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How decentralized finance (DeFi) and gaming merge – GameFi

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Blockchain was and is a disruptive technology that is turning more and more industries upside down. The combination of gaming and DeFi (GameFi) could now trigger the next revolution.

GameFi stands for the amalgamation of decentralized finance and gaming. In the crypto space, the term came about for the first time after the merging of decentralized finance, non-fungible tokens (NFTs) and gaming.

The term is very broad, but stands for games that are based on blockchain technology and contain financial elements. This means that by combining NFTs, gaming and DeFi, players have the opportunity to earn money in games (play-to-earn).

A profit-promising division, because the size of the gaming sector is gigantic. This year alone, the game industry generated over $ 175 billion. For the year 2023, this value is even expected to be up to $ 200 billion grows.

However, a few large game providers are currently putting the majority of this income into their own pockets. This is exactly what GameFi could fundamentally change.

How does GameFi work?

GameFi takes many different forms. As a result, the methods that gamers use to generate income in games also vary. However, there are a couple of key points worth mentioning when it comes to GameFi. Because many of the most popular blockchain games use a combination of similar features to monetize the game.

Axie Infinity
Source: https://axieinfinity.com/

Gambling and making money are the two main elements of any play-to-earn game. In blockchain games, players often receive financial rewards for completing tasks in games. They usually receive these rewards in the form of tokens that are distributed via smart contracts.

In the extremely popular ETH-based game Axie Infinity, for example, the SLP token is a reward for completing the following tasks reserved:

  • Winning battles and tournaments
  • Maintaining your own property
  • Trade on the Axie Infinity Marketplace
  • Breeding Axies

Another point that distinguishes blockchain-based games from normal games: Players not only own their in-game items virtually, but in real life. With the help of non-fungible tokens, any game object can be tokenized. This means that every player is the owner of the items they have earned and can trade them freely via the blockchain with the help of Decentralized Finance.

It is thus possible that unique objects can be created in digital space, which open up completely new economic possibilities for games.

For example, in CryptoKitties or Axie Infinity, players can breed two monsters represented by NFTs to create a third monster. With this third monster you then have the opportunity to earn even more tokens – or you can rent it out to other players and share your winnings.

DeFi features in games

In addition, the boundary between gaming and decentralized finance protocols in GameFi is fluid. Terms such as yield farming, liquidity mining or staking are familiar to many of the users in the DeFi-Space and can offer an additional passive income opportunity with which players can generate income from blockchain games.

An example of how this combination can look in action today is once again the play-to-earn game Axie Infinity. The successful blockchain game published its own decentralized exchange (DEX) “Katana” on November 4, 2021.

Via the new DEX, which is based on the ETH Ronin sidechain, players can freely and inexpensively trade the tokens they have earned in the game. In the coming months and years it can be assumed that many games will follow this concept.

Game providers from the old world have also become aware of the combination of DeFi and gaming. French company Ubisoft announced this week that it has big plans for games with play-to-earn elements.

CEO Yves Guillemot said during a conference that Ubisoft considers play-to-earn and blockchain technology to be revolutionary: “We believe that this technology will revolutionize the industry,” said Guillemot.

 

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All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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