GameFi refers to play-to-earn blockchain games that offer monetary incentives to players. Typically, players can earn rewards in the form of NFTs or tokens while progressing different levels of the game, battling other players, and completing tasks.
Unlike traditional video games, the players have complete control over their characters and in-game rewards. Players can transfer out their items and sell them over the NFT marketplace or trade their tokens in crypto exchanges.
What is GameFi?
GameFi is the fusion of the words game and finance. It has become increasingly popular recently with the mass adoption and popularity of blockchain. It is a play-to-earn model that uses cryptocurrencies, NFTs, and blockchain to create a virtual gaming environment.
Players can earn rewards by progressing through the game, battling other players, or completing tasks. They can transfer their in-game earnings and rewards and trade them in the NFT marketplace or exchange coins in crypto exchanges.
How does GameFi work?
Players will earn rewards such as Avatars, weapons, cryptocurrency, NFTs, characters, or virtual land. Not bad for something whose purpose is to entertain us. Nevertheless, each game will adopt some or all of these. These games are created on the blockchain, allowing players to trade, buy, or sell each other’s rewards.
Some of these rewards could give players certain benefits that allow them to make more rewards. Most often, and commonly used, are rewards that strike the aesthetic eye. These rewards are visual and could be traded or sold on the marketplace. Examples of this include clothes, eyewear, shoes, characters, etc.
Further, depending on the game and model the project has adopted, some players can earn passive income by staking or lending their in-game assets to other players. Talk about creativity. Here are the most common features in GameFi:
Play-To-Earn Model (P2E)
As discussed earlier, this model is a play-to-earn model in which players are rewarded for completing objectives, battling other players, or progressing levels. On the other hand, this is very distinctive and new compared to the traditional pay-to-play model. In this model, players would need to invest before they can continue to play. One common example is Call of Duty, in which players need to purchase licenses or recurring subscriptions.
In most cases, the traditional model won’t generate any financial return for players and in-game assets are usually controlled and held by the gaming company. Contrast this to the P2E model where players can make money in-game and have complete control over their assets.
Nonetheless, it is still essential to research the projects that adhere to this model. Some projects may require buying an NFT before you start playing, while others may require some substantive amount of investment. If the latter is the case, it is more than likely you will lose your money. This is why it is very important to DYOR.
One popular game that adheres to this rule is the Axie Infinity. This Ethereum based NFT project allows players to use their NFTs to battle it out with other players. Users can earn additional rewards, and even earn tokens by battling other players. Talk about paying you just to play. Sign me up.
Digital Asset Ownership
This brings us to the new wave of digital asset ownership. Call of Duty, along with many other popular gaming titles, often controlled and owned in-game items. Players didn’t have the opportunity to trade them or even sell them to other players. They didn’t have the control they now have with blockchain games.
This allows players to monetize their in-game items. In fact, they get paid just to play the game. However, you may be wondering, where does all this money come from? Are things really free? To answer that question we must first answer something fundamental about money. What gives money value? There are many things, the fact that it is divisible, fungible, portable, etc. Further, the trust people have in that currency also gives it value. Similarly, a baseball card. What gives a baseball card value? It's a rarity and the fact there are card collectors willing to pay big bucks for the rarest of baseball cards. Essentially, each of these games is a community that values the items and is willing to purchase them. It is this value that gives it some form of economic value.
Nevertheless, gamers can own digital houses, land, cars, clothes, etc. All these are minted through the blockchain which is a way to verify the authenticity and ownership of the item. Players can then just trade them in an NFT marketplace.
Some popular video games where you can own land are The Sandbox and Decentraland. They emphasize owning plots of land where users can build upon them and charge fees for visiting them or even lease it out or hosting events. The possibilities are endless.
Defi Application
Some GameFi projects offer players the opportunity for staking, liquidity mining, and yield farming. Players are able to stake in their in-game tokens for rewards or to unlock other items.
The introduction of these Defi elements makes the game more decentralized. In fact, one popular governing mechanism that has sprouted as a result of this is Decentralized Autonomous Organizations (DAO). Unlike traditional gaming organizations, DAOs allow players to be part of the decision-making process. They are able to vote for proposals or changes.
For example, Decentraland (MANA) owners are able to lock their tokens as voting power. The more tokens you lock in the DAO the more voting power you will have.
How to get started in Gamefi:
Before you dive into this, make sure to do your own research (DYOR). There are many fake projects out there, including fake websites, whose purpose is to steal your money. To protect yourself make sure to create a new wallet and to use funds you wouldn’t mind losing. Once you have found the right project, one you can trust and have a community follow these steps.
Create your own wallet:
When doing this you want to make sure you create a wallet like Trust Wallet or Metamask. It is also important to note the chain in which the game is being hosted. For instance, if the game is using the BNB smart chain, then you want to make sure you connect your Metamask wallet to that chain.
Other times these GameFi projects will have their own unique wallet they have built to reduce the costs of trading in-game items. Make sure to research the chain the game is on and the type of wallet you need.
Connect your wallet to their website:
To play the game you then need to connect to their website. Make sure you connect to their official website and not a copy. There should be an option to connect your wallet on their website.
Unlike traditional video games, GameFi projects don’t ask you for a username or password. Instead, your wallet is your account. You will be asked to sign a message in your wallet then you will be allowed to play again.
Check the requirements to start playing:
Some GameFi projects require the user to buy an existing token or NFT in order to start playing. Make sure you research what is necessary to start playing the game.
Axie Infinity is a great example of this. They require 3 Axies to start playing. You can purchase them at the NFT store using wrathed Eth. You can also buy Eth on one of the exchanges and send it to your wallet. You can then purchase the Axies from your wallet.
Make sure you research what is necessary and how long you need before you start to earn on your investment.
Closing Thoughts:
With the growing number of GameFi projects, it is only a matter of time before they become mainstream. They have successfully combined entertainment with financial rewards. The ability to earn in-game assets and financial rewards and be able to trade them has proven incredibly popular amongst the community.
With large established companies getting into the fold, it is only a matter of time before this becomes the standard of gaming. If you enjoyed today's content please remember to share and subscribe for more. It will mean a lot to us. With that being said, keep a lookout for more content on GameFi projects we project that might be at the forefront of this new industry.
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