What is GameFi? How Gaming and DeFi Work Collectively

What is GameFi? The gaming business is worth about $400 billion and is predicted to grow accelerated in the following years. A problem exists, though, with conventional gaming. The user genuinely owns nothing in the game. The game developer can alter the rules to remove features or adjust the in-game currency at any moment. GameFi is unique because it allows players to own in-game assets and, in many cases, earn tokens just by playing the game.

Here, we’ll examine GameFi, its functions, and how to begin using it. We will also discuss how GameFi could influence the gaming industry in the future and some of the dangers you should be aware of before starting your blockchain journey.

How Do Gaming and DeFi Work Together?

Decentralized finance (DeFi) technologies, such as smart contracts and non-fungible tokens (NFTs) to symbolize in-game assets, are integrated into blockchain-based games in what is known as GameFi, an online gaming concept. Many GameFi games allow players to earn in-game currency by playing, and some even have economies and assets that can be traded on in-game or external marketplaces.

By providing permissionless access (anyone may play) and actual ownership of in-game assets through transferable NFTs, GameFi games help distinguish themselves from traditional gaming models. DeFi stands for decentralized finance. Trading and in-game service payments are both made possible by DeFi’s smart contracts, which are blockchain-based computer programs.

GameFi vs. Traditional Gaming

The game models, specifically pay-to-play vs. play-to-earn, are where traditional gaming and GameFi diverge. Nevertheless, there is a crossover area with in-game advertising. At times, players of both gaming models may be subjected to in-game ads, like a billboard smack dab amid the action. Most older games use a subscription or outright purchase model for player funding. On the other hand, GameFi is all about the play-to-earn model, where players can earn rewards for their successful gameplay, and in-game activities can be monetized.

This does not imply that playing GameFi will always cost you nothing. Putting money down could be necessary to get things rolling. For instance, in Axie Infinity, you must assemble a squad of three Axies, the game’s characters, to engage in combat. Lucky for you, three simple axes won’t set you back more than $10. On the other hand, Axie Infinity Origin is available at no cost. Asset ownership is another critical area where GameFi differs from conventional gaming. GameFi creates secondary markets for game NFTs by tokenizing in-game assets, making them tradable.

Play-to-Earn Potential

Many classic video games feature the ability to earn in-game tokens for completing tasks, winning battles, or reaching other milestones. However, your in-game tokens and cash will stay in the game, and tokens and coins earned in-game cannot be exchanged for actual money.

In contrast, players of GameFi games can earn in-game currency that can be converted to real money or used in other ways within the DeFi universe. In addition to farming rewards, players can earn in different ways, like selling NFTs and using GameFi. With GameFi, you can make everything from a little pennies here and there to a full-time job if you’re flawless.

Decentralization and Ownership

When comparing GameFi to more conventional forms of gaming, the centralization vs. decentralization debate is crucial. Not long ago, a prominent game developer updated their end-user license agreement. Those against the move could not access their accounts and play the games they had paid for. One company controls access; that’s centralization. Data breaches are another potential danger of centralization. Hackers who target centralized systems are more likely to succeed in stealing sensitive user information and financial details.

On the other hand, GameFi uses public, decentralized blockchains. Don’t worry about giving out your private details. You can avoid using a human-readable player name and instead connect to games using an alias that is your crypto wallet address. No entity can restrict access to GameFi. Token holders on many GameFi platforms can vote on platform updates through a decentralized autonomous organization (DAO).

The degree to which power is concentrated or distributed within the game affects your identity and ownership of in-game assets. In traditional centralized games, you or your in-game possessions can be erased at the push of a button. In contrast, GameFi lets users keep what they earn in-game and frequently lets the community vote on significant project decisions using DAOs.

