GameFi is a general term for blockchain games that allow users to monetize their gameplay.
Since the launch of the Ethereum-based blockchain game CryptoKitties in 2017, the decentralized gaming industry has exploded and is currently valued at nearly $30 billion. Named GameFi for its utility and financial incentives, the marketplace allows players to play to earn money, giving them passive income while enjoying games. Another example of GameFi’s rise in popularity is the massive success of Axie Infinity. More than a million active players enter this game on a daily basis, and the sale of Axie infinity tokens on the securities market in August 2021 exceeded $1 billion.
With over 2.5 billion online game players worldwide, the GameFi industry is showing clear signs that it will grow into a trillion-dollar market over the next decade.
What is the secret of GameFi’s rapid growth in popularity?
The huge push for the development of GameFi was on the heels of the boom of NFTs (non-fungible tokens). The technology demonstrated the possibilities of earning money using these tokens.
The GameFi industry got its start in 2013 when developers introduced cryptocurrencies into their games. Any game that uses blockchain-based cryptocurrencies falls under the GameFi umbrella.
Until 2021, this area had been developing slowly. But thanks to the combined influence of DeFi and NFT, the industry received a powerful impetus to develop. In August 2021, there was a real boom in GameFi, and now users can earn even more on NFTs from this area than on “regular” NFTs or nascent crypto projects. For example, according to the analytical portal DappRadar, the blockchain game developers of Axie Infinity have raked in $800 million over the past month.
Previously, almost every GameFi project worked using the Ethereum blockchain. But as the industry developed, GameFi projects began switching to other technologies, where commissions are not as high as with Ethereum. Developers have also started using Polygon Network, Solana, Polkadot, Binance Smart Chain, and others.
The mechanics: what’s under the hood of GameFi?
The mechanics of GameFi consist of four elements. These are blockchain, the play-to-earn model, asset ownership, and non-fungible tokens. These components allow for monetization in a game to take place.
Blockchain is the basis of GameFi projects. Most games are built on smart contract-enabled networks. One of the most popular platforms for developing a GameFi project is Ethereum. However, since its block space is quite limited, it increases the costs of transactions. That’s why many game developers shift to Solana, Polkadot, and Polygon Network protocols which are faster and have higher capacity.
With blockchain, all game items and their data are stored on a decentralized public blockchain. This ensures that all the transactions are fair and transparent. The blockchain stores data on who owns which item, ensuring that the players themselves own the assets and not the developers.
In play-to-earn games, items like land, weapons, avatars, etc., are represented as NFTs (non-fungible tokens). NFTs make game items unique and impossible to copy or fake.
Players acquire them while playing and can exchange them for cryptocurrencies that can later be exchanged for fiat money.
Players can progress in GameFi projects and increase their earnings by improving their characters, developing structures, battling other users, and so on.
There are Play-to-win games and Play-to-earn. In the first type, users can make money through purchases inside the game. GameFi projects allow for receiving rewards by completing game goals. For instance, you have to take part in or win a tournament. One of the most popular play-to-earn games is Axie Infinity which rewards players by giving them AXS tokens for completing specific game objectives.
The Play-to-earn model also allows users to sell their assets and exchange them.
In GameFi projects, players have many different options with regard to the assets they own. They can sell and lease them, trade them on a marketplace, and so on.
For example, in The Sandbox game, one user bought a plot of virtual land for $450,000!
The monetization of virtual land is also possible with virtual shops, concert venues, and casinos.
The tokenomics of GameFi projects
Tokenomics is a kind of analytical concept that tackles issues related to creating and managing a digital asset. It explores how cryptocurrency works within its ecosystem and interacts with external projects. The result is a financially sustainable business model that is desirable for many companies.
The main goal of tokenomics is determining a cryptocurrency asset’s value. Thanks to such analytics, an investor can accurately assess the prospects of a token before buying it.
