make money. Playing the games, staking, and exchanging the in-game tokens and assets in the markets are all ways to make money.
GameFi draws players by mixing entertainment and cash incentives. With the growing popularity of blockchain games, the metaverse will almost certainly witness an influx of large corporations.