Also Read: What is DeFi? Guide to Decentralized Finance By Esteemcrypto

Monetization Models

Another benefit of decentralization is the shift toward a player-centric revenue model for GameFi games. NFTs are used to tokenize in-game assets. You can make money in some metaverse games by selling or renting out NFTs representing land. Equipment, armor, and skins are all gear upgrades that could be NFTs. This would let players buy and sell gear with ease.

An NFT featuring CryptoKitties fetched 600 ETH in 2018, or around USD 172,000. With the price of ETH where it is now, that’s over $1.8 million. The original crypto Kitties was a blockchain game that set the stage for today’s more complex web3 games.

These P2P transactions revolve around DeFi intelligent contracts, which enable any network wallet address to transact with a pseudonymous identity. The development team may receive a portion of the proceeds from each sale to assist with continuing development costs. To create an incentive to enhance the game and boost demand for game tokens, the team may also hold tokens typically distributed as part of the initial distribution.

Contrarily, subscriptions, microtransactions, and traditional sales are the mainstays of traditional gaming. The game studio keeps 100% of the money that players spend. Even more so, the publisher has complete control over the game’s economy and can make changes whenever they want.

How to Get Started in GameFi

To begin using GameFi, you typically require cryptocurrency and a cryptocurrency wallet. The game you wish to play determines the cryptocurrency you’ll need. For example, Ethereum is at the heart of Axie Infinity. On the other hand, if you want to use Star Atlas, you’ll need SOL tokens and a wallet compatible with the Solana blockchain.

Selecting a GameFi Platform

GameFi offers something for nearly every type of gamer. Choose from more straightforward, time-tested favourites like CryptoKitties or Axie Infinity. Alternatively, explore infinite metaverse worlds like Decentraland or an entire universe with Illuvium.

• CryptoKitties: Although less prevalent than in its heyday when CryptoKitties famously almost broke Ethereum, CryptoKitties still lets players channel their inner geneticist to breed new kitty NFTs.
• Axie Infinity: If you like Pokemon battle-type games, you might also enjoy Axie Infinity. Build a winning team of Axies and battle your way to the top.
• Decentraland: Explore a seemingly endless metaverse with something for everyone and an in-game economy.
• DeFi Kingdoms: Strategy meets profit opportunity in DeFi Kingdoms, a playfully pixellated fantastical world.
• Illuvium: Battle in arenas on distant worlds in this community-governed GameFi project.
• Pixels: The aptly named Pixels brings back 8-bit graphics in this play-to-earn game. The game lets you build your low-resolution world, with profit opportunities for dynamic players.

Making the Initial Investment

Depending on the game you pick, you may want some cryptocurrency seed capital to begin playing. To start your adventure, you can buy an avatar, weapons, and other in-game items. You can’t access the game or perform transactions without a self-custody cryptocurrency wallet. Unfortunately, you can’t link an exchange wallet. On the other hand, you can purchase cryptocurrency in exchange and then move it to a wallet you keep for yourself.

GameFi’s Impact on the Future of Gaming

Traditional games may adopt GameFi features to stay competitive, as GameFi projects provide numerous advantages over conventional games. Players might be able to save in-game items like gear as NFTs, for instance. However, in-game upgrades generate much revenue for gaming businesses, and they want to keep doing what they do. Nonetheless, studios may be likely to grant users more excellent agency if the GameFi market were to experience significant growth. With over 650,000 active wallets, GameFi is a promising market to watch, thanks to games like Pixels. For now, players can choose between traditional games and GameFi; both have their place in the market.

Conclusion

By fusing the gaming and decentralized finance industries, GameFi empowers gamers by granting them greater control over their virtual assets. Because the games are decentralized, everyone can play them without restrictions and paywalls. Once they get there, players can earn GameFi crypto tokens, trade NFTs, and even provide liquidity for game tokens on decentralized exchanges. There are many possibilities to monetize gameplay.

More thrilling games are on the way as the GameFi sector expands. Even more conventional game developers may take note, and players may soon be able to use the blockchain to acquire ownership of some in-game assets.