GameFi opens up the portal to a world where online games are more ‘rewarding’ than ever before. Welcome to the world of play-to-earn gaming. NO, this is not some version of Squid Game, nor is it an online card game.
GameFi is a gaming destination that combines video gaming, blockchain technology, and decentralized finance (DeFi), allowing gamers to earn crypto assets while owning and trading different virtual elements of the game.
Sounds interesting, right? If you want to understand GameFi and how it will disrupt the crypto market, read on.
- GameFi is a booming ecosystem
- Players in GameFi are rewarded in cryptos for their time and effort spent while playing and winning
- GameFi takes out video gaming experience from walled-off data networks to the blockchain
- NFTs and DeFi are the two major components of the GameFi ecosystem
An Overview of the Global Video Gaming Industry
Before we take a deep dive into the topic at hand, let’s look at the size of the global video gaming industry and some key statistics, which will help us get a sense of the significance and potential of this newbie.
- The global market size of video gaming in 2021 was $178 billion, which is estimated to reach $268 billion annually by 2025.
- In 2021, the number of video gamers worldwide has crossed 3.24 billion, and the contribution of Asia is the highest at 1.48 billion.
- In-game consumer spending in 2021 has exceeded $54 billion, overtaking the value of video game purchases. And by 2025, the market value of in-game consumer spending is estimated to exceed $74 billion.
- The global average time spent by gamers playing video games per week is 8.45 hours. But, gamers in China spent the most time weekly, at about 12.39 hours, followed by gamers in Vietnam at 10.16 hours per week.
Globally, gaming continues to be the biggest popular way for millennials and Gen Z to pass time.
What is GameFi?
The traditional video-gaming industry works on the “pay-to-win” model. In this model, gamers have to spend money to upgrade and unlock different virtual elements of the game in order to gain an advantage over other players. However, these in-game purchases are useless to the gamer once the game is completed, and there is no option of transferring them to other players or selling them out. In simple words, gamers have to spend to enjoy a superior gaming experience.
This is where GameFi and crypto gaming makes a difference.
GameFi incentivizes gamers for their effort and time spent while playing and winning games. It takes video gaming from walled-off data networks to the blockchain, enabling gamers to have verifiable ownership of virtual elements of the game in the form of NFTs bought while playing the games.
The NFTs can be later traded on NFT marketplaces for profit or exchanged for cryptocurrencies or fiat currencies.
GameFi thus democratizes the global video gaming market, chipping away at the monopoly of the few established gaming studios who could formerly claim ownership.
How Does GameFi Work?
The GameFi ecosystem has two major moving components: DeFi and NFTs.
Blockchain-based games are built on smart contract platforms, which require them to have their own tokens, token economics, governance, and so on. The tokens are used for in-game purchases, incentivizing gamers and trade in the crypto market.
A few elements in every game are not available to all gamers, and they need to purchase them for use in the game. Some examples of such elements are land, avatars, weapons, costumes, cars, and tools.
All the in-game items are sold as Non-Fungible Tokens (NFTs), which help gamers prove their ownership of the digital objects acquired during gameplay. These can be later exchanged in NFT marketplaces and converted to fiat currencies.
How to Play Games on GameFi?
In most traditional video games, you first need to download and install the game on your system –your computer, PlayStation, or Xbox – before you can start playing.
However, in crypto gaming, it’s an entirely different process. You will need to follow the steps below in order to begin gaming on GameFi:
Create a web 3.0 wallet
First, you need to create a game-specific crypto wallet, to deposit game tokens and receive rewards while playing.
For example, to play games on Axie Infinity, you will need to create a Ronin wallet.
Add funds to the wallet
You need to add funds (supported cryptocurrencies) to your wallet. The cryptocurrencies supported differ depending on the game and the blockchain platform hosting it.
For example, games hosted on Decentraland require you to use MANA tokens, while Axie Infinity requires you to add AXS tokens.
Buy the requisite in-game items
Crypto games require you to own one or more in-game assets before you play. These assets will help you set yourself apart from other players in the game and win rewards. These in-game items are provided as NFTs that can be sold or exchanged for other tokens later.
For example, Axie Infinity requires you to buy three ‘Axies’ before playing the game.
Top GameFi Protocols
Once one has completed all of the aforementioned steps, users may choose to play games on a variety of platforms. Some of the top GameFi protocols are:
Axie Infinity is a play-to-earn online video game – a digital pet community – where you need to buy creatures called Axies to start playing. The game is hosted on the Ethereum blockchain and uses AXS and SLP tokens.
An Axie is an NFT that you can use in battle, or to explore, trade, and breed with other Axies. As the game progresses, the value of Axies increases or decreases, and you may receive in-game rewards based on your performance.
Decentraland is a virtual reality platform where you can buy, sell, and develop virtual land parcels using MANA tokens. The virtual land parcels are sold as NFTs, which are ERC-721 compatible.
For example, you can develop the virtual land parcel by building a virtual casino for other players to visit to play games. The platform is already attracting many users, with over 300,000 monthly active users.
The Sandbox Game is a virtual metaverse platform that lets users build, own, and monetize their gaming experiences.
The user needs to buy a virtual land parcel, using the SAND token, which can be populated with various games and assets. Multiple land parcels can be combined to form an estate.
The Future of GameFi: How Will It Impact the Crypto Market?
Although the concept of GameFi has been in existence for a long time, it has just started to attract attention and trend in the market.
From the perspective of the crypto market, GameFi is set to drive the mainstream adoption of crypto assets into its next phase of growth.
Compared to DeFi and other blockchain protocols, people will find GameFi much more interesting to learn about and explore the different elements of crypto assets. It will spark off a rapid learning curve among the masses and is set to see mass adoption.
In terms of investment, GameFi is the preferred choice of many investors. In 2021, blockchain and NFT-gaming companies received $3.2 billion in investment alone, and they are experiencing a sudden influx of cash. And this is only the tip of the iceberg.
Some recent developments in the GameFi ecosystem, which may be seen as auguring well for its future, include:
- Tron Foundation has launched a $300 fund to boost the GameFi ecosystem,
- SoftBank has invested $93 million in the NFT-based gaming platform The Sandbox,
- Polygon has launched a gaming and NFT arm, Polygon Studios,
- Animoca Brands, a Hong Kong-based blockchain gaming business, has partnered with Binance to create a $200 million blockchain gaming incubator and accelerator program.
If only 25% of the total video gamers worldwide successfully migrate to blockchain gaming, it will have a compounding effect on the growth of NFTs, DeFi, and the overall blockchain ecosystem. As things stand, for now, it seems that GameFi will continue to offer tremendous investment opportunities in 2022.
Download the CoinSwitch Kuber app and explore the world of Web 3.0, NFTs, Metaverse, and DeFi.
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
Table of content
Subscribe to Our Newsletter with exclusive content.