What is GameFi?

​​GameFi or gaming finance are blockchain projects that allow users to earn money as part of the gameplay. Can you really make money with it? Let’s find out!

The model combines game mechanics, elements of decentralized finance (DeFi), non-fungible tokens (NFT), as well as metaverses.

When did GameFi appear?

The term ‘Gamefi’ was first mentioned by Andre Cronje, the founder of the DeFi-project yEarn Finance, in 2020. Back in 2014, some online casinos accepted deposits in bitcoin.

The developers made experiments by integrating bitcoin with Minecraft servers, a computer game in the Sandbox genre. On the MinecraftCC server, players received a reward in the first cryptocurrency for any action, such as: placing blocks, killing monsters, building and much more. In 2016, the program became unstable and bitcoin support was removed, but the server is still active.

The CryptoKitties app, which was launched in 2017, became one of the first popular online games on Ethereum. In CryptoKitties, everyone could buy, raise and exchange digital kittens in the form of ERC-721 standard tokens.

The application aroused great interest among users: in less than a week after its launch, the “crypto currency” accounted for more than 11% of all transactions on the network. The game has repeatedly caused an overload of the Ethereum blockchain.

The GameFi sector has been rapidly expanding since the beginning of 2020. A plethora of games with tokenized in-game objects have emerged. This was made possible by the increasing popularity of DeFi and NFT.

What is the difference between GameFi and classical video games?

The classic “pay to play” model requires the user to pay for a subscription or licensed access, as well as game-enhancing features.

This type of video game is played on gaming companies’ centralized servers. As a result, in-game purchases and the environment cannot be fully owned by the user.

For example, a user may purchase new armor or weapons to improve a game character’s performance. Items are usually restricted to a single gaming platform or virtual environment. They are only used by the player in the location where they were purchased.

GameFi is revolutionizing the gaming industry. Projects combine business and pleasure — gaming and monetization — and blockchain allows this model to be decentralized and transparent.

The concept assumes the preservation of ownership of digital items in the form of NFT. The blockchain stores information about the owner of game artifacts. The data cannot be replaced or deleted.

In addition, users are rewarded for participating in the project’s tokens. On trading platforms, the player can sell tokenized rewards as well as exchange them for another cryptocurrency or fiat money.

GameFi offers a diverse range of genres, from classic lottery to complex multiverse multiplayer. Gala Games, a blockchain game development company, hopes to create a holistic ecosystem with a single economy for various game genres in the future.

Which blockchain is used to create GameFi projects?

The first Gamefi projects were created on bitcoin and Ethereum, but at the moment they mainly use cheaper and faster solutions.

Axie Infinity, for example, was initially released on the Ethereum blockchain, but a full-fledged ecosystem was eventually deployed on the Ronin sidechain.

Other specialized blockchain platforms adapted for GameFi exist, such as Flow from the creators of CryptoKitties. Many games have been released on the blockchains of Tron, BNB Chain, Wax, and Polygon.

What are the types of GameFi projects?

Free2Play
Projects that do not require an initial investment — you can begin playing right away.

For example, Gods Unchained is a collectible card game on the blockchain. It is similar to Hearthstone in many ways, but it allows players to freely sell and exchange NFT cards as well as receive rewards for game success.

Play2Earn

This category includes all blockchain projects that enable users to monetize the gaming experience.

Move2Earn

Projects that reward users for physical activity, rather than gameplay.

A well-known representative of the segment is a fitness application for a STEPN mobile device. The app tracks the players’ movements using GPS, and the user receives project tokens for walking or running. To participate, you must have a pair of digital sneakers in the form of NFT.

Metaverses

It is a three-dimensional virtual world in the form of a game sandbox, in which users own not only digital objects, but also plots of land represented by non-fungible tokens.

For example, in The Sandbox and Decentraland, any player can buy digital real estate, develop it and earn income, and in the multiplayer My Neighbor Alice, you can purchase an entire farm.

Companies that provide tools for the development and distribution of gamified projects on the blockchain deserve special attention.

Enjin, for example, provides project developers with tools, integrates blockchain technologies and virtual economy into existing video games, and assists in the release of in-game cross-chain NFTs.

What is the purpose of the P2E model?

The main advantage of the P2E model is the rewards in the project’s game tokens, as well as the ownership of digital assets and characters.

In general, players are rewarded for completing in-game tasks such as interacting with other players, participating in tests and competitions, progressing through levels, and other actions. However, most Play2Earn projects necessitate an initial investment.

In the Axie Infinity ecosystem, for example, you must first purchase or rent a team of Axie characters before playing the game. Sweet Love Potion (SLP) tokens can be obtained by using NFT creatures. They can be exchanged for another cryptocurrency or fiat currency.

How are DeFi and GameFi connected?

​​ The projects incorporate DeFi mechanics into the gaming ecosystem, such as profitable farming, stacking, and liquidity mining.

For example, in The Sandbox metaverse, players can stake the SAND token. The user receives a profit based on the amount of funds blocked, as well as valuable GEM and CATALYST game resources.

DeFi elements make games even more decentralized. Some GameFi projects provide an opportunity for the community to influence the future of the project via decentralized autonomous organizations (DAOs) and smart contracts. The number of tokens holders affect the voting rights.

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