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What is GameFi? ‘Play-to-Earn’ Gaming Explained

what is gamefi? Play to earn Gaming Explained
Hyper league is play to earn NFT Car racing games

Here we explain the concept of GameFi, from the history of arcade games to the crypto business model of “play-to-earn Crypto gaming”

Until now, making money from games has largely been a one-way street. However, the psychology of gaming has changed. Players want to play a bigger role in the games they play. They want to get rewards for the time they spend online.

‘GameFi’ refers to the financialization of video games. It is characterized by its “play-to-earn” (P2E) business model. It mainly refers to blockchain games that offer token incentives to players while creating a framework for the owner rather than the standard player as a consumer.

 

Read on as we walk through the world of GameFi. In this article, you will all learn about what it is and how it works, its origins, and the different variations of ownership.

What is GameFi?

GameFi is an amalgamation of the terms game and finance. It refers to blockchain games that offer economic incentives for players to earn. The GameFi ecosystem uses cryptocurrencies, blockchain technology, and non-fungible tokens (NFTs) to build a virtual gaming ecosystem.

 

Normally, players can get in-game rewards by completing tasks, competing against other players, and advancing through the various game levels. They can also transfer and trade their assets outside the game on crypto exchanges and NFT marketplaces.

How Does GameFi Work?

Blockchain-based games almost always accompany in-game currencies, marketplaces, and token economies. Unlike traditional games, there is no central authority that controls. Instead, GameFi projects are typically managed and controlled by the community, with players even able to participate in decision-making.

 

Although the mechanisms and economics of each GameFi project may differ, there are some commonalities:

Blockchain Technology: 

GameFi projects run on the distributed ledger of a blockchain. This tracks player ownership and ensures transparency of all transactions.

Play-to-Earn Crypto gaming Business Model: 

Unlike traditional games where users play to win, GameFi projects use a P2E model. These games incentivize players to play and progress by offering rewards that have measurable value outside of the game. Players typically get rewards in the form of in-game cryptocurrencies or NFTs.

Asset Ownership: 

In traditional games, in-game purchases are non-transferable investments tied to a single game. Assets can range from armor to virtual real estate stored on the blockchain as tokens. In P2E, players own their tokenized assets in the game. In most examples, they can trade them for cryptocurrencies and, eventually, fiat.

DeFi Solutions: 

Many GameFi projects can also incorporate elements of decentralized finance (DeFi), such as yield farming, liquidity mining, and staking. These provide additional opportunities for players to grow their token wealth.

Do Video Games Count as GameFi? 

Traditional video gamers can also earn in-game currency and collect digital items to upgrade their characters. However, these tokens and items cannot (or should not) be traded outside of the game. In most cases, they don’t have value outside the game. And even if they have value, players are often prohibited from monetizing or trading their assets in the real world.

In blockchain games, the in-game tokens and assets are usually cryptocurrencies and NFTs. Some blockchain games use virtual tokens instead of cryptocurrencies or NFTs, but players should still be able to convert their in-game assets into NFTs if they wish. Players can transfer their earnings to crypto wallets and trade their assets on crypto exchanges or NFT marketplaces. Afterward, they can also convert their crypto winnings into fiat money.

The Future Of GameFi

The Future Of Gamefi
The Future of Gamefi

The number of GameFi projects jumped in 2021 and will likely continue to grow in the coming years. As of March 2022, more than 1,400 blockchain games are listed in DappRadar. We now have popular games for multiple blockchains, such as Ethereum, BNB Smart Chain (BSC), Polygon, Harmony, Solana, and many more.

As blockchain technology continues to evolve, GameFi’s growth trend is expected to continue rapidly. The ability to own in-game assets and earn money from games makes GameFi very attractive, especially in developing countries.

Final Thoughts

Since the early days of Bitcoin, many people have tried their luck with simple browser games in hopes of making BTC profits. BTC games still exist, but the rise of Ethereum and smart contracts has certainly changed the world of blockchain games, which can now offer much more elaborate and interesting experiences.

It’s easy to see how GameFi attracts players by combining entertainment with financial incentives. As blockchain games become more popular, many large companies will likely build the metaverse.

 

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