Nowadays we see more games on the blockchain. It’s no surprise that gaming has always been interesting, as the global gaming industry is now over 175 billion dollars. The games that run on the blockchain would therefore like to profit from the large money involved.
You’ve probably heard of games like Decentraland or Axie Infinity . The latter accounts for more than $1 billion in digital asset sales. For example, these can be items that can be used in the game. We see that larger companies are stepping into this world. Just think of Ubisoft, for example.
All of this falls under GameFi. In this article we will explain what GameFi is exactly and which games are popular within this industry. We also take a closer look at the play-to-earn principle that is used within the GameFi world.
- 1 What is GameFi?
- 2 How did GameFi come about?
- 3 How does GameFi work?
- 4 How does play to earn work?
- 5 What are the main GameFi games?
- 6 What is the difference between DeFi and GameFi?
- 7 The future of GameFi
- 8 Conclusion
What is GameFi?
GameFi stands for ‘Game’ and ‘Finance’. It deals with the gamifaction of the financial world. It is therefore a subject closely related to DeFi . We will explain what DeFi is exactly, and what the difference between DeFi and GameFi is, in this article.
Just like DeFi, the gaming applications are managed in a decentralized manner. This means that the games run on the blockchain . However, GameFi is not about standard games. GameFi uses the play-to-earn principle. This means that users have to play a game to earn money. For example, they can earn special items in the form of NFTs. This ensures that the items are unique and can yield a lot of money, should the user decide to sell these items.
It is important to mention that GameFi cannot be compared to cyrpto trading or gambling. GameFi is all about developing a special skill that allows you to win certain games. By winning these games, you will receive special items that represent a certain value. They don’t always have to be objects. A game can also reward their players in other ways.
How did GameFi come about?
GameFi is anything but old. It wasn’t until November 2019 that the first GameFi game, called MixMarvel, emerged. This game is not known in the Netherlands and Belgium, because it was mainly played in China .
It was only when Andre Cronje, the founder of Yearn.Finance, tweeted about GameFi in September 2020 that this concept became known in the Western world. We’ve been using GameFi ever since to name games where players can earn money.
Most games run on the Ethereum blockchain . This is because this blockchain supports smart contracts , allowing developers to build their own application on the blockchain. CryptoKitties was the first game to run on the blockchain. This game allows users to collect cats which are stored as ERC-721 tokens. So non-fungible tokens.
By the way, CryptoKitties cannot be compared to a GameFi game. You can of course sell NFT cats to make money, but you don’t actually have to play a game here.
How does GameFi work?
So now you know what GameFi is. But how does a GameFi game actually work, and what characteristics must an application have in order to be counted as GameFi?
On which blockchains do GameFi games run?
It is important that a blockchain offers support for smart contracts. Only then can developers develop a game that can run on this blockchain. Ethereum was the first blockchain to offer this capability, which is why we see that most games currently still use this blockchain.
While Ethereum is the most widely used platform for DeFi, it doesn’t mean it’s the best platform. We see that the transaction costs are very high (sometimes several hundred dollars) and it takes a very long time before a transaction is processed.
That is why more and more GameFi products are choosing to run their game on a different blockchain. It is of course important that players do not have to pay hundreds of dollars in transaction costs every time to execute a transaction. Fortunately, there are plenty of other blockchains that developers can run their game on.
These are the blockchains that most GameFi games run on today, except for Ethereum:
How does play to earn work?
In some games, players earn money by completing certain tasks. This money can be earned in various forms. In many cases, players get native tokens from the game, but it can also happen that players earn NFTs. These rewards are stored in a smart contract. That is why it is important that a blockchain provides support for smart contracts before it can be used for GameFi.
A well-known game within GameFi is Axie Infinity. Users can earn AXS (Axie Infinity Native Token) tokens here by winning matches from other players, creating new Axies and trading on the Axie marketplace. In this marketplace they can trade various items.
What are the main GameFi games?
Axie Infinity is a game whose gameplay can be compared to Pokémon or CryptoKitties. It revolves around breeding Axies, who have a unique set of skills and powers. To start your journey in the Axie universe, you must have a team of at least 3 Axies. Currently, the minimum price to make 3 Axies is about $800.
Users have the option to upgrade their Axies through Adventure mode. They can then earn rewards for each completed mission.
On the other hand, Axie owners can also choose to put their Axies to the test via Arena mode (PVP) where users fight against different users. Every win in Arena mode not only improves your MMR (Matchmaking Rating), but can also earn you a number of rewards based on your MMR.
All items won in the game can be resold. All you have to do to get these items is play the game. Thus, players can earn rewards in the form of Smooth Love Potion (SLP) tokens. Axie Infinity has collected more than $150 million in fees in recent months. This income is redistributed among the players, which is a feature that explains the success of the game, mainly in the Philippines and Indonesia where people play Axie to pay their bills.
