GameFi 2023: Everything You Need To Know
- GameFi is a crucial subsector of the crypto industry and Web 3 space
- There are two unicorns in the subsector at press time
Blockchain technology is disrupting every industry, from finance to insurance. The gaming sector has been disrupted too. In most traditional games, players pay to play and can use higher scores to unlock higher levels of the games.
GameFi concepts or blockchain games replace traditional high scores or credits with cryptocurrencies and NFTs (non-fungible tokens). So for every win, you can earn cryptos or NFTs, hence the term play-to-earn (P2E).
P2E is the core foundation of “GameFi.” The term GameFi is a combination of the words “Game” and “Finance.” Gamers can now earn native cryptos and merchandise, which are exchangeable on the larger crypto ecosystem.
History of GameFi
The concept of blockchain games got traction after the term “GameFi” at the Wuhzen Blockchain Conference in 2019. However, the idea was being experimented with even before the conference.
In 2013, the gaming firm Minecraft worked on BitQuest, a server that uses Bitcoin [BTC] as an in-game currency. As such, it was one of the pioneers of GameFi projects.
After the 2019 Wuhzen Blockchain Conference, GameFi became a buzzword, and several blockchain games sprung up afterward.
A report by DappRadar showed that the blockchain games subsector thrived despite the turmoil in 2022. In Q3 2022 alone, the sector raised about $1.3B, accounting for about 50% of all blockchain activity with close to 1M Unique Active Wallets (UAW).
Some of the leading blockchain games include Axie Infinity and The Sandbox. These platforms also have native tokens or coins that are traded over major exchanges. As of March 2023, the gaming coin (GameFi) market cap was valued at $10B, according to Coingecko.
The GameFi sector is growing exponentially, with Asia, the Middle East, and North Africa showing great potential.
How Does GameFi Works?
GameFi allows you to exchange your game rewards (cryptos and NFTs) for actual legal tender. So gamers can earn, trade, or even stake and get interest on crypto and NFTs made.
However, each blockchain game has different token economics that every gamer should understand to maximize the experience and earning potential. Token economics allows the game to build an economy around its platforms.
GameFi projects can have two tokens — utility and governance tokens. Utility tokens allow you to buy in-game features like clothes and artifacts. They also distribute rewards to you and other players.
Governance tokens give you voting rights on the GameFi project. But, GameFi projects’ tokens vary in complexity and functionality. For example, Sandbox’s SAND acts as a utility and governance token.
But Axie Infinity has three tokens with different functions:
- Smooth Love Potions (SLP) as a utility token
- Axie Infinity Shards (AXS) as a voting right, so its a governance token
- RON is a transaction token on Ronin, an Axie’s sidechain.
But, the most incredible primary feature of GameFi projects is the P2E models.
The P2E model is the secret source and glue that holds together GameFi projects. Each project adopts innovative P2E to ensure a valuable gaming experience.
P2E models have two crucial parts. One is ensuring you collect in-game tokens after wins or tasks. The second part ensures you can trade the in-game tokens seamlessly on other decentralized exchanges (DEXs) platforms.
Some creative P2E models leverage DeFi and NFT concepts to drive NFT staking. Like you would earn yield interests with your stablecoins in DeFi platforms, you can do the same with your earned in-game NFTs.
Some of the games that allow you to stake your NFTs include:
- Samurai Saga
- Legends of Ancients (also allow you to earn interest by holding on to your NFTs).
- Mix Mob
- Blockchain Monsters
- Crywar
Loosely put, the P2E model allows you, as a player, to get hold of valuable in-game assets.
But you must make a substantial upfront investment to generate significant earnings. For example, you will need at least 3 Axies to play the Axie Infinity game. And each Axie costs about US$29. If you do the math, you’ll need about US$100 to start playing Axie Infinity.
With that, you can start earning Axie’s SLP tokens as you play and stake the wins.
Read more on the current state and future of the GameFi market>>>>
