GameFi

The term “GameFi” is a combination of the words “game” and “finance” and was first coined by Yearn Finance CEO Andre Cronje in a 2020 tweet. GameFi blends blockchain technology, non-fungible tokens (NFTs), and game mechanics to create virtual environments where players can participate and receive tokens.

Until recently, video games were hosted on centralized servers, giving developers and publishers access to all content within their games. This means players have no actual ownership or control over any digital items accumulated over the course of hours or years of gameplay. These items range from weapons and clothing (also known as "skins") to avatars and virtual lands - few of which have any value outside of the game. So if players don't follow the professional route, there's no real way to get compensated for their online time or share in the value of the in-game assets they earn.

However, this is not the case with the GameFi project. Players of these games can earn in-game rewards by completing missions and passing various game levels. Unlike traditional in-game currencies and items, these rewards have measurable value outside of the game ecosystem. For example, game items that are rewarded in the form of NFTs or achievement tokens can be traded on NFT markets and cryptocurrency exchanges; thus earning the industry its nickname of “making money.” It's important to note that "making money playing games" is a popular term, but playing games on GameFi is not without risks, including potentially high initial costs that players may lose or not recoup.

How Does GameFi Work?

In GameFi, rewards can come in different forms, such as cryptocurrencies or in-game assets such as virtual lands, avatars, weapons, and costumes. Each GameFi project will employ a different model and game economy. In most cases, in-game assets are NFTs that run on the blockchain, meaning they can be traded on NFT markets. However, in other cases, in-game assets need to be converted into NFTs before players can trade or sell them.

Typically, in-game assets provide certain benefits to players, allowing them to earn more rewards. However, some games also feature avatars and decorations that are purely visual and have no impact on gameplay or revenue.

Depending on the game, players can earn rewards by completing missions, fighting other players, or building monetized structures on their land. Some games also allow players to generate passive income without playing the game, either through staking or lending their gaming assets to other players.

How to Get Started with GameFi?

1. Create a Crypto Wallet

To get into the GameFi space, you need a GameFi-enabled ETH wallet, such as Trust Wallet or MetaMask. Additionally, you may need to use multiple wallets or connect to different blockchain networks, depending on the games you play.

For example, to play blockchain games on the BNB Smart Chain (formerly known as Binance Smart Chain), you must first link your MetaMask to the BSC network. You can also use Trust Wallet or any other supported crypto wallet. Check the game's official website to see who they support.

2. Connect Your Wallet to the Game

Connect your ETH wallet to the Ethereum blockchain to access most games on the Ethereum network. Nonetheless, some games, such as Axie Infinity and Gods Unchained, generate wallets to save money and improve performance.

Although Axie Infinity is built on Ethereum, the Ronin network is formed as a sidechain. Therefore, you must use the official Ronin wallet to interact with the Axie Infinity ecosystem. As a sidechain, the Ronin Network greatly reduces the transaction and reproduction costs of Axies, thereby reducing the overall cost of the game.

3. Check the Playback Requirements

Most GameFi projects will require you to obtain their cryptocurrency tokens or in-game NFTs. The prerequisites are different for each game, but you must always weigh the possibility of making money against the total risk. Next, calculate the time it will take to recoup your original investment and start reaping the benefits.

To play Axie Infinity, you must have three Axies in your game wallet. They can be purchased at the Axie Marketplace. Only ETH (WETH) wrapped in your Ronin wallet can be used to purchase Axes. ETH can be purchased on cryptocurrency exchanges like Binance and transferred to your Ronin wallet via the Ronin Bridge.

Are Traditional Video Games GameFi?

Traditional video game players can also earn in-game cash and collect digital assets to help them level up their characters. However, these tokens and stuff cannot (or should not) be traded outside of the game. In most cases, they have little use outside of the confines of the game. Even if they do, gamers are often prohibited from monetizing or exchanging their possessions in real life.

In-game currencies and assets in blockchain games are typically cryptocurrencies and NFTs. Some blockchain games use virtual tokens rather than cryptocurrencies or NFTs, although players should be able to convert their in-game assets into NFTs if they wish. This means players can deposit their winnings into crypto wallets and trade them on cryptocurrency exchanges or NFT markets. They can then also transfer their cryptocurrency winnings to fiat currency.

Future of GameFi

The number of GameFi projects increased dramatically in 2021, and more are expected to be added in the coming years. As of March 2022, DappRadar now lists over 1,400 blockchain games. Additionally, popular games are now available on multiple blockchains, including Ethereum, Harmony, Solana, Polygon, BNB Smart Chain (BSC), and more.

GameFi’s growth trend is expected to continue apace as blockchain technology advances. Additionally, GameFi’s option to have in-game items and make money from such games makes it very attractive, especially in less developed countries.