We are living in a world of new terms like Non Fungible Token (NFT), crypto, yield farming, DeFi, and the latest…GameFi! While it may seem confusing at first, anyone can learn about these models and begin taking part in a new and revolutionizing financial environment.
So that brings us to the question: What the hell is GameFi?
Gaming + Decentralized Finance = GameFi
The idea behind GameFi, also referred to as GAFI, came from the intersection between two of the fastest growing industries: gaming and decentralized finance (DeFi). In other words, it is the gamification of financial systems, mostly in the form of play-to-earn crypto games.
GameFi isn’t limited to one type of blockchain game or financial structure, but rather is an all-encompassing term that can be applied to titles with completely different financial elements. While some games might reward players for completing in-game tasks, others provide the chance to generate revenue from digital assets. And there are some that do both!
The Mechanisms of GameFi
GameFi consists of many different mechanisms that enable players to earn rewards through gameplay. The best blockchain games combine these different mechanisms to create a far more favorable environment for the player compared to traditional gaming structures.
The first of these important mechanisms is play-to-earn (P2E), where players are rewarded for completing objectives within the game. What are the rewards? That depends, but they typically come from native tokens that are held within a smart contract.
The other major mechanism that powers GameFi is asset ownership, which is unlike anything offered by previous gaming models. These digital assets come in the form of NFTs, which can encompass nearly any imaginable item. These NFTs allow players to generate rewards both passively and actively, depending on the path they chose. They can be collected, held, traded, or sold on secondary markets.
GameFi also pulls many concepts from DeFi, such as yield farming and staking.
Yield farming refers to the process of generating rewards with crypto holdings, and it is often paralleled with staking, which is the act of locking crypto to support the security and operations of a blockchain network while generating rewards.
What’s the Point?
This all sounds great, but you might be wondering where it’s all going. Is GameFi just a way to play games while earning rewards? Exactly…and much more!
If we’re going to get a bit more wordy about it, we can say GameFi is establishing a decentralized and gamified financial structure that is focused on the player. Before this new model, video game development was a highly centralized process. With GameFi, much of the power is placed in the players’ hands. This is achieved through a decentralized autonomous organization (DAO), where governance token holders can vote on new proposals that can directly affect the game’s structure.
Besides having a direct say in the game’s ecosystem and development, GameFi provides clear financial benefits with its P2E structure. It allows you to earn rewards while playing games, and we’re not talking about small amounts. As the industry continues to diversify and attract new players and developers, the opportunities to earn substantial rewards grow as well. This is the most revolutionizing and consequential aspect of GameFi for the average person.
P2E gaming is accelerating at an incredible pace, attracting new users from all across the globe. The amount of games available on the market is also increasing, each with its own unique and themed structure. By enabling players to receive digital currency for their playing hours, GameFi is disrupting an industry that has largely treated players like consumers rather than collaborators.