What Is GameFi And How Does It Work?

In brief
GameFi refers to blockchain games played for money, providing an economic incentive for players. Typically, players can earn cryptocurrency and NFT rewards by completing tasks, battling other players, and achieving different levels in the game.
Unlike traditional video games, most blockchain games allow players to transfer game items out of the game's virtual world. This allows players to trade their items on NFT marketplaces and sell cryptocurrencies on exchanges.

IntroduceFollowing the rise of Axie Infinity, GameFi quickly took over the traditional gaming industry. It attracts gamers by providing them with the opportunity to earn money while playing games. So, what is GameFi and how is it different from the video games that we are familiar with?

What is GameFi ?GameFi is a combination of the words game and finance. It refers to blockchain games played for money, providing economic incentives to players. The GameFi ecosystem uses cryptocurrencies, non-fungible tokens (NFTs), and blockchain technology to create a virtual gaming environment.
Typically, players can earn in-game rewards by completing missions, battling other players, and progressing through different game levels. They can also transfer their assets outside the game to trade on cryptocurrency exchanges and NFT markets.

How does GameFi work?In GameFi, rewards can be in different forms, such as cryptocurrencies or game assets such as virtual lands, avatars, weapons, and outfits. Each GameFi project will adopt a different game model and economy. In most cases, in-game assets are NFTs that run on the blockchain, meaning they can be traded on NFT markets. However, in other cases, in-game assets need to be converted to NFTs before players can trade or sell them.
Typically, in-game assets will provide certain benefits to players, allowing them to earn more rewards. However, some games also have avatars and cosmetic items that are purely visual and do not affect gameplay and earnings.
Depending on the game, players can earn rewards by completing quests, fighting other players, or building structures and earning money on their land. Some games also allow players to generate passive income without playing, through staking or by lending their in-game assets to other players. Let's take a look at some of the popular features in GameFi.

Play to earn (P2E) modelAt the core of GameFi projects is the revolutionary play to earn (P2E) mechanics. It is completely different from the pay-to-play model adopted by traditional video games. Pay to play requires players to make an investment before they can start playing. For example, video games like Call of Duty require players to purchase a license or a recurring subscription.
In most cases, traditional video games will not generate any financial profit for the players, and their in-game assets are controlled and held by the game company. In contrast, P2E games can give players full control over in-game assets while also providing them with the opportunity to make money.
However, remember that it all depends on the game model and design of GameFi projects. Blockchain technology can (and should) give players full control over their in-game assets, but that's not always the case. Make sure you understand how the game works and who is behind the project before participating in P2E games.
One thing to note is that P2E games can be free to play while still generating financial rewards for players, but some GameFi projects require you to purchase NFTs or cryptocurrency before you can play. Therefore, it is important to DYOR and assess the risks. If a P2E game requires a large investment to start and small rewards, you will more than likely lose your initial investment.
One of the most popular money-making games is Axie Infinity. One of them is Axie Infinity, a title that has been growing in popularity since 2018. Players can use their NFT pets (Axies) to earn SLP tokens by completing daily missions and fighting with other players.
They can also receive AXS rewards if they reach a certain PvP rank. Additionally, AXS and SLP can be used to create new Axies, which can be used in games or traded on their official NFT marketplace.
In addition to buying and selling Axies, players can lend their Axies to other players, which gives owners the opportunity to earn money without playing the game. This loan model is called a scholarship. It allows players to borrow Axies to play and earn rewards.
In other words, Axie owners can earn passive income while players can play the game without any investment. The earned rewards are then divided between the players and the owners of the Axies.

Ownership of digital assetsAs we discussed, blockchain technology enables ownership of digital assets, which means players can monetize their in-game assets in a variety of ways.
Similar to video games, players can own avatars, pets, houses, weapons, tools, and more. But in GameFi, these assets can be issued or minted as NFTs in the blockchain (also known as minted NFTs). This allows players to have full control over their assets, with verifiable authenticity and ownership.
Some popular metaverse games, such as Decentraland and The Sandbox, focus on the concept of land ownership. It allows players to earn money from their virtual lands. In The Sandbox, gamers can purchase pieces of digital real estate and develop them to generate revenue. For example, they can charge fees when other players visit their lands, earn token rewards by hosting content and events, or rent out their lands to other players.

