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GameFi brings together play-to-earn blockchain games that offer cash rewards. Their players can earn cryptocurrency and NFT rewards by completing challenges, battling other players, and completing levels in the game.

Unlike traditional video games, most blockchain games allow game items to be transferred from the virtual world to the real world. They can be sold on NFT marketplaces, and the earned cryptocurrency can be exchanged on crypto exchanges.

Introduction

Since the advent of Axie Infinity, the GameFi field has quickly begun to take over the traditional gaming industry. It attracts players with the opportunity to earn real money in video games. What is the GameFi industry and how is it different from traditional video games?

What is GameFi

The term GameFi is derived from a combination of the words game (game) and finance (finance). It refers to play-to-earn blockchain games that offer cash rewards. The GameFi ecosystem's virtual gaming environment includes cryptocurrency, non-fungible tokens (NFTs), and blockchain technology.

Users of these games can earn in-game rewards by completing tasks, fighting other players, and completing levels in the game. After this, they can sell their assets on crypto exchanges and NFT marketplaces.

How does GameFi work?

In GameFi, rewards come in the form of cryptocurrency or in-game assets such as virtual lands, avatars, weapons, and costumes. Each GameFi project uses its own unique model and gaming economics. In most cases, in-game assets are blockchain-based NFTs that can be traded on NFT marketplaces. However, in some cases, in order to sell or trade in-game assets, they must first be converted into NFTs.

Typically, in-game assets provide users with certain benefits that allow them to earn larger rewards. Some games also offer avatars and other cosmetic items that have no impact on gameplay or revenue.

In most games, rewards are given for completing tasks, fighting other players, and creating monetized structures on your virtual land. Players can also earn passive income from staking or by renting out their game assets to other players. Let's take a look at the main features of GameFi.

Play-to-earn model

At the heart of GameFi projects is the revolutionary play-to-earn gaming mode. It differs significantly from the "pay and play" model common in traditional video games - you need to deposit funds to start playing them. For example, in the game Call of Duty, users must buy licenses or pay for subscriptions.

Typically, traditional video games do not provide any benefit to the players, and their game assets are controlled and owned by the production company. Play-to-earn games, on the other hand, give players full control over their in-game assets and also allow them to earn money.

However, remember that everything depends on the model and game design of each specific GameFi project. Blockchain technology can (and should) give players complete control over in-game assets, but this is not always the case. Carefully study how a play-to-earn game works before joining it.

It's worth noting that while play-to-earn games are typically free and provide financial rewards to players, some GameFi projects require the purchase of NFTs or crypto assets before playing. We always recommend doing your own research and assessing the risks. For example, if a game requires a large investment and offers little reward, you risk losing your initial investment.

One of the most popular play-and-earn games is Axie Infinity. This is an Ethereum-based NFT game that has been growing in popularity since 2018. In it, players complete daily quests and participate in battles with other players using their NFT pets (Axie), receiving SLP tokens for victories.

For reaching a certain level in PvP battles, players are awarded AXS tokens. Both AXS and SLP can be used to create new Axies, which are then either used in the game or sold on NFT marketplaces.

They can not only be sold and bought, but also lent to other users and receive income for this, without even playing the game. This rental model is called a stipend: players borrow someone else's Axie to play and earn rewards.

Thus, Axie owners receive passive income, and fellows play without any investment. The awards received are then shared between fellows and Axie owners.

Ownership of digital assets

As we already mentioned, blockchain technology allows you to own digital assets, which means players have many options for monetizing them.

Just like in traditional video games, players can own avatars, pets, houses, weapons, tools, and more. However, in GameFi, these assets are blockchain NFTs (assets are created by issuing an NFT), allowing players to establish formal ownership of their assets and have complete control over them.

Some popular metaverses, such as Decentraland and The Sandbox, specialize in owning and monetizing virtual land. In The Sandbox, players can buy digital properties, develop them and earn income. For example, the marketplace allows you to charge other players for visiting your land, earn tokens for posting content or hosting events on it, and rent it out to other players.

DeFi applications

Some GameFi projects also offer DeFi products and features such as staking, liquidity mining, and yield farming. Typically, players can stake their game tokens and receive rewards, exclusive items, and access to game levels.

