What Is GameFi? How Can You Earn Money Playing Video Games?
DeFi became the hottest new trend in 2020. On the other hand, revenue from the billion-dollar gaming industry continues to grow annually—it is estimated that by the end of 2021, the global video gaming market will be worth over $178 billion.
So, what happens if you fuse two wildly successful industries? A community of gaming and blockchain enthusiasts has already merged DeFi with gaming, and since the pandemic, its popularity has only gone up.
The industry is called “GameFi.” So, how does GameFi work, and can you really earn money playing video games?
What Is GameFi and Who Invented It?
As you may have already guessed, the name “GameFi” comes from joining the words “gaming” and “finance.” GameFi combines cryptocurrency, blockchain, NFTs, and rules and mechanics in gaming to create a virtual world where players participate, have fun, and earn money in the process.
The origin of the term “GameFi” is unclear, but it is believed that the concept was first introduced by Chinese blockchain game developer MixMarvel during the 2019 World Blockchain Conference in Wuzhen, China. Before the conference, MixMarvel had already released HyperSnake, the world’s first multiplayer real-time competitive blockchain game. HyperSnake was shut down in September 2020, but the game served as a template for the future development of GameFi games.
But prior to the first use of the term, games like CryptoKitties and Axie Infinity were already providing Ethereum users with opportunities to earn crypto through gaming.
How Does GameFi Work?
GameFi’s main attraction is that it operates on a “play-to-earn” business model. This means players are financially rewarded for playing a game and progressing through its levels. In this case, cryptocurrency, in-game tokens, and NFTs serve as financial incentives.
The “play-to-earn” model is not a new concept. However, what is new is the innovative technology that powers GameFi games today. Blockchain, smart contracts, and in-tokens are present in many elements of a game. Users can convert tokens earned from a game into other well-known cryptocurrencies such as Ethereum, Bitcoin, or stablecoins, then swapped to fiat currency.
Many GameFi projects include NFTs. Every land, weapon, outfit, and skin in a game is one-of-a-kind. Not only can they be bought and sold on in-game marketplaces, but they can also be used to perform a variety of functions on DeFi, such as collaterals and yield farming. As more game studios join the GameFi hype, there are companies such as Yield Guild Games that now offer users the option to stake in-game tokens to earn passive income.
In GameFi, every game’s mechanisms are different. However, one common requirement is that a player must own a cryptocurrency wallet to store the game’s tokens or NFTs. The wallet should also be pre-loaded with cryptocurrency. Before you begin, many GameFi games also require that you purchase starter characters.
Advantages of GameFi
Playing to Earn
GameFi’s business model is a departure from the traditional “pay-to-play” and “play-to-win” models in the world of video games. Think about old-school arcade games or any other popular game like Farmville where players had to pay real money to buy upgrades to gain an advantage over other players. With “play-to-earn,” money-making is no longer limited to game studios and developers. Users can now earn money by playing their favorite games, creating opportunities for financial inclusion.
The Philippines is one real-life case that highlights the extent to which GameFi can become a source of income. When the country was braced for a nationwide lockdown in early 2020, many who lost their income signed up to play Axie Infinity. Soon came reports of Filipinos earning above minimum wage by playing Axie Infinity, making $50 per day compared to about $8.15 per day. Some Filipino players have also turned playing Axie Infinity into a full-time job, according to CoinDesk.
The integration of NFTs in a game expands the monetization possibilities of a video game and brings about true ownership in the digital space. The fact that the purchase and transfer of in-game items are recorded on a distributed blockchain ledger means it is the players who own, for example, an outfit, not the game developer. Any in-game item owned cannot be destroyed or counterfeited. If the game studio experiences a technical blackout, players can be assured that whatever they purchase will not be removed.
By monetizing ownership of digital assets, GameFi games also create customer loyalty.
Popular GameFi Games
- Axie Infinity: Created by Vietnamese startup Sky Mavis and described as Pokémon meets CryptoKitties, Axie Infinity has become one of the most popular GameFi games. Players breed, train, and collect adorable creatures called Axies, and earn in-game tokens called “Smooth Love Potions” (SLP). In August 2021, Axie Infinity became the first blockchain game on Ethereum to reach $1 billion in sales with more than 1.8 million daily users, per CryptoSlam.
- Decentraland: Decentraland started as a 2D pixelated grid platform but evolved into a 3D virtual reality universe where players can buy, develop, and sell virtual land. Now, the game has become one of the hottest destinations to launch a metaverse. In November 2021, a group of investors bought a plot of land on Decentraland for $2.4 million, the largest metaverse land acquisition to date.
- CryptoKitties: Built on the Ethereum blockchain, CryptoKitties is a game that allows players to collect and breed cute cats. Each CryptoKitty generated is a unique NFT and can be sold at a high price. To date, the most expensive CryptoKitty is kitty #896775, named “Dragon,” which was sold for 600 ETH, or approximately $172,000 at the time. However, it appears that Dragon is currently up for sale once more.
GameFi: Play Games to Earn Crypto
The intersection between DeFi and gaming has given rise to a new generation of video games that benefits everyone financially. From game studios to casual and competitive players, just about anyone looking to earn passive income has the option to use GameFi to earn while gaming.
Although GameFi interacts with many aspects of DeFi, it is still relatively new to the blockchain scene, and its true potential is yet to be fully uncovered. Nonetheless, DeFi’s integration into the billion-dollar global gaming industry means good news for widespread blockchain adoption, and it is likely just a matter of time before you find yourself bidding for a rare NFT skin for your favorite video game character.
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About The Author
Jie Yee Ong
(65 Articles Published)
Currently based in Melbourne, Australia, Jie Yee has experience in writing about the Australian real estate market and the Southeast Asian tech scene, as well as conducting business intelligence research in the wider Asia-Pacific region.
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December 29, 2021 at 06:05AM