Inside GameFi: What It Is, How It Works, Why It’s Popular

As the technology expands in prominence, businesses all over the world are seeking new ways to incorporate cryptocurrencies into their core products and services. In this arena, online gaming, in particular, has become a hub for novel ideas. Developers are coming up with new ways to buy and trade in-game stuff, cosmetics, unlock characters, and more using cryptocurrency. Our metaverse, where the virtual and the real collide, has never looked so lovely.

While the Covid-19 outbreak pushed some economies to close in 2020, the video gaming industry was one of the few to witness unexpected growth.

People naturally turned to seek entertainment within their houses during the repeated rounds of restrictions, with numerous countries adopting nationwide lockdowns.

GameFi is one of the fastest-growing parts of the video game industry. Previously, video games were stored on centralized servers controlled by a gaming corporation with the implied power to turn off the world whenever they wanted. Furthermore, players did not have genuine ownership of the stuff they acquired through their character — clothing, weapons, and awards. It all lived just within the game's limits and had no real value outside of it.

This is not the case with GameFi items due to their decentralized structure and dependence on blockchain technology.

What exactly is GameFi?

GameFi, which is the suitcase of decentralized finance and gaming, is the result of combining the words "game" and "finance." It is a virtual world made by combining cryptocurrencies, non-fungible tokens (NFTs), and play-to-earn (P2E) gaming features. Gaming and Defi manifestos collide in two ways −

  • There are elements of Defi in decentralized games.
  • Defi-platforms with a game-like interface.

As we all know, the GameFi operates on a play-to-earn model, in which players are rewarded for their efforts. It is with monetary incentives that players are encouraged to play and advance in games.

In certain cases, blockchain games allow players to make a full-time living while participating in board game/video game components, including point scoring, leaderboards, rewards, competitors, avatars, badges, and real-time feedback.

Defi components are implemented into such decentralized online games to create cash potential for gamers. There are also a variety of Defi-integrated games to choose from, ranging from simple lottery-style games to enormous online multiplayer role-playing games. All of these games allow players to earn in-game incentives, which are typically in the form of cryptocurrency and NFTs.

Gaming and decentralized banking have one clear advantage: they appeal to younger, more tech-savvy, and fun-loving customers. Axie Infinity, a play-to-earn game, can best the GameFi notion as decentralized gaming adorning with Defi capabilities. Earning tokens and trading in NFTs are two ways for participants to make money. MOBOX, the Defi realm, on the other hand, introduces the concept of gamified Defi as GameFi. According to what is known about MOBOX, it is the Defi platform that uses a play-to-earn model. Staking schemes, liquidity pools, yield farming tools, and the NFT environment are also included.

How does it work?

The key selling point of GameFi is that it is based on a "play-to-earn" business model. This refers to the fact that players are compensated financially for playing a game and progressing through its levels. Cryptocurrency, in-game tokens, and NFTs are used as financial incentives in this situation.

The concept of "playing to earn" is not new. What is new, though, is the cutting-edge technology that now drives GameFi games. Many aspects of a game include blockchain, smart contracts, and in-tokens. Users can exchange game tokens for other well-known cryptocurrencies like Ethereum, Bitcoin, or stablecoins, which can subsequently be exchanged for fiat currency.

NFTs are used in a lot of GameFi projects. A game's land, weapon, dress, and skin are all unique. They can be used for a variety of tasks on DeFi, including collaterals and yield farming, in addition to being bought and sold in in-game marketplaces. As more game studios join the GameFi craze, organizations like Yield Guild Games are now allowing users to make passive money by staking in-game tokens.

Every game's mechanisms are unique in GameFi. However, a player must have a cryptocurrency wallet to store the game's tokens or NFTs, which is a typical requirement. Cryptocurrency should also be pre-loaded into the wallet. Many GameFi games also need you to buy starter characters before you can play.

Benefits of GameFi

Following are the advantages of GameFi −

Playing to Make Money − In the field of video games, GameFi's business model is a break from the typical "pay-to-play" and "play-to-win" methods. Consider good old arcade games or any other popular game where players had to pay real money to buy upgrades in order to gain an advantage over other players, such as Farmville.Money-making is no longer limited to gaming studios and creators, thanks to "play-to-earn." Users can now make money while playing their favorite games, allowing them to become financially independent.

The Philippines is one real-life example of how GameFi can be used as a source of income. Many people who lost their jobs signed up to play Axie Infinity while the country was ready for a statewide lockdown in early 2020.

Soon after, tales surfaced of Filipinos earning more than minimum wage by playing Axie Infinity, with daily earnings of $50 compared to $8.15. According to CoinDesk, some Filipino players have turned Axie Infinity into a full-time career.

Obtaining Ownership − The use of NFTs in a game increases the game's revenue potential and establishes true ownership in the digital realm. Because the purchase and transfer of in-game things are recorded on a distributed blockchain ledger, it is the players, not the game developer, who own an outfit, for example. Anything you own in the game can't be destroyed or faked.

Players may rest certain that whatever they buy will not be withdrawn if the game studio has a technical outage. GameFi games build consumer loyalty by monetizing ownership of digital assets.

How can I get started with GameFi games?

On the market, there are thousands of blockchain games, each with its own set of rules. Scam businesses and phony websites must be avoided at all costs. Connecting your wallet or downloading games from unknown websites is dangerous. You should make a fresh crypto wallet just for this purpose, and only utilize funds you can afford to lose. If you're confident that the game you found is secure, follow these steps to get started.

To begin, create a cryptocurrency wallet.

Entering the GameFi environment requires a proper bitcoin wallet, such as Trust Wallet or MetaMask. Depending on the game, you may need to connect to different blockchain networks or utilize separate wallets.

To play blockchain games on the BNB Smart Chain, you must first link your MetaMask to the BSC network (previously Binance Smart Chain). You can also use Trust Wallet or any other compatible crypto wallet. Visit the game's official website to learn more about the charity it supports.

You may also play most of the Ethereum network's games by connecting your cryptocurrency wallet to the Ethereum blockchain. Some games, like Axie Infinity and Gods Unchained, will continue to construct their own wallet to save money and improve speed.

Axie Infinity is based on Ethereum; however, their team built the Ronin network as a sidechain. As a result, you must use the official Ronin Wallet to communicate with the Axie Infinity ecosystem. As a sidechain, the Ronin network makes it much cheaper to trade and breed Axies, cutting the cost of entry.

Establish a connection between your wallet and the game.

To play a blockchain game, you'll need to connect your wallet. Make sure you're connecting to their legitimate website and not a fake. Look for the option to link your cryptocurrency wallet on the game's website.

Unlike traditional online games, which need you to create a username and password, most blockchain games use your crypto wallet as a gaming account, which means you'll almost certainly be forced to sign a message on your wallet before you can play.

Examine the game's requirements.

Most GameFi initiatives will require you to purchase their cryptocurrency token or in-game NFTs to get started. Although the requirements vary every game, you should always consider the earning potential as well as the total risks. Calculate how long it will take to return your original investment and start making money.