What is Defi? GameFi? & SocialFi?
We believe you must be heard these terms among your crypto community before
What is decentralized finance (DeFi)?
Let’s go with Defi 1st, DeFi (pronounced dee-fye) is short for decentralized finance. It’s an umbrella term for the part of the crypto universe that is geared toward building a new, internet-native financial system, using blockchains to replace traditional intermediaries and trust mechanisms.
Let’s back up a bit. To send or receive money in the traditional financial system you need intermediaries, like banks or stock exchanges. And in order to feel comfortable doing the transaction, all parties need to trust that those intermediaries will act fairly and honestly.
But now in DeFi, those middlemen are replaced by software. Instead of transacting through banks and stock exchanges, people trade directly with one another, with blockchain-based Smart Contracts doing the work of making markets, settling trades and ensuring that the entire process is fair and trustworthy.
So DeFi is crypto’s version of a stock exchange?
That’s only part of it. Basically, crypto people are building their own version of Wall Street, one that is largely decentralized and deals exclusively in crypto, with crypto versions of many of the products offered by traditional financial firms, and without much of the red tape and regulations that govern the existing financial system.
To be more specific, DeFi is a segment that comprises financial products and services that are accessible to anyone with an internet connection and operates without the involvement of banks or any other third-party firms. The decentralized financial market doesn’t sleep and therefore, transactions take place 24/7 in near real-time, while no intermediary has the power to stop them. You can store your crypto on computers, in a hot wallet, cold wallet and elsewhere, and gain access at any time.
Bitcoin and most other cryptocurrencies hold these characteristics due to the underlying technology that backs these assets. Thanks to DeFi dependence on blockchain technology, transactions are completed faster, cheaper and in some cases will be more secure than they would with human intervention. Decentralized finance seeks to use crypto technologies to solve a plethora of issues that exist in the traditional financial markets:
How does DeFi work?
Users typically engage with DeFi via software called Dapps (“decentralized apps”), most of which currently run on the Ethereum blockchain. Unlike a conventional bank, there is no application to fill out or account to open.
Here are some of the ways people are engaging with DeFi today:
- Lending: Lend out your crypto and earn interest and rewards every minute not once per month.
- Getting a loan: Obtain a loan instantly without filling in paperwork, including extremely short-term “flash loans” that traditional financial institutions don’t offer.
MakerDAO is an organization developing technology for borrowing, savings, and a stable cryptocurrency on the Ethereum blockchain. It has created a protocol allowing anyone with ETH and a MetaMask wallet to lend themselves money in the form of a stablecoin called DAI. MakerDao was formed in 2014 by Danish entrepreneur and current CEO Rune Christensen
- Buying derivatives: Make long or short bets on certain assets. Think of these as the crypto version of stock options or futures contracts.
- Trading: Make peer-to-peer trades of certain crypto assets — as if you could buy and sell stocks without any kind of brokerage.
Uniswap is the largest decentralized exchange (or DEX) and one of the first decentralized finance (or DeFi) applications operating on the Ethereum blockchain. It allows users anywhere in the world to trade crypto without an intermediary. It was created on November 2, 2018 by Hayden Adams, a former mechanical engineer at Siemens
- Saving for the future: Put some of your cryptos into savings account alternatives and earn better interest rates than you’d typically get from a bank.
WBTC stands for Wrapped Bitcoin, simply an ERC-20 token that represents Bitcoin. One WBTC equals one BTC. A BTC can be converted into a WBTC and vice-versa. Being an ERC-20 token makes the transfer of WBTC faster than normal Bitcoin, but the key advantage of WBTC is its integration into the world of Ethereum wallets, decentralized apps (dapps), and smart contracts.
Wrapped Bitcoin start launched on the Ethereum mainnet in January 2019. It was brought to the world as a collaborative project between major players in the DeFi ecosystem, such as BitGo, Ren, Dharma, Kyber, Compound, MakerDAO, and Set Protocol.
- Stablecoins: A cryptocurrency that’s tied to an asset outside of cryptocurrency (the dollar or euro, for example) to stabilize the price.
Cryptocurrencies often experience sharper price fluctuations than fiat, which isn’t a good quality for people who want to know how much their money will be worth a week from now. Stablecoins peg cryptocurrencies to non-crypto currencies, such as the U.S. dollar, in order to keep the price under control.
The most notable stablecoins included:
Tether (USDT)
USD Coin (USDC)
Binance USD (BUSD)
Dai (DAI)
After the Defi, let’s continue with what is GameFi
GameFi refers to the financialization of video gaming. Similar to the popular crypto term DeFi, or decentralized finance, GameFi is a fusion of the words “game” and “finance.”
GameFi is a rather broad term, and, as we’ll explain in this article, titles that are considered GameFi may have entirely different financial elements from one another. For example, some blockchain games reward players for completing in-game tasks while others may enable revenue generation from the various assets a player owns.
It is important to note that GameFi is not gambling. The games we consider part of this emerging sector require players to leverage a mix of skill and strategy to generate income. Although luck may be a part of these games, it is not the predominant factor in determining who wins or is eligible for financial reward.
The History of GameFi
The origins of the term GameFi can be traced back to November 2019, when the founders of MixMarvel, a blockchain game publishing platform, delivered speeches at the Wuzhen World Blockchain Conference in China on how the technology underlying cryptocurrencies could revolutionize the video gaming industry.
