GameFi: Everything you need to know about the ‘play and earn’ game economy

With the rise of cryptocurrencies and NFTs, playing money-making games has become more and more popular. In the past, people paid to play video games, but now, gamers have the opportunity to enjoy the most exciting video games and make a lot of money by doing so.

Of all the ways in which blockchain technology is impacting the world, blockchain gaming is probably the most lucrative, spawning GameFi and a powerful game-money game economy. But before we dive into that topic, let’s take a quick look back at GameFi’s history.

History of GameFi

“GameFi” is the abbreviation of game finance, which can be traced back to November 2019, when the founder of blockchain game distribution platform MixMarvel delivered a speech at the World Blockchain Conference in Wuzhen, China.

While Mary Ma’s presentation was the first use of the term GameFi and marked the beginning of the buzz surrounding the technology, the basic concept of GameFi existed long before the presentation (titled ”  GameFi – A Path to Technology-Driven Innovation in the Gaming Industry “) “for anyone interested in checking it out).

In fact, the concept behind GameFi is almost as old as Bitcoin itself, dating back to 2013, when games like ”  Minecraft” and ”  Bombermine” were trying to integrate with BTC. More specifically, by leveraging peer-to-peer services in games, these games enable gamers to monetize their gaming experience, using BTC as a medium of exchange. 

Years later, we  see a more precise exploration of GameFi in projects like “CryptoKitties” built on the Ethereum network.

CryptoKitties has game assets represented by non-fungible tokens (NFTs). Players acquire these NFTs to breed unique cats, which can then be traded on dedicated marketplaces. 

Interestingly, while CryptoKitties has not achieved much success due to various factors such as network congestion, limited ability of developers to implement complex game features, poor gaming experience, and lack of a competitive market in the blockchain industry, it does constitute a A wave of new projects in the GameFi ecosystem as we know it today paved the way.

So, what is GameFi?

For those unfamiliar with games, let’s say this: GameFi is to the traditional game industry, and DeFi is to traditional finance. Essentially, GameFi aims to revolutionize traditional gaming infrastructure by combining and integrating blockchain technology and decentralized finance. 

Unlike traditional games, GameFi enables players to monetize their gaming experience in two steps – first, through the tokenization of in-game assets, and second, by leveraging the in-game pay-to-play (P2E) economy.

For example, in a typical video game, winning is rewarded with some form of ranking points, points, ratings, stars, and in-game currency – all of which serve as mental stimulation and provide a sense of victory. But the point is that you can’t take these rewards outside of the game, and you can’t use them in any valuable form of exchange.

With GameFi, the narrative has changed. Because they are based on the blockchain, the GameFi protocol or the game title, providing players with rewards that can be easily monetized in the real world. These rewards usually come in the form of cryptocurrencies and NFTs, and when players earn these rewards, they can be exchanged for real fiat currency.

There are already a lot of people who have gotten rich with GameFi who pride themselves on making money while having fun. Parents who had warned their children to play video games in the past started to support them because of financial gain.

How does GameFi work?

GameFi, like most blockchain-based projects, survives through distributed ledger technology, another term for blockchain technology. However, each GameFi project has its own unique mechanics in terms of technical elements and the type of reward system being implemented.

Regardless, GameFi typically uses the blockchain as the underlying infrastructure to provide players with verified ownership of assets and create a decentralized marketplace where traders can exchange in-game and out-of-game tokenized items (NFTs).

For example, in-game items such as weapons, skins, gold, pets, artifacts, etc. are tokenized and represented as NFTs in every GameFi protocol. 

Therefore, when players compete and acquire any of these in-game items, they automatically claim full ownership of those items and have the ability to trade them, either through the protocol’s dedicated marketplace or outside the game world.

In some cases, in-game assets are not NFTs, but can be converted to NFTs using third-party applications such as Hoard Exchange and then sold for profit. Hoard Exchange is known for bridging the gap between NFT technology and the traditional gaming industry. You can learn more about the project via the link below. 

Hoard Exchange bridges the gap between NFTs and the regular gaming industry

That said, players can keep accumulating wins and in-game assets by refusing to sell if you’re not in a rush for financial gain. In fact, doing so is even beneficial, as most games have systems that allow in-game assets to be exchanged for better tools, more powerful items, and other boosts, making it easier to win more.

The financialization of game protocols to incentivize players to create a “game to make money” game model. Today, almost every true GameFi protocol must have an incentive model or reward system.

