GameFi has become a popular concept in the blockchain industry. By the end of 2021, we saw a multitude of active GameFi projects, charting an increase of 172% from the previous year as per DappRadar.
This momentum has continued in 2022, with the top 10 GameFi projects amassing more than $841 million in transaction volume, spread across 2 million unique active wallets.
Play-to-earn games or GameFi projects are combining NFTs, gaming, and finance to disrupt the traditional gaming industry.
What Is GameFi, And How Does It Work?
GameFi, also commonly referred to as play-to-earn, is often seen as the combination of gaming, NFTs, and finance – all powered by blockchain technology.
In traditional games, we saw the ‘pay-to-win’ model where users had to pay to gain a competitive advantage over other users. For example, players could buy ‘skins’ for their guns and unique apparel for their in-game characters in games like PubG and Fortnite to stand out from the crowd.
GameFi changes this by introducing a new model known as ‘play-to-earn’ that rewards them for their time and effort instead of making users pay to play the game. Through completing quests in the game or trading digital assets, GameFi gives users an opportunity to earn for their in-game efforts.
To understand how GameFi rewards users, it is important to understand how they combine blockchain technology, NFTs, and decentralized Finance, aka DeFi.
Built on blockchains, GameFi projects allow users to store their assets on a distributed network that is not controlled by anyone, unlike traditional gaming software. This allows users to maintain custody of their in-game digital assets and truly own them. We cannot talk about true ownership without NFTs. They are unique and indivisible assets created using blockchain technology that enables users to truly own their character. For example, users have an avatar in a game like Fortnite, but they do not own it. In a ‘play-to-earn’ game, each avatar is an NFT with a unique owner.
But, where does DeFi fit into all this? It glues all the pieces together as it enables GameFi projects to build an in-game economy where users can trade non-fungible tokens (NFTs) digital assets and earn for their efforts. Moreover, as GameFi evolves, DeFi concepts such as staking, liquidity mining, and yield farming are also becoming a part of these projects, enabling users to earn-passive income through their digital assets.
How To Start Playing GameFi Games?
Playing GameFi or play-to-earn games has many benefits, which attract users from all walks of life. On paper, all users need to start is a funded wallet for buying an NFT and making transactions in the game. However, this is not as easy as it sounds because there are a lot of scam projects in the ecosystem that deceive users and drain their wallets.
Thus, if you are new to the GameFi ecosystem, it is essential to start with a well-known game that is reliable and safe to play. As well as using a hot wallet, meaning that wallet used to connect to play NFT games should not store a big amount of funds. But should be used in the sole purpose to connect to the NFT games. So if the games end up being a scam or steal user funds. Only a part of the liquidity stored in the hot wallet will be impacted.
There are GameFi projects like Squid Squad OG Games that aim to restore users’ faith in the ecosystem by making a game that exists solely for users who have been on the receiving end of scams. The project gives such users a chance to start over with 1$ lottery ticket to receive a NFT airdrop to participate in a game where 45 600$ USDC will be rewarded to the survivors. Moreover, the game is also fairly easy to understand as it revolves around the concept of a child’s game called ‘Rock, Paper, Scissors,’ a game that we have all played.
GameFi Is Revolutionizing The Gaming Industry
What started with the hype around Axie Infinity, a play-to-earn game that helped several players earn life-changing amounts of money, has now turned into a revolution. GameFi projects put forward a unique model to reward players for their time and effort, attracting millions of traditional gaming users. The concept of GameFi, combining NFTs, gaming, and finance, is certainly an improvement over the traditional games, and it will be interesting to see how the industry grows in the future.