Founded in 2011 by Frenchmen Arthur Madrid (CEO) and Sébastien Borget (COO), The Sandbox is a virtual world in which developers can design and monetize games on the Ethereum blockchain, using NFTs and a cryptocurrency called Sand . .
The platform currently offers a suite of no-code game creation tools, which developers can house in one of the 166,464 sections of The Sandbox’s virtual space, much like you would choose a retail location in a city. The tools include solutions for creating 3D animated objects, creating NFTs and a marketplace for trading them. A 5% fee is charged on all transactions. More than 500,000 users have connected their crypto wallet to the platform.
NFTs are also used as title deeds for the tracts of land in this virtual universe, which must be purchased in the same way that one buys land before building anything on it. These tracts of land can be located on a virtual map on which players can run their avatars. Two thirds of these tracts of land have been sold to date for a total of more than $144 million.
Just like in the heyday of Second Life, big brands have taken over some of the space. Square Enix (Final Fantasy, Lara Croft), Atari, Dapper Labs (CryptoKitties, Top Shot), The Smurfs and Snoop Dogg have already positioned themselves within The Sandbox, as well as 165 other brands in all.
The Sandbox can be seen as the convergence of Minecraft, Roblox, Second Life and user generated content around blockchain technology. We are not talking about a ‘metaverse’, in the sense that Mark Zuckerberg understands it, with the use of virtual reality headsets. On the other hand, there is a real connection between NFT and virtual worlds with the metaverse.
In a world without materials, non-fungible tokens are the key to private ownership and a means of differentiation for users. Luxury brands in particular are starting to get a lot of interest for that reason. After all, there is already a lot of money in this world, and that is why more and more people want to take advantage of this.
Aavegotchi is a project supported by a grant from the team at the decentralized financial platform Aave . Simply put, Aavegotchies are digital ghosts (sort of virtual Tamagotchis), with attributes, accessories, and Aave tokens.
It is a community-based project (controlled by a DAO), led by the video game studio Pixelcraft. They now own the Aavegotchi brand and are responsible for its development and tracking of the blockchain.
Today, the studio has a great influence on the project to quickly develop the necessary features for the launch. But little by little, the DAO will become more and more important, so that everyone can have their say.
The rarity and value of an Aavegotchi is determined by two main components: the intrinsic value of the tokens and the rarity score. When the mind is connected to 300 aDai, you can determine the minimum value of the mind by looking at the current value of aDai.
The rarity score is determined by the power of the ghost’s abilities and the rarity of the gear it possesses. This score is of course not fixed, as the Aavegotchi can evolve over time and the equipment can be changed.
The rarest Aavegotchi in the ecosystem will be rewarded with a share of the GHST that users use while fighting. For example, some ghost owners will be able to apply dual passive income strategies with their Aavegotchies.
Gods Unchained is a card game like Hearthstone in which you compete against each other and win cards stored as NFT. Each card is an NFT with its own peculiarities. In other words, unlike Hearthtstone, you do own your cards. This is because smart contracts always store who the owner is.
Gods Unchained was created in collaboration with Nine Realms, and GODS is the ERC-20 token for the Gods Unchained universe. Players can use GODS to craft NFTs, purchase packs from the Gods Unchained marketplace, and earn even more rewards by staking the tokens in the Immutable marketplace. GODS tokens also represent voting rights, allowing players to participate in governance proposals that affect the fate of the game.
The number of GODS tokens in circulation is 20 million, of which 1.4 million will be available in a public sale. GODS token holders who participate in game campaigns while actively staking can earn rewards in the form of GODS tokens, which will be distributed from the reward pool from the start.
The token also serves to expand Gods Unchained’s economy through gameplay, as staking rewards can be earned by players completing in-game campaigns. As the number of players of Gods Unchained grows, so does the pool of rewards for all GODS token holders.
Decentraland is a virtual reality platform built on the Ethereum blockchain. Like Minecraft, Second Life or The Sandbox, there isn’t really a goal in Decentraland. Instead, users traverse a virtual world, buying parcels of land (called LAND) that are stored as NFTs and on which they can earn money. This can be done via tokens, games, apps , etc. LAND is purchased with MANA, Decentraland’s proprietary ERC-20 token.
With Decentraland you can build anything on your own pieces of LAND, and we’ve already seen what happens when people get that kind of power. Minecraft servers, for example, contain exact replicas of fantasy worlds, working computers, and creations of all skill levels. The PlayStation-exclusive LittleBigPlanet features over six million community-created levels, including recreations of other games (Plants vs Zombies is a classic), a working piano, computers, and more.
Not only does Decentraland provide a digital VR terrain to build on, but it is also hosted on decentralized Ethereum servers. The world is also rendered using BitTorrent and Kademlia DHT networks, making it a combination of blockchain and P2P torrent technology.
Based on the model of the famous Panini cards, featuring football players, Sorare allows users to collect them and speculate on the rarest and most sought-after copies. By registering on Sorare, users receive virtual cards from players. These can then be used to create one or more virtual football teams of five players, who also play in different virtual leagues.
