What Is GameFi: Everything You Need To Know About GameFi (2023)
Blockchain technology has found its way into gaming and is expected to disrupt this $180 billion dollar industry. Here’s everything you need to know about GameFi.
Most of us grew up playing games. Whether it is video games or something as simple as rock paper scissors, we all get the thrill of competing and satisfaction from winning. However, the games back then didn’t allow players to earn money for their efforts and time spent in those games. The majority of the money and profits went to the companies that created and developed the games.
But what if everyday players, not just competitive gamers, are also able to earn money by playing games? This democratization and decentralization along with increasing interoperability of games are what GameFi aims to achieve. So if you want to find out what GameFi is and how you can get started in this space, read on.
What is GameFi?
GameFi incorporates gaming together with blockchain-powered financialization. The term “GameFi” came from combining the words “game” and “finance” together. Players in GameFi games can earn rewards for performing game-related tasks (play-to-earn), earn interest by lending assets like digital characters or depositing their assets (staking), and/or earn through asset ownership from in-game non-fungible tokens (NFTs).
GameFi originally started as an alternative to proposed blockchain games for legacy gaming titles. But today, GameFi has created an additional dimension in games by incorporating decentralized finance (DeFi) elements into these games.
How does GameFi work?
While the details and mechanics of blockchain-based games may differ, there are a few fundamental principles that they are built upon:
Asset ownership/Open markets
Unlike traditional closed markets where game developers have full control over the economy, open markets in GameFi allow users to buy, sell, and trade their in-game assets, virtual currencies, and other digital assets freely. Once you own the asset, you are able to transfer, exchange or cash out on these assets.
Gaming incentives
GameFi rewards and incentivizes players through Play-to-Earn, staking and yield farming, governance and voting rights, NFTs, and more.
In GameFi, players are rewarded for playing games. These rewards differ from game to game. In some games, players are rewarded for battling with other players and completing tasks while in others, players can earn passive income from the game by staking or lending their in-game assets to other players. Players can also convert their in-game assets into an NFT and trade and/or sell them on NFT marketplaces.
These incentives leverage on blockchain technology and decentralized finance (DeFi) and are crucial elements of GameFi.
Why GameFi – From Pay-to-Play to Play-to-Earn (P2E)
GameFi represents a paradigm shift in the gaming industry, transforming the traditional pay-to-play model into a play-to-earn (P2E) system. With GameFi, players are no longer just consumers but active participants who can earn real-world value for their time and skills spent in the virtual world. This revolutionary concept brings together gaming and decentralized finance, where players can monetize their gameplay and virtual assets. With GameFi, players have the opportunity to unlock a whole new level of economic empowerment, as they can earn tokens, in-game currencies, or even rare non-fungible items that hold tangible value. This shift not only enhances player engagement and motivation but also introduces a more inclusive and rewarding gaming experience where players have the potential to turn their passion into a source of income. GameFi pioneers a future where gaming becomes a viable and sustainable means of earning, marking a significant evolution from pay-to-play to play-to-earn.
How to get started with GameFi?
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Set up your crypto wallet
The first thing you need to get started in GameFi is to set up a crypto wallet that is compatible with the game that you are playing. The crypto wallet helps you store your game tokens or NFTs. One of the more commonly used crypto wallets is MetaMask.
For some games, you might need to use multiple wallets or connect to different blockchain networks to get started.
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Connect your crypto wallet to the game
After you have created and set up your crypto wallet, connect your wallet to the blockchain game. Unlike traditional online games, blockchain games use your crypto wallet as an account. Your crypto wallet functions as your username and password to log into the game thus make sure you connect your wallet to the game’s official website and not a fake website.
How is GameFi different from traditional video games?
While GameFi games and traditional games share many similarities, there are a few important differences that make GameFi different from traditional video games.
First and foremost, in traditional games, the money and digital goods that a player spends time and effort achieving cannot be easily or legally sold outside of the games or converted into cash. So it was difficult for players to monetize in traditional games. But GameFi games have a decentralized marketplace where players can trade their in-game tokens for other crypto assets such as cryptocurrency allowing players to gain economic value from playing these games.
The introduction of GameFi elements in the gaming industry has opened a whole new world of financial possibilities that were once unavailable for players.
Secondly, in traditional games, developers and organizations hold the power. If the developers or organizations decide to pull the plug, digital goods and tokens in that game will go down the drain. Imagine spending hours leveling up and acquiring assets in a game only to have it vanish because of an event that was out of your control.
That is why the decentralized network that GameFi games are run on has changed the landscape of the gaming industry. These games operate independently of any single organization which substantially reduces the risk of games shutting down and players losing their digital assets.
Lastly, the blockchain technology that GameFi utilizes means that in-game assets (goods and tokens) that a player acquires during his or her gameplay cannot be counterfeited, removed or destroyed. They are all written onto the blockchain allowing players to easily prove ownership and retain their in-game assets.
How do GameFi companies make money?
Many GameFi games are free to play so how do GameFi companies make money? Developers of these games usually set aside a portion of the in-game tokens for themselves. The value of these tokens is determined by the demand and popularity of the game. The more people play the game and trade their tokens, the more money the developers make.
In addition, some GameFi games have transaction fees. Fees are charged on certain transactions and the developers get paid from it.
GameFi has been steadily moving into the mainstream gaming industry in recent years and it has accelerated into the spotlight in 2021. According to DappRader, blockchain games have generated $480.7 billion in transactions in 2021. It’s hard to imagine GameFi not being an important part of the gaming industry in the future.
Disclaimer: Any opinion shared in this article is strictly the views and opinions of the author and should not be construed as financial advice. Flipster makes no judgment on the projects or the content uploaded.