04/17/2024 | Press release | Distributed by Public on 04/16/2024 22:54
GameFi is a concept in blockchain gaming in which gamers are rewarded for their time and effort as they play their favorite games. This guide explains what GameFi is, how it works, and discusses the benefits and drawbacks of this crypto market segment.
What Is GameFi? An Introduction to Play-to-Earn (P2E)
Gaming Finance (GameFi) is a development within the blockchain ecosystem that blends online gaming and elements ofdecentralized finance (DeFi).
The GameFi market represents a category of decentralized applications (dApps) and is creating an ecosystem that merges blockchain technology, cryptocurrencies, non-fungible tokens (NFTs), and DeFi.
Luck plays a role, but GameFi isn't gambling.
These blockchain games integrate monetization opportunities that enhance player participation and experience, requiring a mix of skill and strategy. The play-to-earn (P2E) concept in GameFi seeks to offer players tangible value for their time.
Players can earn NFTs or GameFi crypto, such as avatars, costumes, weapons, or virtual land, which allows them to battle other players, engage in Metaverse GameFi by building monetized structures, or advance to higher levels.
Once a player receives a reward, they can use it within the game, transfer it outside the game, trade it on NFT marketplaces or cryptocurrency exchanges, or use it as collateral in DeFi Apps.
How Does GameFi Work?
Blockchain is the backbone of GameFi. The distributed ledger ensures that gaming projects are transparent and secure in tracking player transactions and ownership.
Integrating blockchain creates a decentralized environment where all actions, transactions, and ownership are verifiable and immutable. Blockchain's transparency and security guarantee the security of GameFi ecosystems by preventing cheating or hacking.
The in-game assets earned in GameFi provide certain benefits to players and help them earn additional rewards. However, not all earned assets have a direct earning impact on the gameplay itself. Some only have a cosmetic value, but they still add some value to the market price of the NFTs to which they are attached.
Some platforms offer players passive income opportunities like lending or staking that don't involve direct gameplay but pay a commission instead.
GameFi exists in many different forms, offering various mechanisms through which players can potentially generate gains. However, most popular blockchain games provide a combination of any of the following features:
Examples of Popular GameFi Applications
Let's take a look at examples of popular GameFi applications. Before we dive in, be mindful that we are not endorsing any of these platforms or their tokens.
Aavegotchi
Aavegotchi is a gamified DeFi product where pixelated ghosts called gotchis serve as on-chain piggy banks where players deposit crypto and receive an interest rate. The unique combination of DeFi and NFTs allows players to stake their NFT avatars, such as in-game wearables, whose value is determined by rarity levels. Players can participate in activities like mini-games, meet-ups, rarity farming, or governance to earn rewards that are paid in GHST tokens.
Alien Worlds
The Alien Worlds NFT metaverse game runs on WAX, Ethereum, and BNB Smart Chain. Participants play in a simulated economy, competing for scarce resources like NFTs and in-game tokens. The players engage through mining to acquire and rent land or vote for in-game governance rights. Reward payouts for good combat and accomplishing missions are paid Trillium (TLM) tokens.
Axie Infinity
Axie Infinity is a blockchain-based monster-battling game where players buy, battle, and breed in-game monsters called Axies. Players can use their Axies and land plots to populate the game or breed the Axies to create more powerful teams and gain additional NFTs they can sell on the marketplace for real money. The game uses two tokens: Axie Shards (AXS) for winning battles or upgrading body parts and Smooth Love Portion (SLP) to raise new Axies characters.
DeFi Kingdom
DeFi Kingdom is a yield farming simulation game that blends the appeal of DeFi and P2E economies. The game's ecosystem uses the JEWEL token, which acts as a gas token on the DFK Chain as a governance or fee distribution token. Gamers can also harvest rewards by staking their JEWEL tokens in The Gardens or using the collectible Hero NFTs to enhance their performance, fund in-game activities, and craft or unlock liquidity pool rewards.
Splinterlands
Splinterlands is a digital trading card game powered by the HIVE blockchain. Since the players fully own the cards and in-game items, each of which is an NFT, they can hold them as collectibles, use them to battle, or combine them to level up. Users can also burn their cards to obtain SplinterShards (SPS) and Dark Energy Crystals (DEC), the official tokens of the Splinterlands ecosystem.
Benefits and Drawbacks of GameFi
Below are some of the benefits and drawbacks presented by GameFi applications:
Pros
Cons
The Bottom Line
GameFi embodies a new category of use cases that fuse the elements of online gaming and DeFi, offering innovative applications and revealing the potential of blockchain beyond cryptocurrencies.
Play-to-earn games (and their tokens) were big in the last bull market of 2021, with the likes of Decentraland, Sandbox, and Axie Infinity emerging as the leading platforms in the space.
As the current bull run continues, it will be interesting to see how this crypto market segment will perform and how the P2E gaming sector will evolve.
FAQs
What is the meaning of GameFi?
Short for Game Finance, GameFi combines blockchain technology, online gaming, and decentralized finance to create play-to-earn games. The concept gives players economic incentives to catalyze their participation. The GameFi ecosystem uses digital tokens, NFTs, and blockchain to create an immersive virtual gaming world that's gravitating toward the metaverse.