Abstract

GameFi refers to a blockchain game that provides players with economic incentives and allows them to earn while playing. Players can usually earn cryptocurrency and NFT rewards by completing tasks, playing against other players, and completing levels.

Different from traditional video games, in most blockchain games, players can transfer in-game items out of the virtual world of the game. Players can buy and sell items on the NFT market and use earned cryptocurrencies to trade on cryptocurrency trading platforms.

Introduction

Since the rise of Axie Infinity, GameFi is rapidly replacing the traditional game industry. Earning money while playing is GamiFi's weapon to attract players. What exactly is GameFi, and how is it different from the video games we are familiar with?

What is GameFi?

GameFi consists of Game (game) and Finance is a combination of two words, which means blockchain games that provide players with economic incentives and can earn money while playing. The GameFi ecosystem uses cryptocurrency, non-fungible tokens (NFT) and blockchain technology to create a virtual gaming environment.

Players can usually earn in-game rewards by completing tasks, playing against other players, and completing levels. They can also transfer game assets out and trade them on cryptocurrency trading platforms and NFT markets.

How does GameFi work?

Rewards in GameFi are diverse, including cryptocurrency and in-game assets such as virtual land, avatars, weapons, clothing props, etc. Each GameFi project has different modes and game economies. Most in-game assets are NFTs in the blockchain and can be traded directly on the NFT market. In some other projects, in-game assets need to be converted into NFT before they can be sold or traded.

In-game assets usually create benefits for players, allowing them to earn more rewards. However, avatars and skins in some games can only present visual effects and have no impact on gameplay or rewards.

Different games have different gameplay. Players can typically earn rewards by completing missions, playing against other players, or building monetized structures on land they own.  In some games, players can pledge or lend game assets to other players and earn passive income without playing the game. Let’s take a look at the common features of GameFi.

Play and Earn (P2E)

Play and Earn (P2E) is an innovative game Patterns are at the core of the GameFi project. This model is completely different from the pay-to-play model of traditional video games. In paid games, players need to invest money before they can start playing. For example, video games like Call of Duty require players to purchase a license or recurring subscription.

Traditional video games generally do not bring any financial returns to players, and game companies control all in-game assets. In contrast, players can fully control their in-game assets in P2E games and have more opportunities to earn profits.

It must be noted that whether you can control assets depends entirely on the GameFi project model and game design.  Blockchain technology can (and should) allow players to fully control in-game assets, but this is not the case in reality. Before participating in a P2E game, players must understand the operating mechanism of the game and the team behind the project.

It should also be noted that some P2E games can generate financial rewards while being free to play, while others require the purchase of NFT or cryptocurrency assets before starting the game. Therefore, be sure to do your own research (DYOR) and conduct a risk assessment. If a P2E game requires a large investment of funds to participate and offers few rewards, your initial investment is likely to be lost.

Axie Infinity is one of the most popular games to earn while you play. Since 2018, the popularity of this Ethereum-based NFT game has continued to rise. Players can use NFT pets (Axies) to complete daily tasks and compete with other players to earn SLP tokens.  

You can also get AXS rewards after winning a certain player versus player (PvP) ranking. Additionally, AXS and SLP can be used to breed new Axies, and new pets can be traded as in-game assets or on the official NFT market.

In addition to buying and selling, players who own pets can also lend Axies to others, and they can still earn rewards even if they are not playing the game. This lending model is called a "sponsorship plan." Sponsors can use borrowed Axies to participate in games and earn rewards.  

In other words, Axie owners can earn passive income, while sponsors can participate in the game without investing. The rewards earned are divided between the two parties.

Digital asset ownership

As mentioned above, blockchain technology allows players to have digital asset ownership. Monetize in-game assets in a variety of ways.

Similar to video games, players have avatars, pets, houses, weapons, tools and other assets in the game. The difference is that assets in GameFi can be issued or created in the form of NFT in the blockchain (this process is also called "NFT casting"), giving players full control over their assets. These assets are genuine and have verifiable ownership.

Some popular metaverse games, such as "Decentraland" and "The Sandbox", focus on the concept of land ownership, and players can monetize virtual land in the game. In "The Sandbox", players can purchase virtual real estate and create income by developing real estate. For example, they can charge visitors to the land, earn token rewards by publishing content themes and holding events, or rent the transformed land to other players.

DeFi Applications

Some GameFi projects also have decentralized finance (DeFi) products and features, such as staking and liquidity Sex mining and liquidity mining, etc. Players can often stake in-game tokens to earn rewards, unlock exclusive items, or compete in new game levels.