Perhaps more famously, however, particularly for western readers, the term was evidently first used by Andre Cronje, the founder of Yearn, in a September 2020 tweet. Since then, “GameFi” has been used with increasing regularity to describe games with financial elements enabled by blockchain technology.
Despite the term only entering popular usage more recently, GameFi’s history goes back almost as far as Bitcoin itself. Early Minecraft servers with BTC integrations, the 2013 website Gambit.com, titles like Bombermine and peer-to-peer services enabling gamers to monetize mainstream titles with BTC represent some of the earliest efforts in the field that we now consider GameFi. Later, projects like Huntercoin used blockchain technology for more than just payments, enabling players to monetize their gameplay by mining cryptocurrencies.
Some of the well-known GameFi among the crypto community
1. Axie Infinity is an online game universe revolving around Pokémon-Esque creatures known as Axies
Axie Infinity is a non-fungible token-based online video game developed by Vietnamese studio Sky Mavis on October 2018, known for its in-game economy which uses Ethereum-based cryptocurrencies.
Players of Axie Infinity collect and mint NFTs which represent axolotl-inspired digital pets known as Axies.These creatures can be bred by the AXS tokens and battled with each other within the game. Sky Mavis charges a 4.25% fee to players when they trade Axies on its marketplace. T
2. The Sandbox World is an Ethereum-based decentralized NFT gaming metaverse that enables non-tech savvy users to create, sell, use, and monetize their own virtual reality NFTs
The Sandbox ecosystem consists of three integrated products and services that facilitate user-generated content creation:
VoxEdit is a program for creating the NFT game assets.
Marketplace for selling and buying those assets.
Game Maker which players use to build their own game experiences without coding
The Sandbox used SAND tokens to facilitate various transactions that are part of its gameplay, including purchasing LAND, interacting with user-generated content, and staking it to participate in the governance of the decentralized autonomous organization (DAO).
3. StepN is a Move-to-Earn platform that gives people money to exercise. One of the hottest properties in blockchain gaming at the moment
It’s built on Ethereum competitor Solana and created by app developer FindSatoshi Lab on August 2021, Stepn is a smartphone app that lets users earn money by walking, jogging, or running for a narrowly delineated time period that refreshes every 24 hours.
But you’ll need a pair of an NFT Sneakers to start earning, with the floor price currently sitting at 3.4 SOL=120 USDT (23June2022) and above. So it’s quite a high financial barrier to entry, especially considering that to earn serious money, a user needs to own a few pairs of Sneakers to unlock higher earning potential. StepN will introduce a leasing function to the platform soon, where players can rent Sneakers from other users and share the profits with them.
Finally, we come to SocialFi = Social Finance
In other simpler terms, SocialFi is social media that will merge the existing capabilities of social networks with blockchain and NFTs.
The SocialFi space lets users earn income from content creation, participation in DAO governance, NFT minting, communicating with other users, watching entertainment and gaming. Unlike the Web 2.0 social networks that we’re familiar with, SocialFi projects provide higher levels of privacy and security for users’ personal data, fairly distribute advertising revenues and offer a more valuable user experience.
Why is SocialFi important?
In the Web 2.0 era, the data of social network users is in the hands of major social network operators. They earn from fundamental social data with little benefit to users.
The following are the major issues with traditional social networks that SocialFi seeks to address:
- Data rights attribution: Social media platforms acquire and retain as much user data as they legally can throughout their platform networks and from third parties, which then becomes their property. SocialFi intends to employ blockchain technology to make user data collecting transparent and non-spoofable.
- Privacy and security: In a traditional social network, all account registrations require the user’s information to be retained in the program, such as their mobile phone number, email address, and so on. It’s trivial to reveal the operator’s backend. The anonymous nature of user-identifying information helps maintain privacy and security because SocialFi is built on blockchain technology.
- Benefits: In general, social media networks make money by selling advertisements based on their user traffic. The platform enjoys the benefits of increased traffic and engagement in the form of billions of dollars in ad revenue, while users reap just the benefits of using the platform.
Some SocialFi web worth the mentioning from us are the following
1. Odysee, a YouTube-like video hosting platform, was launched at the end of 2020 following a beta version that went online in September
It is owned and run by LBRY who’s technology is decentralized to stop people from being censored or de-platformed. They use a blockchain that both creators and consumers can earn LBRY tokens (cryptocurrency) when they create and watch content
2.Matters.news, is a writing community like Medium
They are builded based on decentralized technologies, with open-sourced codebase and self-governance of creators. Creators can write, publish, read and discuss, as well as participate in designing how they create, live and decide together. They also partner with LikeCoin fundation, to reward creativity in the form of cryptocurrency LikeCoin.
3. Mastodon is free and open-source software for running self-hosted social networking services. It has microblogging features similar to the Twitter service
You can use Mastodon through a web client on any device with a web browser, or through a mobile client on a smartphone or tablet. It includes the features similar to Twitter, which including replies, boosts (like “retweets”), favorites (similar to “loves” on Twitter) a timeline view, and support for moderation features such as blocking and voluntary content warnings that hide sensitive content.
Overall, SocialFi is a promising platform that is rapidly expanding in the web 3.0 era. With the current positions that SocialFi holds, we believe that it is a significant advancement in the technology sector as well as a decent means to protect users’ interests in the virtual realm. SocialFi is extremely likely to become a major feature of the decentralized Metaverse ecosystem in the near future.
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