Having the right tokenomics on the GameFi project affects the game’s success. Projects with well-designed tokenomics have increasing value and fun gameplay. In comparison, those with the wrong tokenomics will soon have a collapse in the game’s finances.
Here are the fundamental mechanics in GameFi tokenomics:
- Crypto coins and tokens are native currencies of a blockchain. Gamers get their rewards from playing blockchain-based games in crypto tokens.
- Smart contracts are blockchain protocols that automate the execution of projects. For example, smart contracts in Ethereum allow for pulling real-world weather data from external sources to use in farming games and predict the success or failure of crops.
- Staking is when users lock up their digital assets for a while to receive a reward. With staking for GameFi tokens, a user can unlock more transactions and participate in building the foundation of the gaming economy.
- Treasury is the address where coins and tokens are distributed and pooled. There are different methods for automatically allocating treasuries. One of them is to reward staking and encourage players.
- Voting means gamers can use their tokens to vote on the game’s governance. Tokens used for this purpose are known as governance or security tokens.
- The roles of participants in GameFi projects include developers, investors, and players. GameFi tokenomics allows these three categories to work together through the blockchain.
The business state of blockchain games: an industry overview
There are hundreds of GameFi dApps on the market. According to DappRadar, DeFi Kingdoms and Axie Infinity were responsible for almost half of January 2022’s game dApps transactions.
DeFi Kingdoms, a new challenger in the blockchain gaming scene, is allowing Axie Infinity to make money by expanding their P2E and NFT games on the Harmony One blockchain. The platform offers its version of tokens, heroes, and characters that players use in quests to win and earn more tokens. These are programmable NFTs that players can upgrade and equip with extra gear to increase their chances of winning a quest.
According to DappRadar, DeFi Kingdoms currently ranks first in transaction volume. The decentralized gaming protocol boasts over $300 million worth of transactions in a week and the platform has 25,000 daily users.
Liberty Gaming is considered one of the fastest-growing blockchain games today. Launched in 2021, the platform offers unique features and functions that enable gamers to enjoy the benefits of GameFi via lower entry barriers, new investment options for players, and a diversified portfolio of decentralized games.
Liberty is also committed to educating and mentoring these gamers and providing them with the opportunity to make money playing games. To make it easier for players to join the P2E metaverse, the protocol launched its “Liberty Gamers Guild” in November, allowing players to minimize the risks of earning in just one game. Platform members use a portfolio of seven games and can immediately invest in them. This helps gamers to diversify their portfolio of games. Available games include Axie Infinity, The Sandbox, League of Kingdoms, Star Atlas, Guild of Guardians, and Illuvium.
Ethereum-based Illuvium also made the list after seeing explosive growth in trading volumes, concurrent users, and completed transactions in 2021. According to DappRadar, the platform ranks eighth among the largest gaming platforms in total blocked volume, with $275 million in its treasury. This makes it the 26th largest decentralized application on the Ethereum blockchain.
According to the Illuvium website, it is an open-world role-playing video game that allows players to travel across a vast and varied landscape to “hunt and capture god-like creatures called Illuvials.” Capturing these characters pays off in token rewards, which can be exchanged on the cryptocurrency markets for other tokens or cash.
It’s time to invest in your own GameFi project
While the origins of GameFi lead back to the advent of cryptocurrencies, these technologies have only recently begun to go mainstream.
The ever-evolving technology behind crypto gaming has advanced to the point where new GameFi projects are attracting huge followings and corporate funding. Industry experts believe that crypto games are the most successful way to widespread blockchain technology adoption. As GameFi projects become more popular among traditional gamers, the adoption of cryptocurrencies will only increase.
With all the opportunities that GameFi brings to the blockchain industry, it can undoubtedly become your best 2022 investment. Unicsoft offers full-cycle Play-to-Earn game development delivered by a unique alliance of experienced game developers and blockchain (incl. NFT) gurus. We provide blockchain game development, NFT development, tokenomics, and exchange infrastructure that is seamlessly integrated with the best gaming experience possible.
Don’t hesitate to step in!