Introducing DeFi elements can also deepen the decentralization of cryptocurrency games. Traditional game studios centrally control game updates, but in some GameFi projects, players in the game community can participate in update decisions. Players can submit proposals and vote for future updates of the game through the Decentralized Autonomous Organization (DAO).

For example, players of “Decentraland” can lock governance tokens (MANA) in the DAO and vote on in-game policies and organizational policies. The more tokens locked, the greater the voting power. Players can use this mechanism to communicate directly with game developers and provide suggestions for game development.

Do video games belong to GameFi?  

In traditional video games, players can also upgrade their characters by earning in-game currency and collecting digital assets. However, these tokens and items cannot (or may not) be traded outside of the game. In most cases, they have no value outside of the game. Even if valuable, players often cannot buy, sell or monetize these assets in the real world.

In blockchain games, in-game tokens and assets are often cryptocurrencies and NFTs. Some blockchain games use virtual tokens instead of cryptocurrencies or NFTs, but players can still convert in-game assets into NFTs. That is, players can transfer their earnings into a cryptocurrency wallet and trade the assets on a cryptocurrency trading platform or NFT market, or they can convert their cryptocurrency earnings into fiat currency.

GameFi Game Getting Started Guide

There are currently thousands of blockchain games in the market. The operating mechanisms also vary. Players must be careful to avoid falling into the trap of scam projects and fake websites. Randomly downloading games from websites or linking wallets is a security risk. The ideal operation is to create a new dedicated cryptocurrency wallet and invest within your personal affordability. If you are sure that this game is safe and reliable, you can join the game in the following ways.

1. Create a cryptocurrency wallet

To participate in GameFi games, you need a compatible cryptocurrency wallet (such as Trust Wallet or Metamask). In different games, you may need to use different wallets or connect to different blockchain networks.

For example, MetaMask first needs to be connected to the Binance Smart Chain network in order to participate in blockchain games on the chain. You can also use Trust Wallet or any other supported cryptocurrency wallet. You can check the game’s official website to learn about supported wallets.

You can also connect your cryptocurrency wallet to the Ethereum blockchain and participate in most games running on the Ethereum network. However, developers of games like Axie Infinity and Gods Unchained have created exclusive wallets for their games as a way to cut costs and improve game performance.

Although "Axie Infinity" is built on Ethereum, its team developed a side chain, which is the Ronin network. Therefore, you need to use the official Ronin wallet in order to interact with the Axie Infinity ecosystem. The Ronin Network sidechain significantly reduces the cost of trading and breeding Axie as well as the cost of gaming for Axie Infinity players.

2. Associate your wallet with the game

Before participating in blockchain games, you need to associate your wallet with the game. When making connections, you need to carefully distinguish between the official game website and fake and counterfeit websites. Visit the game website and find the option to link a cryptocurrency wallet.

Traditional online games require setting up a username and password, but most blockchain games use a cryptocurrency wallet as a game account, so players need to sign a message in the wallet to associate it with the game.

3. Check the game requirements 

Most GameFi projects require the purchase of cryptographic tokens or in-game NFTs before participating. Each game has different requirements, but before joining, be sure to understand its earning potential and overall risks, and estimate the time it will take to earn back your initial investment and start making profits.

To join "Axie Infinity", you need to pre-deposit 3 Axie in the game wallet. Visit the Axie Market and purchase Axie using wrapped ether (WETH) from your Ronin wallet. You can first buy Ethereum from a cryptocurrency exchange like Binance and then transfer it to a Ronin wallet using the Ronin Bridge. For more information, please read "How to use Ronin Wallet?" 》

If you don’t have enough funds or are unwilling to take risks, you can consider looking for sponsorship programs to participate in the game by borrowing NFTs, but the profits earned must be shared with the NFT owners.

The future of GameFi

In 2021, the number of GameFi projects will surge and may continue to increase in the future. As of March 2022, DappRadar has gathered more than 1,400 blockchain games. Popular games are spread across multiple blockchains, including Ethereum, Binance Smart Chain (BCS), Polygon, Harmony, Solana, and more.

As blockchain technology continues to upgrade, GameFi is expected to continue its rapid development momentum. Not only can you own in-game assets but also earn money while playing, GameFi has attracted a large number of players, and it is even more attractive in developing countries.

Summary

In the early days of Bitcoin, people began to try simple browser games , hoping to earn Bitcoin income. Although Bitcoin games have not disappeared, the rise of Ethereum and smart contracts has clearly given blockchain games a new look, bringing players a more refined and interesting gaming experience.

It is obvious that GameFi is perfectly integrating entertainment and economic incentives to continue to attract players. As the popularity of blockchain games heats up, it will become common for large companies to build their own metaverses.