You’re playing Monopoly online during the weekend with friends, and as usual, they are all bankrupt. You own most of the city from Euston Road to Park Lane, your account has many zeros, and you’re enjoying your life as a virtual capitalist. As R’n’B singer, Brandy, put it, you’re “sittin’ on top of the world.”
Would you believe me if I told you those virtual assets and cash from Monopoly could be converted to actual cash, real money that can be kept in your bank account and spent? If your imagination fails you at this point, don’t worry; it sounds too good to be true anyway, and it’s probably a scam.
But it’s true, and that’s exactly what GameFi is.
As the name implies, GameFi is the combination of gaming and finance. GameFi allows users to earn real money doing what they love — gaming.
Players play games, complete tasks, and finish missions for financial rewards in cryptocurrency coins that can be converted to cash. All rewards are paid in tokens — the game’s currency — which can be converted to real cash through a cryptocurrency exchange, a platform to buy and sell cryptocurrencies.
Is your imagination running wild yet? When was the last time you played FIFA with your friends? Could you have gotten 50 token points for each goal you scored? For how much could you have sold those points on an app or website for hard cash? It’s a mind-blowing concept.
The more popular a game is, the higher the tradeable value of its local token. That means players can make more money from selling their tokens.
Let’s take the Monopoly example again and imagine that £2,000 of your Monopoly money is worth £20 in physical cash. If the game’s popularity grows, and there is more demand for the Monopoly money, the value of 2,000 Monopoly pounds could rise as high as £200 or more.
Like cryptocurrencies and NFTs, GameFi has become one of the hottest trends in the real-world application of blockchain technology because of its earning potential.
Origin of GameFi
The term, GameFi, was first used in November 2019 by the founders of MixMarvel, a blockchain game publishing platform. They delivered a speech on how blockchain technology can revolutionise the gaming industry at the Wuzhen World Blockchain Conference in China.
GameFi was then popularised by famous crypto expert and Yearn Finance Founder, Andrew Conje, in his tweet on September 10, 2020.
With the rise of blockchain technology, especially decentralised finance, the blockchain seems to be the perfect place for GameFi to thrive. Versatile Blockchain Systems, like the Ethereum Network, provide an opportunity for video game developers to build and execute applications comfortably.
Blockchain games like CryptoKitties and Axie Infinity have leveraged the platform to build popular games where players play to earn the game’s currency (tokens) that can be swapped for real-world money.
How GameFi works
GameFi works in different ways depending on the gameplay and revenue streams of the particular game. Players can earn money through a variety of options.
However, the most popular blockchain games use one or a combination of these features to help players monetise their online gaming activity.
This is currently the most popular way for players to earn money from GameFi. Players are given specific tasks to complete to qualify for monetary rewards.
For example, the Ethereum-based game, Axie Infinity, gives tokens called AXS to players who win battles and tournaments, tend to, breed, and trade digital pets known as Axies. Think of Axies as your virtual cats, which you feed, train, and care for while simultaneously making money.
Finishing missions takes on an entirely different meaning as you can actually make real money.
Non-fungible tokens (NFTs)
NFTs are virtual assets with unique identities that can’t be exchanged for each other. Many GameFi apps use NFTs as characters or game assets like weapons, powerups, etc. This peculiarity allows for these characters and assets to be sold to collectors as unique collectables
Collectors can bid for these NFTs and acquire them with cryptocurrencies at really high prices. The cryptocurrency can then be traded for cash on any crypto exchange. GameFi games like CryptoKitties allow users to sell their virtual characters as NFTs to other players.
Like in the real world, games on the blockchain allow you to rent your digital assets in exchange for tokens that can be converted to cash. For context, imagine that you could get paid for renting out your army as mercenaries to other players while playing Clash of Clans.
Games like Decentraland and Sandbox are focused on the concept of land ownership. Players can monetise their plots the way you would use a piece of real estate in the real world. They can rent them out, lease them, or even develop and make them attractive to citizens of the virtual world. Some players go as far as building casinos and amusement parks as additional sources of income from their land.
The tokens that people pay to access these virtual places can then be converted into cash.
True to their industry name, GameFi games also work with a bit of decentralised finance. Players can put their game earnings in investment plans that yield actual money returns, taking earning passive income to another level.
How to play GameFi games
Being decentralised, GameFi games have a low entry barrier. A prospective player only needs to get a blockchain wallet and an account compatible with the network on which the game is based and can hold cryptocurrencies. Axie Infinity players, for instance, need to have an Ethereum wallet.
A player has to register on the game website with their wallet address and fund the account with the minimum amount of tokens to get game access; their wallets serve as their identity and storage. All progress and money earned are saved to that wallet address.
How GameFi developers make money
The money GameFi games distributes to their players does not come from thin air; the game tokens are equally beneficial to the players and the developers. During the game development process, programmers apportion a part of the game’s token for in-game rewards and other related purposes.
When players want to register to play, they buy some tokens to qualify. Developers get a transaction fee from players’ peer-to-peer trades within the game and a percentage of the trades made outside the game.
This is possible because of the blockchain’s decentralised nature. Every transaction is recorded, and all in-game items are connected to the game network. It doesn’t matter where the transaction occurs; the blockchain automatically registers to the game system that a transaction has taken place, and an automatic deduction of the fees follows.
The future of GameFi
Though it’s just garnering mainstream appeal, GameFi might be here for a long while. The success of Axie Infinity — one of the first GameFi games — makes a case for the industry. In August 2021, Axie became the first GameFi game to hit $1 billion in token sales and a million daily active players.
In the past, several blockchain games have tried but failed to get a percentage of the $175 billion video gaming industry. However, with the rise and adoption of blockchain technology like cryptocurrencies and NFTs, this tiny niche might disrupt the gaming industry.
When you combine the high dopamine of video games with the chance to earn money, you have created a very enticing offer. The more than 3 billion video gamers worldwide are already familiar with the idea of tokens and in-game currencies. So adopting tokens that can be converted to real cash shouldn’t be a hassle.
We can’t predict how far GameFi will go, if the technology will get adopted globally, or if it’ll slowly fizzle out due to lack of use, but one thing is sure, blockchain technology will change the world.[/vc_column_text][/vc_column][/vc_row]