(Note: GameFi is built on the innovations currently promoted by the blockchain, mainly NFT and DeFi. If you have not read any of these two, I would recommend some overviews on Messari)
Listen to conversations in meetings, on the phone, or in conference rooms in the gaming industry, and you will find a recurring theme: GameFi.
It’s not just what we said, but senior managers such as Andrew Wilson have also noticed this phenomenon. As the CEO of Electronic Arts, his job is to position his company on breakthroughs-he describes emerging things in the cryptocurrency field as “an important part of the future development of our industry”, and this is no coincidence.
So what is GameFi and how will it affect gamers?
Well, if you are like billions of people in the world, then you may be playing games, or you know people who play games. In general, the time spent in these digital worlds is equivalent to “wasted time”, at least in the direct monetary sense. All it takes to build the strongest army, collect the best items, or complete the most difficult tasks over and over again, will completely disappear once you leave the game.
Now, what if this is not the case? What if you can keep what you have built? Not only keep what you earn, but you can also sell it to others, lend it to others, or show it out? Although this sounds like a dream, it is GameFi’s promise, which is why leaders like Wilson are excited about the next development. GameFi is located under a new genre in which the digital economy will not end due to the closure of the game, thereby blurring the boundaries between the resources in the game and the real-world assets. For yourself and billions of people around the world, it represents a paradigm shift, an opportunity to take time and ownership back into the hands of ordinary players themselves.
What does the financialization of games mean?
GameFi is a homonym of “gaming” and “finance”. It runs on the blockchain network and aims to integrate the fun of games with the financialization of the in-game economy. Distributed ledger technology is not only important for helping players provide verifiable asset ownership, but also for building trading markets inside and outside the game.
In this new type of game, all objects are represented as tokens on the blockchain network. Therefore, every sword, armor, or plot can be owned by you or anyone else in a blockchain-based game. In other words, in a blockchain-based game, each player is both a participant and an owner. Although the genre of the game differs in narrative, a recurring goal is to accumulate resources. Playing a good game allows you to accumulate more game coins (usually expressed as homogenized tokens) or assets in the game (clothes, land, items), expressed as non-homogeneous tokens (NFT). The key here is that once you have earned your assets, you can exchange them for other cryptocurrencies in the market-or fiat currencies like the US dollar-for disposable income.
The concept of P2E games is not new (more on that later), but other aspects of GameFi are very new. Broadly speaking, the combination of cryptocurrency primitives (ie token incentives, smart contracts, etc.) and games brings countless possibilities. Using the composability of the blockchain, that is, the tokens of one application can be transferred to another application, the game NFT can be integrated into the game content of the game studio either vertically or horizontally. An item in one game–for example, digital clothing or clothing–can be incorporated into other games to build a huge world.
In addition to games, tokenized assets in games can also be used for other purposes. For example, owners of game items that are difficult to obtain will be able to use NFTs to prove their ownership, opening the door to discounts for hardcore players or personal activities for gamers of certain levels. In addition, the very popular NFT sells for a very high price, and it is not an exaggeration to imagine the selling price of a game NFT. In these valuations, game NFTs can be used as collateral for DeFi loan agreements, loaned to individuals who need in-game quest items, become members of exclusive digital groups, or reused in the real world. NFT, as a financial asset earned through games, has mature possibilities behind it, but it has yet to be fully explored.
A brief history of the game and the development direction of the game
The opportunities around GameFi are fascinating, but before delving into it, it’s worth understanding why it makes sense. What happened to GameFi is actually a continuation of decades of trends. Power is transferred from the game studio to the players. If we want to understand what this means, let us walk along the trajectory of memory.
Paid games (P2P): the first video games
Almost all early video games started with the same revenue model. Users pay for playing games. The first batch of games, such as Pac-Man (left), allowed players to play one or two rounds before asking for more payment. Games that later developed into personal computers, such as “Call of Duty” or “World of Warcraft” (right), sold perpetual licenses or recurring subscriptions. Although the transaction is simple, the user has no influence. The most obvious improvement is to provide more game time in the form of content expansion packs.
Free to Play (F2P): Democratizing Game Access
Starting in the late 1990s, free-to-play games have eliminated the payment barriers to entry. Fans can download the product, start playing the game without upfront fees, and then decide whether they like it and spend money. Companies get revenue from this model through advertising or advanced add-ons.
An example of the latter is through the sale of customizable skins. In addition to their attractive appearance, skins provide almost no value-they do not give buyers any competitive advantage-but passionate fans have a high demand for them. For example, the game studio Riot Games has become a multi-billion dollar company because of its hot-selling skins in the “League of Legends” series of games. Note the similarities between these skins and gamified NFTs.
Games of this era are significantly easier to obtain. Players can taste different games, choose the games they like, and buy at will to support the developers they like. Power began to slowly transfer to the player.
Game to Make Money (P2E): A great way to make money
The low threshold created conditions for the first batch of “remuneration for work” games. Remember that “make money while playing” is not a new idea? As early as 2000, some free games, such as “Diablo II” and “Runescape”, had an active in-game item market. Players earn gold coins by completing tasks, use gold coins to buy weapons or armor, and then sell items for real money to buyers who have not done the same thing.
Source: Sal’s Realm of Runescape
Of course, in this era, such transactions have never been recognized by the law, tax authorities, or anyone else. Gamers can build their own small digital economy in a small corner of the Internet, but it is easy to be deceived, making participants more similar to shady Internet figures than noisy entrepreneurs operating within the boundaries of established ecosystems.
