GameFi has been rapidly replacing the traditional gaming industry since Axie Infinity became popular. It appeals to gamers by giving them a chance to make money while enjoying themselves. So, what is GameFi and how does it differ from the video games we know?
What is GameFi?
GameFi is a combination of the terms game and finance. It describes blockchain games that provide financial rewards to players when they play. The GameFi network incorporates crypto, non-fungible tokens (NFTs), and blockchain technology to build a digital gaming ecosystem.
Usually, gamers can gain in-game prizes by doing tasks, competing with other players, and advancing through the various game stages. Additionally, they are able to move their possessions from the game to exchange on cryptocurrency exchanges and NFT marketplaces.
How does GameFi work?
In GameFi, the reward can take many forms such as digital currencies or virtual items like plots of land, avatars, weapons and clothes. Every GameFi project will have a different system and economy. Generally speaking, the virtual assets are Non-Fungible Tokens (NFTs) that run on the blockchain, which allows them to be traded on NFT exchanges. However, there may be cases in which these assets must first be converted into an NFT before they can be exchanged or sold.
Generally, the in-game elements give players some advantages that can lead to more rewards. However, some games also incorporate avatars and cosmetics that do not influence the game or bring any income. Depending on the game, gamers may get rewards through finishing tasks, competing with other users or constructing monetized structures in their area.
Additionally, some titles allow gamers to gain passive income without having to actively play the game by either staking or lending their gaming assets to others. Now let us explore a few of the common features offered by GameFi.
Play-to-earn model (P2E)
The centerpiece of GameFi projects is a revolutionary form of gaming known as play-to-earn (P2E). This is completely distinct from the pay-to-play system used in classic video games. With pay-to-play, gamers must invest before they can begin playing; for instance, Call of Duty necessitates players to buy permits or ongoing subscriptions.
Traditional video games usually don’t bring any financial rewards to gamers, and they don’t own the in-game items; instead, these are managed by the game’s developer. On the other hand, P2E games provide players with ownership of their virtual assets while also providing ways for them to make money.
Nevertheless, it is important to remember that the results of a GameFi project depend on the model and design chosen. Blockchain technology should enable players to have authority over their in-game items, yet this isn’t always true. Before joining a P2E game, make sure you are aware of how it works and who made the project.
It’s important to remember that some P2E games are free-to-play and still give out financial rewards, while others require the purchase of NFTs or cryptoassets before playing. Therefore, it is essential to do thorough research on the game before investing any money. If you make a substantial investment but the rewards are low, it’s likely that you will not get back what you put in.
Axie Infinity is a very well known Ethereum-based Non-Fungible Token (NFT) game that has become more and more popular since 2018. Gamers have the opportunity to make SLP tokens by carrying out daily tasks and competing with other players while using their NFT pets (Axies).
Players who attain a particular PvP ranking can be rewarded with AXS. Also, AXS and SLP can be used to generate new Axies which can then be utilized in the game or exchanged on the official NFT marketplace.
Apart from trading, Axie owners have the option of allowing other players to borrow their Axies which affords them the chance to make money without actively playing.
This system is called scholarship and it allows those who borrow the Axies to play and collect rewards. Owners can thus receive a passive income while scholars can participate in the game without any financial outlay; any rewards earned are divided between both parties.
Possessing digital property
Blockchain technology enables digital asset ownership, enabling gamers to make money from their in-game possessions in a variety of ways.
Players of GameFi have the ability to possess avatars, pets, dwellings, arms, tools and more as Non-Fungible Tokens (NFTs) that are produced or minted on the blockchain. This provides gamers with complete authority over their possessions and guarantees authenticity and validated possession.
In Decentraland and The Sandbox, two popular metaverse games, players are able to benefit financially from land ownership. Through these games, gamers can buy digital land and make money by charging other players for visiting their area, receiving tokens as rewards for hosting content or events, or leasing out the customized property to other gamers.
Applications related to Decentralized Finance
GameFi projects may offer DeFi services such as staking, liquidity mining, and yield farming. This allows players to gain rewards, exclusive items or access new levels by investing their in-game tokens.
Introducing DeFi into the equation makes crypto gaming more decentralized than traditional game studios who have full control over updates; some GameFi projects let the community be involved in decision making via DAOs (Decentralized Autonomous Organizations).
