What is GameFi?
The term GameFi is made up of a combination of two words, gaming and finance. GameFi then combines the desire to play games, be entertained, and went with the desire to make money.
Thanks to the advent of blockchain technology, gamers are no longer just users generating revenue for centralized gaming companies. They can get paid to play games using cryptocurrencies and tokens in real time.
The whole concept of GameFi encompasses not just the play-to-earn business model of the world’s most popular blockchain games are actively employing, it also merges together the concepts of game for them, decentralized finance, and NFTs to create an experience where the gamer becomes not just the player, but also the creator, and beneficiary of the value they are generating while playing games, purchasing in-game assets, and achieving whatever the objectives of the specific game may be.
It might be hard to grasp the idea that you can actually get paid to play games without having a major sponsor or a big YouTube channel of followers watching your every move on a live stream. Here’s the thing. Major traditional gaming companies make money off of you in several ways.
Traditional gaming companies turn a profit in many ways, but here are some of the top ways:
The costs associated with playing video games can really add up if you want to get serious about it too. Yes, it’s true that you can play many games on consoles owned by centralized companies like Microsoft and Sony, but even if you want to save money by not buying those consoles, it means you’re likely gaming on a personal computer.
Nowadays given that massive multiplayer online role-playing games (MMORPG) games are so expansive, and so many gamers are trying to stream their gameplay online, you can add to that the cost of getting high-end graphics cards for your personal computer or investing in video equipment so that you can stream your gaming live and build your own fan base.
Given the above costs, it makes sense that gaming companies have become billion-dollar entities while building up valuable libraries filled with intellectual property that don’t belong to you. Software companies are also making money hand over fist charging you for hardware and software related to gaming, not to mention they hold onto your valuable player registration and gameplay-related data.
GameFi puts the monetary and data related value that you generate back into your hands.
Whereas traditional gaming companies build their own ecosystems by forcing you to buy their games, controllers, consoles and subscription-based services, blockchain games keep you in their ecosystem by launching their own token. The token usually acts as both a governance mechanism and the means by which monetary rewards associated with your play-to-earn experience or paid out.
Obviously, the latter function is what keeps you tied to the ecosystem the most. It’s also what makes the gaming process a little bit cumbersome in some senses. You need to be able to acquire the tokens, and if they are not formatted for the blockchain that you use the most, you’ll need to bridge those tokens so that you can put them in a wallet tied to the ecosystem that you want to use.
While the concept of play-to-earn gaming is still new, some of the top games in the world like Axie Infinity are paying out enough of a reward such that people in places like the Philippines are actually earning a full-time living playing the game.
Industrious entrepreneurs are also building gaming guilds, where the entrepreneur funds the cost of NFT assets on behalf of gamers who otherwise wouldn’t be able to afford to play, and the gamers benefit from earning tokens while they play and saving up to purchase their own NFT assets, so that they can eventually build their own guilds.
Last year, nearly $25 billion worth of NFTs were sold worldwide. Big-time gaming companies in both the traditional and decentralized realm or inking major partnership deals and becoming conglomerates. Individual users are also benefiting.
Traditional gaming companies now have their own marketplaces where users can buy and sell in-game assets. While these marketplaces will allow gamers to make a profit off of their wares, the intellectual property still belongs to the gaming company. Thus the gamers must follow all the rules of the marketplace in order to engage, and of course they’re going to pay extensive fees.
NFTs, like cryptos, fluctuate in value. With blockchain gaming however, assets can be used to increase in-game functionality and enhance the gaming experience. Not only that, the degree to which you can be prolific at collecting the right assets might increase your chance to play to earn more tokens. This means you generate more monetary value for yourself while playing the games in addition to the fact that the NFT assets themselves can be later sold for a profit.
DappRadar.com categorizes gaming projects that live on altcoin blockchains like Binance Smart Chain and others. The list of the most popular games is always changing of course because the desires of gamers are always evolving.
Here’s a list of some of the most popular GameFi opportunities out in the crypto world today that are relevant at the time of this writing:
Blockchain games often offer users tokens that they can multiply just by locking them into a given gaming ecosystem. This is how gaming becomes GameFi. Your NFT assets hold value, you create value by playing the games and receive a kick back for your efforts, and you earn a percentage on your tokens by committing your tokens and locking them into the game.
Therein lies the power of GameFi overall. As large and exciting as NFTs and blockchain gaming platforms have the potential to be, the world of DeFi is seeing billions of dollars worth of tokens locked into various protocols.
Using the principles of DeFi for gaming makes complete sense. It’s just another way to incentivize players to keep interacting with the same blockchain gaming platforms they know and love already.
There you have it. You now have a deeper understanding of what GameFi is and why it’s such an exciting space for Avarta to be apart of!