The current P2E difference is not only the complexity of the market. It is also about your degree of autonomy over their assets. Actions are not limited to what the game studio allows. If an operator goes bankrupt or shuts down its servers, you will not lose the assets you have established. This is why digital ledger and NFT tokenization are important; it allows you to own assets on your own terms.
The future of games: GameFi + blockchain
All of this brings us to the key question now: If GameFi has great potential, what does GameFi games look like today?
For those who are used to game engines on desktops or consoles, the answer may be disappointing. Since blockchain games are in their infancy, the first generation of GameFi was mainly simple card-based games (published in the form of NFT), where players used their collections to fight each other. Imagine something close to Pokémon. Winning battles and completing goals are both ways users collect resources in these games. Popular games of this generation include ” Axie Infinity “, “Alien Worlds”, “Sorare”, “Gods Unchained” and more.
In these games, Axie Infinity is considered the current leader. In 2021, the number of users will increase sharply. Residents in the Philippines are hindered by the epidemic restrictions and even play this game for income. Some people make more money from Axie Infinity than their previous jobs, so they now make a living by playing games. An award-winning documentary titled “P2E: NFT Game in the Philippines” actually shared this phenomenon.
Although the growth of users signifies interest in GameFi, developers must find a way to solve the problem of high network costs. Currently, expensive transaction fees and slow processing times on the blockchain hinder the ability to replicate top games on desktops and consoles, but over time, ongoing network expansion experiments should alleviate these challenges. Alternative blockchains for NFTs are also being launched to accommodate larger transaction volumes. Future games are expected to incorporate advanced gameplay after expansion to make them more attractive. Next-generation games like Star Atlas and Illuvium have raised millions of dollars in venture capital to achieve these goals.
The potential of GameFi lies in the adjustment of the incentive mechanism. Players with their own game assets may become more engaged, loyal, and better manage their favorite games. To achieve this goal, there are a large number of startup companies and agreements to support players, developers and game studios. The following are some of the services that add value to the nascent GameFi ecosystem, from approaching players to relationships with developers.
As the community pushes for new players to join, one challenge is the upfront investment required at the beginning. For example, the purchase cost of Axie in Axie Infinity is as high as hundreds of dollars. This fee is unaffordable for many players. In the long run, this is a problem that game designers need to solve through the internal economy of the game. Prior to this, the capital pool has formed a game guild to help beginners fund initial expenses through “scholarships” in exchange for a revenue sharing agreement. We can think of them as revenue sharing agreements for coding bootcamps, but for games rather than software engineering work.
The function of GameFi aggregator is to provide a platform for game-related content. Players can explore existing and upcoming games in multiple blockchain networks. The aggregator will also allow them to manage their in-game NFT, track revenue, and demonstrate mini-games. The idea is to create a one-stop shop for all tokens, game releases, promotions, etc. If all this is successful, then the aggregator will have the opportunity to expand into other NFT areas outside of games, such as art collections and music royalties.
Initial Game Release (IGO) Launchpad
Launchpad is a platform designed to help promote IGO. IGO is a fundraising activity through crowd sales. IGO often happens when a project team needs funds to start a game release. Investors provide funds to fund the development of the game in exchange for discounts or special features before the game is released. According to U.S. regulations, certification is required to participate in publishing platforms.
Block chain game pioneer CryptoKitties found that when NFT game began trading in 2017 accounted for Ethernet Square when more than 20% of all traffic, activity on the network can become extremely crowded. Competitors also take this lesson to heart. Today, multiple blockchains support NFT, bringing the so-called blockchain war to GameFi. The game exists or plans to exist on the default network, Ethereum, and various other common and NFT-specific blockchains.
Automating part of the development process helps game studios enter the market faster. Smart entrepreneurs are aware of this need and now provide developers with successful tools. These tools include application programming interfaces (API), software development kits (SDK), payment platforms and general infrastructure services. Most of the parties involved in developer tools are centralized start-ups with venture capital investment.
The game studio is the last piece in the GameFi ecosystem. In a recent study completed in the United States and the United Kingdom, 58% of the 197 video game developers surveyed announced plans to use blockchain in future games. 47% of the same group of people have already started including NFTs in their projects. Early trendsetters set the tone for blockchain games, but the full development of the community has just begun. This is something worthy of attention in the next few years.
Take the game to a new level
The characters in the game need to be continuously upgraded, and so does GameFi. Fortunately, there are two strong wind directions that are beneficial to the ecosystem.
The first is the increase in interest around games. The rise of e-sports and live broadcasting are the latest developments in the past decade, which have consolidated the game with a source of entertainment and a legal profession. Currently popular games are competing with traditional sports, and many people even thought it was unthinkable twenty years ago. In particular, cryptocurrency games have seen a surge of interest. Compared with other NFT sub-theories, the amount of investment in games is the highest, which highlights the shift in the focus of venture capital, as investors are beginning to seize opportunities in this field.
The second trend is to continue to adopt cryptocurrencies. GameFi is one of several pillars that simultaneously incorporate new users into cryptocurrency. Combined with DeFi, NFTs, Web3 and other fields, an increase in the total amount of blockchain activity in the next few years seems possible. Jumping from one vertical field to another field is very frequent, which means that GameFi may benefit.
So, what does the future of GameFi look like in the end? The predictions are speculative, but interesting activities and developments are accelerating. The opportunity to own assets at will, make money from the game, and connect with the wider community is widely regarded as a compelling feature proposed in this new cryptocurrency vertical. Although the future is unknown, one thing is certain: So far, the mood of the participants-industry executives, game studios, investors, and game players themselves-seems quite optimistic.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/explain-gamefi-from-the-brief-history-and-future-development-of-the-game/
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