What is GameFi?

Unsurprisingly, developers of decentralized Web3 projects have not overlooked the gaming industry. The combination of the gaming industry and blockchain has led to the emergence of a new sphere known as GameFi. This article will talk about it.

What is GameFi?

The term was coined in September 2020 by André Cronje, founder of the famous Yearn Finance project, to denote blockchain protocols oriented towards the gaming industry.

GameFi stands for "game finance" or "game finance", similar to DeFi. GameFi has become one of the areas of decentralized finance.

However, GameFi was first discussed in November 2019 during a speech at the Wuzhen World Blockchain Conference in China: the founders of blockchain game publishing platform MixMarvel talked about how blockchain technology could turn the video game industry upside down.

The first blockchain games started appearing long before that. In 2017, the first primitive blockchain game, CryptoKitties, appeared. It was similar in mechanics to the Tamagotchi game popular in the 90s: players bred and improved virtual kitties and sold them as NFTs. The game became so popular that it almost caused the Ethereum blockchain to shut down due to excessive load and low network bandwidth.

Now, the number of blockchain games is in the thousands, so they have started to be categorized:

• Play-to-Earn (P2E) — "play to earn";
• Free-to-Play (F2P) — free multiplayer games;
• Other derivatives of P2E include Move-to-Earn (M2E or "move to earn"), Learn-to-Earn (L2E or "learn to earn"), and even Sleep-to-Earn (S2E or "sleep to earn").

What problems does GameFi solve?

The premise behind GameFi was that most traditional games lack a monetisation option for gamers. Of course, there are exceptions: for example, CS:GO skins are in high demand, many of which are sold on grey markets for thousands of dollars, and the price of the most expensive game item sold has exceeded $1.5 million.

On the one hand, some gamers have spent much time improving characters and achieving game progress. On the other hand, some potential customers are ready to purchase accounts instead of spending time reaching a certain level from scratch. However, the grey market opens an enormous scope for fraud.

Another problem with traditional games has been moderation: players can be restricted from acting on certain in-game items and even have their account access blocked.

Blockchain fixes all of this. GameFi users don't have to worry about fraud: they know exactly what item they're buying, and all transactions go through smart contracts that eliminate the possibility of fraudulent buyers.

Players have complete control over their items, and with that comes new monetisation opportunities. For example, owners of rare and valuable in-game items can receive rewards through tokens or other useful artefacts.

In addition, players often receive rewards for in-game progress, an additional incentive to keep playing.

Popular GameFi projects

The Sandbox

The Sandbox is the largest GameFi project, with a market capitalization of over $900 million and a market cap of over $1.2 billion in 2022. The game is based on the Play-to-Earn concept and is similar to popular games such as Minecraft and Roblox.

Players of The Sandbox can create in-game events, entire virtual worlds and even their blockchain games. And everything players make can be sold on decentralized marketplaces and generate income.

There are two types of tokens in The Sandbox: NFT (LAND) tokens, which represent virtual plots of land, and ERC-20 SAND tokens, which are used for mutual settlements.

Decentraland

GameFi is a virtual reality platform based on the Ethereum blockchain. Decentraland was one of the first projects to combine GameFi and Metaverses.

Users can buy and sell virtual plots of land and other Decentraland metaverse items, including digital avatars. Like The Sandbox, this project has its native ERC-20 token, MANA, used in all calculations.

Axie Infinity

This game caused quite a stir in 2021, and the capitalization of its native AXS token reached and even exceeded $1 billion quickly, making Axie Infinity one of the fastest-growing games on the blockchain. The game's concept is based on the famous Pokemon franchise but has been slightly revamped.

Players battle against opponents, and if they win, they earn another SLP token that can be exchanged for other cryptocurrencies or used to breed new fighters (Axies).

Gods Unchained

Gods Unchained became one of the most popular card games on the blockchain. It had two features:

• Firstly, the game is based on the WAX blockchain, due to which users pay very low gas fees, unlike Ethereum-based games;
• Secondly, players receive an initial set of cards for free and can start earning without investment if they defeat their opponents.

GODS tokens can be used to buy stronger cards on the marketplace. Cards received for free cannot be sold.

Stepn

When we talk about GameFi, we can't ignore the Stepn project on the Solana blockchain. The game made a tangible furore in 2022 and launched the trend for a separate industry within GameFi Move-to-Earn.

The game still exists, but interest in it has dropped significantly, as has the exchange rate of the game token GMT itself. Nevertheless, the game has historical value, and players can still buy NFT trainers and earn a small amount of tokens while walking, improving their physical health along the way.

Conclusion

Right now, the excitement around GameFi and NFT, in general, has fallen off a lot due to the overall bearish trend in the crypto market. Still, interest could return with renewed vigour during the next bull cycle, which experts predict.

An organization called the Blockchain Game Alliance has even been set up to develop GameFi, which includes major companies such as game development studio Ubisoft and chip maker AMD.