Insurance Opportunities in GameFi
New ways of value transfer are opening up as we are able to create products around in-game assets.
What is GameFi?
GameFi refers to blockchain games that offer economic incentives to the people that play them. The idea is self-explanatory — play and earn financial incentives for game progression. Not fake, in-game money, but the kind of money that helps pay the bills.
While traditional gaming is typically based on a “play-2-win” model, GameFi flips this and employs a “play-to-earn” (P2E) model.
In web2, items accumulated (clothes, weapons, prizes, cards) all existed solely within the confines of the game, and had no real value in the outside world. That’s not the case in web3. DeFi turns in-game items into tradable liquid assets. The player is finally empowered.
Players have access to new opportunities on GameFi and the possibility of real asset ownership inside the games. They can trade, lend, rent, or borrow against their winnings. Typically players earn in-game rewards like crypto tokens, virtual land, avatars and other NFTs by completing tasks, battling other players or progressing through various game levels.
“If they help create part of the value of the gaming universe, maybe they should have a piece of it”. Tracy Spaight, Head of Gamification of Synesis One
Present State of GameFi
GameFi was one the hottest sectors in Web3 in 2021 and overall, it remains a key focus for institutions and VCs.
According to Binance half-yearly research report, During H1’22 the total capital investments in GameFi exceeded over $4.1 billion with important players behind like Epic Games, Ubisoft, Andreessen Horowitz, Coatue and Softbank. This represents a 40% growth vs H1’21.
We are still in very early stages with significantly more room for growth. Naavik and BITKRAFT Ventures estimated that the blockchain gaming market will grow at a CAGR of 100%, from $1.5B in 2021 to $50B in 2025. This is 10 times the forecasted ~10% CAGR for the traditional gaming industry (source)
Insurance Opportunities in GameFi
Just like any other asset in TradFi or daily lives, in-game assets will be able to be hedged and modularity between financial products across games and platforms is how the space is likely to look like in a few years.
With liquidity coming from big game developers like EA and Ubisoft, one of the last remaining challenges to really kick starting this shift is the merge between Web3 and Web2 workforce.
Once an inflow of crypto-born degens and coders join forces with the already existing gaming industry, that’s when we will see big progress.
One example of what this future might look like is depositing a FIFA Ultimate Team player card as collateral to borrow assets that could later on be used to purchase a piece of clothing in Grand Theft Auto. This is just an example, but would only be realized via blockchains.
Smart contract attacks in the past indicate that hacks are something to be taken very seriously as they all resulted in users permanently losing their assets. Such incidents are not 100% preventable as of today, but players could be protected against their devastating effects.
GameFi Needs DeFi Insurance to Thrive
With new opportunities such as GameFi, new liabilities arise. Surprisingly, there’s little to no protocols insuring GameFi, only a few DeFi Insurance protocols have detected this gap. UnoRe is one of them.
This protocol offers a decentralized insurance and reinsurance platform, building tailor made products for different DeFi ecosystems (bridges, pools, marketplaces and now GameFi)
Uno Re will be ensuring the security of GameFi through smart contract-related risks and player staked assets by providing, as an example, insurance coverage to gaming platforms staking pools. They already have partnerships with Gamerse, Wall Street Games, Arcade Network & more metaverse participants.
New ways of value transfer will open up as we are able to create products around in-game assets. Not only will today’s real economy merge with that of the games we play, but the gaming experience will also be improved tremendously. The gaming industry is about to be disrupted with crypto and protection products.