DeFi applicationsSome GameFi projects also offer DeFi products and features, such as staking, liquidity mining, and yield mining. Typically, players can stake their tokens in the game to earn rewards, unlock exclusive items, or access new game levels.
Bringing in DeFi elements could also make crypto gaming more decentralized. Unlike traditional game studios that centrally control their game updates, some GameFi projects allow the community to participate in their decision-making process. They can propose and vote on future updates through decentralized autonomous organizations (DAOs).
For example, Decentraland players can vote on in-game and organizational policies by locking their governance tokens (MANA) in the DAO. The more tokens they lock up, the higher their voting power. This allows gamers to communicate directly with game developers and influence the game's development.

Are video games considered GameFi?Players of traditional electronic games (video games) can also earn in-game currency and collect digital assets to upgrade their characters. However, these tokens and items cannot (or are not allowed) to be traded outside of the game. In most cases, they don't even carry any value outside the scope of the game. Even if they do, players are often prohibited from earning money or trading their assets in the real world.
In blockchain games, the tokens and assets in the game are usually cryptocurrencies and NFTs. There are some blockchain games that use virtual tokens instead of cryptocurrencies or NFTs, but players can still convert their in-game assets into NFTs if they want. This means players can transfer their earnings to crypto wallets and trade their assets on crypto exchanges or NFT marketplaces. They can then also convert their crypto profits into fiat currency.

How to get started with GameFi games?There are thousands of blockchain games on the market and they work in different ways. Be careful with scam projects and fake websites. Connecting your wallet or downloading games from random websites can be very dangerous. Ideally, you should create a new cryptocurrency wallet specifically for this purpose and only use funds that you can afford to lose. If you believe the game you found is safe, follow these steps to get started.

1. Create a cryptocurrency walletTo access the GameFi world, you need a compatible cryptocurrency wallet, such as Trust Wallet or MetaMask. Depending on the game you are playing, you may need to use different wallets or connect to different blockchain networks.
For example, if you want to play blockchain games on BNB Smart Chain (formerly Binance Smart Chain), you need to connect your MetaMask wallet to the BSC network first. You can also use Trust Wallet or any other supported cryptocurrency wallet. Check the game's official website to find out which wallets they support.
You can also connect your cryptocurrency wallet to the Ethereum blockchain and access most games running on the Ethereum network. However, some games like Axie Infinity and Gods Unchained will build their own wallets to reduce costs and improve performance.
Axie Infinity is built on Ethereum, but their team developed the Ronin network as a sidechain. Therefore, you need to use the official Ronin Wallet to interact with the Axie Infinity ecosystem. As a sidechain, the Ronin network makes trading and breeding Axie much cheaper, reducing the cost of play.

2. Connect your wallet to the gameTo play a blockchain game, you will need to connect your wallet. Make sure you are connecting to the game's official website and definitely not a fake copy. Visit the game's website and find the option to connect your cryptocurrency wallet.
Unlike traditional online games that require you to set up a username and password, most blockchain games use your cryptocurrency wallet as a game account, so you'll likely get required to sign a message on your wallet before you can connect to the game.

3. Check the requirements to playMost GameFi projects will require you to purchase cryptocurrency tokens or NFTs in their game to get started. Different games often have different requirements. You should always consider your earning potential and overall risk. Estimate how long it will take to get your initial investment back and start making a profit.
If you want to play Axie Infinity, you need to have 3 Axies in your game wallet. You can purchase these beasts on the Binance NFT Marketplace. To buy Axie, you need to have wrapped ETH (WETH) in your Ronin Wallet. You can buy ETH from cryptocurrency exchanges like Binance and use the Ronin bridge to transfer them to your Ronin Wallet. For more information, please see How to use Ronin Wallet?
If you don't have the money or don't want to take the risk, consider looking into a scholarship program. It allows you to borrow NFTs to play, but you will have to share your earnings with the NFT owner.

The Future of GameFiThe number of GameFi projects has exploded in 2021 and will likely continue to grow in the coming years. As of March 2022, there are more than 1,400 blockchain games listed on DappRadar. We currently have popular games on multiple blockchains, such as Ethereum, BNB Smart Chain (BSC), Polygon, Harmony, Solana, etc.
As blockchain technology continues to develop, the GameFi trend is expected to continue growing at a rapid pace. The ability to own assets and monetize games makes GameFi very attractive, especially in developing countries.

summarySince the early days of Bitcoin, there have always been people willing to try their luck with simple browser games, hoping to profit from BTC . While BTC games still exist, the emergence of Ethereum and smart contracts have certainly changed the world of blockchain gaming, allowing for more complex and exciting experiences.
It's easy to see that GameFi has attracted gamers by combining entertainment with financial incentives. With the growing popularity of blockchain games, we will likely see more and more large companies getting involved in building the metaverse.