For instance, Decentraland players can cast a vote on either in-game or organizational policies by storing their governance tokens (MANA) into the DAO. The more tokens they put away, the stronger their voting authority becomes. This provides gamers with an opportunity to converse directly with game creators and have a say in how the game is developed.
Do video games fit into the GameFi category?
Players of traditional video games can get digital tokens and items to enhance their characters’ abilities, but these often don’t have any value beyond the game itself. Generally it is not allowed to make money off or exchange them in the real world. In comparison, blockchain games usually employ cryptocurrencies or NFTs as their in-game tokens and assets.
Some may use virtual tokens instead, but players should still be able to turn these into NFTs if they wish. Gamers have the ability to move their winnings into digital wallets and exchange their possessions on cryptocurrencies or NFT marketplaces. Furthermore, they can exchange their cryptocurrency profits into real-world currency as well.
What is the first step to play GameFi games?
Thousands of blockchain games exist, and each one is different. Be vigilant about potential scams and fraudulent websites. Be cautious when connecting your wallet to the internet or downloading games from random sites as it can be hazardous. It is best to create a new crypto wallet for this activity, utilizing funds that you are willing to lose if need be. If you believe the game you’ve discovered is secure, take these steps to begin playing.
1. Create a crypto wallet
You will require a compatible crypto wallet, such as Trust Wallet or MetaMask, to enter the GameFi universe. Depending on the game you intend to play, you may have to utilize distinct wallets or link up with different blockchain networks.
If you wish to engage in blockchain gaming on the Binance Smart Chain (previously known as BNB Smart Chain), you must first connect your MetaMask to the BSC network. You can also utilize Trust Wallet or any other crypto wallet that is supported. To find out which wallets are accepted, take a look at the official website of the game.
You can link your cryptocurrency wallet to the Ethereum blockchain and access most of the games running on the Ethereum network. However, certain titles like Axie Infinity and Gods Unchained developed their own wallets to reduce fees and enhance performance.
Axie Infinity is constructed on Ethereum, but its creators designed the Ronin network as a sidechain, necessitating users to utilize the official Ronin Wallet for communication with the Axie Infinity realm. As a sidechain, it makes trading and breeding Axies much less expensive, bringing down costs of playing.
2. Connect your wallet to the game
To engage in a blockchain game, it is necessary to link your wallet. Ensure that you are linking to the real website rather than a replica. Go to the website of the game and search for the option of connecting your crypto wallet.
Unlike regular online games which require you to make a username and password, most blockchain games use your crypto wallet as a gaming account, so you probably have to sign a communication on your wallet before being able to attach yourself to the game.
Verify the necessary criteria to participate
Many GameFi projects involve buying their cryptocurrency token or NFTs to get started. It is important to research the earning potential and risks associated with each game before investing. It’s also a good idea to calculate how long it would take for you to earn back your initial investment and start making profits.
For example, if you want to play Axie Infinity, you need 3 Axies in your game wallet that can be bought from the Axie Marketplace. To make the purchase, you must have WETH in your Ronin Wallet which can be acquired from cryptocurrency exchanges such as Binance, then transferred using the Ronin bridge.
If you don’t have any money or are risk-averse, think about searching for a scholarship program. This type of program allows you to use Non-Fungible Tokens (NFTs) to play, but it requires that you give a portion of your winnings to the NFT owners.
The future of GameFi
The popularity of GameFi projects has skyrocketed in 2021 and is anticipated to continue increasing in the upcoming years. As of March 2022, there are more than 1400 blockchain-based games listed on DappRadar, ranging from Ethereum to BNB Smart Chain (BSC), Polygon, Harmony, Solana and beyond.
With the steady advancement of blockchain technology, it is expected that the trend of growth for GameFi will persist quickly. The possibility to own virtual assets within these games and make money from them makes GameFi incredibly appealing particularly in developing countries.
Summary
Since the beginning of Bitcoin, people have been attempting to make money through simple online games. Although these types of BTC games still exist, Ethereum and its smart contracts revolutionized the blockchain gaming environment, leading to more complex and engaging experiences.
It is not difficult to understand why GameFi appeals to gamers by combining fun with monetary incentives. With the increasing popularity of blockchain-based gaming, we can anticipate a growth in major companies constructing virtual worlds.
