What is GameFi? Play-to-Earn Gaming Explained

What if playing games could earn you real money? Not streaming them and blogging about them — simply playing. GameFi says yes to this concept.

In today's guide, we delve into GameFi basics: What it is, How It Works, and Why It's getting so Popular.

What is GameFi?

GameFi is also referred to as crypto gaming, NFT gaming, Play-to-Earn, or Web3 games. As the naming suggests, the term combines gaming with finance, to be more exact, Decentralized Finance. Web3 games powered by blockchain attract users since they offer gamers earning opportunities for playing.

Some of the top GameFi projects include Sandbox and Decentraland metaverses, Gods Unchained card game, and Blockchain Monster Hunt — Web3's Pokemon Go.

GameFi fever started in 2020 with the first NFT game CryptoKitties. The game allowed buying, breeding, and selling NFT cats. The project gained extreme popularity, as it quickly gained a user base of 1.5 million players that since then generated $40 million worth of transactions.

gamefi cryptokitties ingame marketplace
In-game Marketplace / Source: CryptoKitties

How Does GameFi Work?

GameFi revolves around blockchain, DeFi, NFT, and the P2E model. Combined, they change the way users interact with online games.

  • Blockchain technology moves gaming servers from centralized hosting to decentralized distributed ledgers. By doing this, Web3 games cannot be taken down or restricted single-handedly, unlike traditional video games.
  • Merging gameplay with DeFi reshapes the gaming economy. It enables integrating blockchain transactions inside the game. With GameFi, players can exchange digital items for crypto, buy them with crypto, stake (loan) items to get passive income, and other actions blockchain allows.
  • Emergence of NFTs literally changed the game.
    While CryptoKitties triggered a trend for NFT collectibles, GameFi brought a use case to Non-Fungible Tokens. They turned into in-game characters.
    Axie Infinity is the most well-known GameFi game out there, with a peak of 5.5 million players. “Axies” — Axie Infinity world creatures — are digital collectibles traded on OpenSea and in-house marketplace. At the same time, each Axie is a playable character that battles and explores the virtual Axie Infinity world.
gamefi axie infinity gameplay
Axie Infinity Gameplay / Source: DigiParadise
  • Play-to-Earn (P2E) concept.
    The aforementioned Axies earn crypto rewards for their owners through gameplay. They can also be bred and sold for profit. At the same time, users need to buy at least three NFT creatures before being able to start the game to then try to get a return on the investment. Hence, the Pay-to-Earn model would be a more accurate definition for the majority of NFT games.

How GameFi Platforms Different from Regular Video Games?

The most notable benefit of GameFi is that blockchain games give players full freedom with items they own and earn made possible with tokenization. Here's an outline of how Web3 gaming is different from traditional games.

gamefi platforms difference 1
Source: Arctic Wallet
gamefi platforms difference 2
Source: Arctic Wallet
gamefi platforms difference 3
Source: Arctic Wallet

How to Get Started With GameFi?

Having a crypto wallet is enough to start playing blockchain games. All you need is to set up a wallet and connect it to the game you choose. Some games, however, may have a condition of owning an NFT character or several of them to be able to play or unlock revenue streams.

NoftGames Interface
NoftGames Interface / Source: Noft Games

GameFi made gaming accessible to all - no need to be a skillful player or crypto expert. Web3 gaming is still early in its development; NFT gaming mechanics are pretty easy to handle. Nevertheless, crypto gaming is as risky as the cryptocurrency space is. So, research and proper security measures should not be ignored.

Not every NFT game is trustworthy as GameFi standards are only starting to establish. Thus, players may consider entering games with decent user bases, sustainable development, and stable gaming economies to have an enjoyable and safe GameFi journey.

Closing Thoughts. The Future of GameFi

GameFI entered the history of gaming transitioning it from Pay-to-Play to Play-to-Earn and there is yet a lot to see what effect it will have on gamers and the industry in general. Will it mark the evolution of gaming or become one separate division?

More to that, since video gaming industry giants such as Square Enix start applying blockchain technology, the GameFi activity has immense potential to grow.

Always remember that any crypto activity is fraught with risks. Stay tuned to our blog to keep researching the crypto world!

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