The results of the user will depend on the performance of the real players in real football matches. If a player from one of the property cards scores a goal in real life, the card becomes worth more. Each player is rated on a scale from 0 to 100, calculated by an algorithm based on data from Opta. This is a company that specializes in football statistics. It is therefore up to the user to choose his virtual players wisely, taking into account their current form or any injury.
Obviously, the rarer a player card is, the more points it earns and the more expensive it will be. This is how Sorare makes money, auctioning the cards every minute. Some can be sold for $280,000. This record amount was achieved by a card from Cristiano Ronaldo.
The cards are classified according to different scales of rarity, the most prized of which is the ‘unique’ category, meaning only one will exist per footballer and per season. So the lucky owner can expect to be able to sell it on the market for several thousand euros.
Then there are the ‘super rare’ cards, digitally produced in 10 copies per player and per season, the ‘rare’ (100 copies) and the ‘limited’ (1,000 copies). For example, a ‘limited’ card by Lionel Messi was sold at PSG for 11,000 euros. Sorare users can also buy or sell their tickets among themselves through a dedicated marketplace.
What is the difference between DeFi and GameFi?
DeFi stands for Decentralized Finance and is one of the areas within the crypto world that is currently receiving a lot of attention. DeFi wants to recreate the financial system we use today, but in a way that would remove all trusted intermediaries such as banks.
Bitcoin , the first decentralized network, laid the foundation for this movement by enabling peer-to-peer payments. This means you can send Bitcoins to anyone in the world without having to know or trust that person, and without using a third party service such as a bank.
In addition to these features, Bitcoin has other features that are incorporated into its protocol. Perhaps the most important is the supply limit. This limit states that there can never be more than 21 million Bitcoins in total. This scarcity explains why Bitcoin is often referred to as “digital gold.”
Once people realized the power of the Bitcoin network, they immediately started thinking about how it could provide more uses beyond just storing Bitcoin’s ownership status.
Determined to find a solution to this problem, a young Bitcoin enthusiast named Vitalik Buterin started creating Ethereum in 2013. Technically, Ethereum is a kind of “world computer” that can store both code and data. Like a normal computer, Ethereum can execute code, and it uses the blockchain as its hard drive. Whenever code is executed and data is changed, the state of the blockchain is updated.
DeFi was created because Ethereum has the following properties:
- Decentralized . Applications that can operate without a single central entity controlling them and that are controlled by their users.
- Censorship Resistant . Applications that cannot be hindered by a government or other actor.
- Available to everyone . Applications that can be built and used by anyone in the world, without geographical restrictions.
While Ethereum is theoretically suitable for any type of application, DeFi is the sector that is currently the most explored. DeFi encompasses a wide range of applications that are intended to replace banks and other financial institutions. Basically, there is little difference between GameFi and DeFi.
GameFi can be seen as part of DeFi. Users can earn money by playing a GameFi game. Since it is basically a decentralized way to make money, we can say without a doubt that GameFi is an important part of DeFi.
The future of GameFi
It seems like GameFi is already huge, but it is actually still in its infancy. There are very few games left where users can earn money simply by playing the game. Games like Axie Infinity have already seen tokens being sent that are worth more than $1 billion.
There have of course been several blockchain games in the past that have failed. It seems that these are mainly games where players can’t earn anything. We see that players are looking for games where they can earn rare items that can be worth a lot of money.
Because more and more large companies are stepping into GameFi, the future of GameFi looks bright. There is a good chance that a lot of new games will be developed in the coming years where players can earn money. We will probably also see these games get a feature much more often.
For example, a game could be developed where players mine crypto by playing a game. As a result, the energy that they would normally spend on the game is also used for mining crypto. Energy is thus used in a much more efficient way.
It seems that you often have to be present at a game early. When you get in too late, it is often difficult to collect objects that can become valuable. That is why it is advisable to keep a close eye on the GameFi world, so that you are there in time. This increases the chance that you will acquire objects that can become very valuable, which could make you rich with the gaming.
It is still important to mention that you also have to watch out for scammers here. When there is money to be made, scammers are always lurking. Just think of ICOs where many people have lost money in the past, or the so-called pump-and-dump coins. The same can happen with games where you could earn so-called money.
The gaming industry is growing very fast. It did that before we ever heard of blockchains. However, it has gained momentum since it is also possible to play games that run on the blockchains. Many of these types of games allow players to earn money by playing the game. We call these play-to-earn games and these games fall within GameFi.
GameFi stands for ‘Game’ and ‘Finance’, which means (as the name implies) that it is a mix between play and finance. It is therefore part of DeFi, which has also become very popular in recent years.
Nowadays there are a lot of games in which users can earn money. Think for example of Axie Infinity, Sorare, Decentraland and The Sandbox. It’s not about change by the way, because some items that players earn are sometimes sold for tons. So you can get really rich by playing these kinds of games.
Thanh Lanh Tran(1989) is Chief Editor from BitcoinUSD.com