What is GameFi? How does it function?

The term “Gamefi” describes blockchain-based play-to-earn games that reward players with money. Normally, completing tasks, competing against other players, and moving through the various game levels will net players rewards in cryptocurrencies and NFT.

Since the emergence of Axie Infinity, Gamefi has been quickly displacing the traditional gaming sector. It draws players by giving them the chance to have fun and earn money at the same time.

What is Gamefi?

The terms “game” and “finance” have been combined to form the term “GameFi.” It alludes to blockchain play-to-earn games that give players financial incentives. A virtual game environment is produced by the GameFi ecosystem, which also leverages blockchain technology and non-fungible tokens (Nfts).

Players typically gain access to in-game goodies through completing missions, competing against other players, and advancing through the various game levels. In order to trade on cryptocurrency exchanges and NFT markets, they can also move their asset outside of the game.

How does GameFi work?

In GameFi, rewards can come in different forms depending on the game. They could be in-game assets, like virtual land or avatars, or be converted into an NFT to be traded on NFT marketplaces. In-game assets typically provide certain benefits to the players, like the ability to make more rewards.

Depending on the game, players can gain rewards through completing missions, engaging in combat with other players, or constructing buildings that can be sold. Through staking or by lending their in-game assets to other players, some games can allow users to earn passive revenue without actively participating in the game. Let’s take a look at some of the common features in Gamefi.

Play-to-earn model (P2E)

Play-to-earn (P2E) is a ground-breaking gaming mode that is at the heart of all Gamefi ventures. Compared to the play-to-play concept used by classic video games, it is considerably different. Play-to-play demands that players make an initial investment before they begin. For instance, users must buy licenses or recurring subscriptions to play video games like Call of Duty.

Defi applications

Staking, liquidity mining, and yielding farming are just a few of the Defi products and features that certain GameFi projects also offer. Players typically risk their in-game tokens to gain awards, gain access to premium products, or advance through the game’s stages.

Decentralized gaming in cryptocurrencies can also be achieved by adding Defi aspects. The community can take part in the decision-making process for various Gamefi projects, in contrast to traditional game studios that have centralized control over their game updates. Through decentralized independent organizations, they are able to suggest and vote on next upgrades (DAOs).

Digital asset ownership

Because digital asset ownership is made possible by blockchain technology, gamers can earn money from their in-game assets in a variety of ways. Some popular metaverse games, such as Decentraland and The Sandbox, focus on the concept of the land ownership. They allow players to monetize their virtual land. In The Sandbox, gamers can purchase digital pieces of real estate and develop them to generate revenue.

Do video games fall under GameFi?

In-game currency can be earned and digital assets collected by regular video game players to enhance their characters. Nevertheless, these tokens and things cannot be exchanged outside of the game.

The in-game currency and assets in blockchain games are typically cryptocurrencies and NFTs, but players should still be able to change their in-game currency and assets into NFTs if they so want. Players can now transfer their winnings to cryptocurrency exchanges or NFTs markets. Then, they can also turn their cryptocurrency winnings into fiat currency.

The future of GameFi

As blockchain technology continues to develop, the Gamefi growing trend is expected to continue at fast pace. The ability to own in-game assets and make money from games makes Gamefi very attractive, especially in developing countries.

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