Learn how GameFi uses blockchain technology, DeFi, and smart contracts to track earnings, pay players, and unite both casual and professional gaming.
Eliza Crichton-Stuart
Head of Operations
GameFi, the fusion of gaming and decentralized finance (DeFi), stands at the forefront of technological innovation, offering a groundbreaking paradigm that redefines the landscape of both industries. By integrating blockchain technology with decentralized financial protocols,ย GameFiย creates immersive gaming experiences where players can not only engage in virtual worlds but also earn and trade digital assets securely.
This innovative synergy not only introduces a new dimension to gaming but also revolutionizes the concept of value creation within digital ecosystems. In this article, we delve into the intricacies ofย GameFi, exploring how it seamlessly blends blockchain and DeFi to shape the future of gaming and finance.
According toย Statista, there are around 3.3 billion global video game users. For many, video games are just a hobby; for others, gaming is a career. GameFi exists in the intersection of casual and professional gaming, allowing people toย earn money as they play.
GameFiย games use blockchain technology andย smart contractsย to track earnings and pay players. Theย GameFi modelย emerged with CryptoKitties, an Ethereum-based GameFi project that lets players collect, breed, and trade cat NFTs. Since then, we've seen an explosion of play-to-earn games.
GameFiย games, orย play-to-earnย games, combine distributed ledger technology (DLT) with traditional video games. To get started, letโs get into the nuts and bolts of GameFi.
GameFi, short for "game finance," is a gaming model in which players earn rewards with real-world value. Sometimes, these games require players to buy in-game NFTs or tokens to engage in gameplay. However, many GameFi games areย free to play.
These projects rely on in-game transactions with pay-to-win elements that generate revenue. For example, the Winter Wonderland set that was released in December 2022 for the Immutable (IMX) web3 gameย Gods Unchained contained several powerful cards that would make it easier for players to beat their opponents. People were incentivized to buy these new cards to help them win.
DeFi, short for "decentralized finance," is a technology-focused collection of financial instruments that do not rely on centralized intermediaries.ย DeFi platformsย let people let people engage in activities likeย yield farming, lending and borrowing, and buying and selling cryptocurrencies, NFTs, derivatives, and more using DLT.
NFT gamesย aren't actually stored on the blockchain. Instead,ย traditional gaming technologyย is used for gameplay elements. Players can connect their crypto wallets to these games to interact with the blockchain.
Suppose you're playing a GameFi RPG with a medieval theme and want to use a new armor NFT you earned. In this case, the game would read the contents of your wallet, identify the tokens that interact with the game, and let you choose between the corresponding in-game items.
The actual characters, armor, and otherย in-game assetsย are stored in the gaming software but can only be "unlocked" if the player'sย crypto walletย contains the corresponding token.
Often, when players earn cryptocurrency or NFTs, the game interacts with a smart contract that sends the assets to the players' wallets. In other cases, players earn off-chain assets similar to those in traditional games. They must mint these assets to turn them into NFTs.
GameFi.orgย lets you look through thousands ofย blockchain-based games. This site ranks these games based on active users, sales, and user growth.
The Sandbox is a popular metaverse game that lets players design gaming assets to be sold to others. People can buy land and develop their own games or virtual experiences using NFT assets made by other players.
Alien Worlds is another popular GameFi game that lets players travel the universe looking for planets to mine. As they upgrade their equipment, they can mine more minerals, which they canย trade for cryptocurrency.
Now that we know more about GameFi, let's look at why people are drawn to it.
Players are incentivized to spend time every day with blockchain gaming because they can increase their rewards if they do. As players advance throughย game levelsย or earn new equipment, their earning potential grows, increasing the likelihood they'll stick to playing one game for long periods.
According toย Pierre-Edouard Planche, partner at Griffin Gaming Partners, "gamers now have skin in the game and own a piece of the ecosystem, and as a result, theyย spend more time and money, which equals increased engagement and monetization."
Theย GameFiย ecosystem lets players take part in the creative direction of their projects. GameFi projects often haveย governance tokensย that players can use to vote on important decisions that impact their favorite games.
Theย play-to-earnย gaming ecosystemย lets players own and monetize their in-game items. In contrast, the traditional gaming industry often restricts players from selling the items they earn or buy. For example, in 2018, Pokemon Go's top player wasย suspendedย for selling Pokemon to other players.
Pokemon Go isn't the only game restricting players from monetizing their items. Popular games like Fortnite have sections in their terms of service prohibiting players from selling their items or accounts. Similarly, game developers likeย Epic Gamesย explicitly state that players do not own their accounts or items.
GameFiย continues to rise in popularity, with overย 5 million unique active walletsย engaging with theseย play-to-earnย games. Still, GameFi developers must overcome various issues before this ecosystem reaches the size of the traditional gaming industry.ย GameFiย games store large sums of digital assets in crypto wallets, making them prime targets for hacks and exploits. Additionally, transaction costs and speeds can detract from peoples' gaming experience.
Despite GameFi's challenges, its market value is expected to reachย $8.9 billionย by 2028. As of April 2023, there were aroundย 2,453 GameFi protocolsย across all chains, with more to come. Popular brands like Starbucks are building GameFi games to reward their customers for engaging with their brands. In the future, we'll likely see the GameFi ecosystem integrate with more brands and industries.
In conclusion, the emergence ofย GameFiย represents a significant milestone in the evolution of both gaming and decentralized finance. Through the innovative integration of blockchain technology and DeFi protocols, GameFi offers a dynamic ecosystem where players can immerse themselves in captivating gaming experiences while simultaneously participating in decentralized financial activities.
As this nascent field continues to mature, it holds the potential to democratize access to financial services, empower gamers with true ownership of digital assets, and foster new avenues for creativity and innovation. With its promising trajectory and transformative potential,ย GameFiย is poised to redefine the boundaries of gaming and finance, ushering in a new era of decentralized, immersive, and inclusive digital ecosystems.
This article was inspired by an original blog post, you can read the original write-up hereย for more information.
updated:
March 30th 2024
posted:
March 29th 2024