The introduction of DeFi elements makes crypto games more decentralized. Unlike traditional game studios, which update games centrally and at their own discretion, some GameFi projects allow the community to influence decision-making by having players propose and vote on future updates through decentralized autonomous organizations (DAOs).

For example, Decentraland users can vote on in-game and organizational issues if they lock their governance tokens (MANA) into the DAO. The more tokens they lock, the more weight their vote has. In this way, players can interact with the developers and directly influence the development of the game.

Are video games part of GameFi?

Traditional video game users can also earn in-game currency and collect digital assets to upgrade their characters. However, these tokens and items do not allow for trading outside of the game. They often don't even carry any value outside of the game, and even if they do, their developers usually prohibit players from trading the assets in the real world.

In blockchain games, in-game tokens and assets are cryptocurrencies and NFTs. Some games use virtual tokens, but players still have the option to convert assets into NFTs if they wish. That is, users can always transfer their earnings to crypto wallets and sell assets on a crypto exchange or NFT marketplace. The resulting cryptocurrency can then be converted into fiat.

How to Play GameFi Games

There are many blockchain games on the market and each one has its own features. Beware of fraudulent projects and fake sites: do not connect a wallet or download games if the site is not familiar to you. We recommend creating a new crypto wallet specifically for the game and only using funds that you are willing to lose. Once you are confident that the game is safe, follow these steps to join.

1. Create a cryptocurrency wallet

To access the GameFi ecosystem, you will need a compatible cryptocurrency wallet, such as Trust Wallet or MetaMask. Some games require you to use different wallets or connect to different blockchain networks.

For example, to play blockchain games on BNB Smart Chain (formerly Binance Smart Chain), you first need to connect MetaMask to the BSC network. You can also use MetaMask or any other supported cryptocurrency wallet. Detailed information about compatible wallets can be found on the official game websites.

You can also connect your crypto wallet to the Ethereum blockchain and get access to most games on the Ethereum network. Additionally, to improve performance and reduce costs, some games such as Axie Infinity and Gods Unchained are looking to create their own wallets.

Axie Infinity was built on Ethereum, but its team developed the Ronin network as a sidechain. Therefore, to interact with the Axie Infinity ecosystem, you must use the official Ronin Wallet. Being a sidechain, the Ronin network makes Axie trading and breeding much cheaper, lowering the cost of play.

2. Connect your wallet to the game

To start playing the blockchain game, connect your wallet. Make sure you are connecting to the official site and not a fake copy. Go to the game website and connect your crypto wallet.

Unlike traditional online games, which require a username and password, most blockchain games use the user’s cryptocurrency wallet, or rather the wallet’s electronic signature, for authorization.

3. Check the game requirements

Most GameFi projects require the purchase of native tokens or in-game NFTs. Requirements may vary depending on the specific game, but you should always make a sound assessment of the potential income and possible risks. Calculate in advance how long it will take to return your investment and when you will start earning money.

To play Axie Infinity, you must have 3 Axie pets in your game wallet, which can be purchased on the Axie marketplace. To buy your first Axie command, deposit the wrapped version of ETH (WETH) into Ronin Wallet. ETH can be purchased on crypto exchanges such as Binance and then transferred to the Ronin Wallet using the Ronin Bridge. More information can be found in the article How to use Ronin Wallet?

If you don't have enough funds or don't want to take the risk, try using a scholarship program. You will be able to borrow NFTs to play, but will be forced to give a portion of the earnings to the owner of the rented tokens.

The Future of GameFi

The number of GameFi projects has increased dramatically in 2021 and will likely continue to grow further. As of March 2022, there are over 1,400 blockchain games registered on DappRadar. Today, players can choose from a variety of popular games available on the Ethereum, BNB Smart Chain (BSC), Polygon, Harmony, Solana and many more blockchains.

As blockchain technology continues to evolve, GameFi is also expected to grow at a rapid pace. The opportunity to own in-game assets and make money from games makes the GameFi industry extremely attractive, especially in developing countries.

Summary

Since the early days of Bitcoin, people have been trying to succeed in simple browser games, hoping to make a profit in BTC. Although BTC gaming is not losing ground, the development of Ethereum and smart contracts has changed the blockchain gaming industry - it now offers more complex and interesting opportunities.

GameFi's appeal to players stems from a combination of entertainment and financial incentives. Most likely, with the growing popularity of blockchain games, more and more large companies will contribute to the development of the metaverse.