Likewise, DeFi functionality is incorporated into most GameFi projects as a secondary reward system. This allows for the integration of known concepts from the DeFi space, such as yield farming, liquidity mining, and staking, providing a passive way to generate income while playing the game.

Some notable blockchain games have incorporated the aforementioned DeFi concepts, including ”  Axie Infinity  “, ”  Decentraland  “, ”  Aavegotchi  “, ”  DeFi Kingdoms  “, ”  Nine Chronicles  ” and many more.

Understanding Game Money Game Economics

Since players can monetize their winnings from blockchain games, it means that in addition to having fun, players can also pay for their time. Therefore, the in-game economy of a particular video game will determine how much time players spend playing it.

This is because the game loop is designed to keep players engaged and happy, while also supporting its core plot and natural dynamics.

From an economics point of view, in order to keep players engaged, prolong the time spent in the game, and increase the amount of money players can earn from the game, the game earning economy must have the following five characteristics.

Player base takes precedence over governance

If a game isn’t perfectly designed and enough players aren’t playing, then there’s no need for a governance system.

In this context, governance refers to governance tokens — a cryptocurrency that empowers the community around a project to vote or make major decisions about the future of the blockchain project, in this case, the game direction.

A loyal player base must be achieved before any major governance takes effect or it will be wasted. 

Consider multiple economic agents

When considering traditional games, game developers and players are often the two main drivers of a game’s success. In fact, the ideas of other influential agents are often ignored. 

But when it comes to games that make money through games, there are other factors that must be considered, namely the investors, builders, and collectors that drive the in-game economy.

Investors are the financial backers of the game. While many of them may have been bought speculatively, their money goes a long way toward making game development a success. 

Collectors may not be actively involved in the game, but they are involved in NFTs, creating a need to make the P2E system work. Instead, builders may generate a supply of value inside and outside the game.

A game that holds up even without the “money” aspect

While it is true that blockchain games are money-making games and appeal to their player base, in part for the value they can generate, games must be built in such a way that their survival depends not only on these revenues. Games should always be able to attract players on the entertainment level, and the financial aspect should not be a priority.

If video games were more about making money than about the thrill and fun of the experience, it would be unsustainable because the user base would shrink rapidly. This is not unique to P2E games, as even in traditional games, games that lack an “end game” can lose popularity significantly. It’s a good indication that one aspect alone is not enough, there must be a balance between entertainment and value.

Higher passive income = lower player activity

As mentioned above, if the entire video game is focused on the financial aspect, the “play to make money” economy will die; if the only attraction is money, then there will be no participation. 

Likewise, if people are able to make money from games without actively participating in tasks such as robbing banks and getting loot, killing monsters to earn points, racing cars, and winning prizes, economic activity such as P2P transactions declines.

GameFi projects that seek to attract players with passive income must include models such as rentals, which allow people to make money by borrowing items such as safe houses or weapons that will be actively used by others in the game itself.

The value of player-generated NFTs must be protected

If the game economy of the game design revolves around players creating their own NFT content, then sufficient investment must be made to protect their interests and the value of the content produced.

How to get started with GameFi

Those who are already familiar with cryptocurrencies and NFT trading will find this very easy to do. Of course, as a gamer, you also have an advantage over any newbie who wants to start playing for the money.

However, if you don’t fall into any of the above categories, you don’t need to worry. The whole process is simple, and the vast variety of video games on the blockchain is varied and exciting enough to get anyone involved while being rewarded handsomely. The following steps will guide you on your GameFi journey:

Step 1: Create a new crypto wallet

Even if you already own one, it’s important to create a wallet for your GameFi account because your GameFi experience should be considered a new investment. Be careful though, and do your research as always, as different games may require different wallets to connect to the blockchain network, so make sure to choose a wallet that is supported by the game of your choice.

Step 2: Connect your new wallet to the games you want to play

Visit the game’s official website and tap the option to “connect your wallet” or something similar. This will allow you to earn digital assets which will be sent to your wallet allowing you to trade or hold them at will

Step 3: Meet Startup Requirements

In GameFi, each game has different launch requirements, but one thing that is consistent is that you need to buy their initial token – usually an NFT.

These tokens will serve as your initial investment, which is why it is important to create a new wallet and only fund it with money you can afford to lose.

Finally, beware of fake websites! There are many fake GameFi sites out there, which is why we always urge our readers to double-check any links you receive, and only submit an item if you’re sure it’s genuine. Research is a top priority.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/gamefi-everything-you-need-to-know-about-the-play-and-earn-game-economy/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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