One of the hottest topics in the cryptocurrency world right now is GameFi. That name describes the combination of video games and the development of cryptocurrency in the so-called DeFi. GameFi players can trade, lend or rent in-game assets. The popularity of the concept sparked a debate about whether GameFi would completely redefine gaming. Reports have shown that many people borrow money to play games, raising the prospect that GameFi will democratize crypto opportunities, or become a form of digital sharing. In this Tech Town article, we will learn about this hot trend.
What is GameFi?
First we need to know about DeFi, which is short for “decentralized finance” – an area in which token-based transactions for lending and borrowing are performed on blockchains. Of the most popular applications, GameFi is a type of decentralized applications (dApps) with economic incentives. Such types of applications often involve tokens that are used to reward players for completing in-game tasks such as winning battles, mining valuable resources, or even planting skill trees. digital… That approach is also known as play-to-earn. Take the example of the game Alien Worlds, users can passively earn money by letting others exploit their virtual land. They can also earn interest using techniques developed by the DeFi platform to lend assets such as digital characters or deposit them in staking exchanges.
How does GameFi work?
The detailed way GameFi works can vary, but the most basic and successful model to date cannot fail to mention the game Axie Infinity. The game has a blockchain transaction volume of $564 million in the last 30 days alone (according to DappRadar). Axie’s economy relies on two tokens, AXS and Smooth Love Potion (SLP), plus non-fungible tokens (NFT), digital certificates representing real and in-game characters. digital product. First, players typically spend around $700 on small blob-like monsters called Axies, which they pay SLP for winning battles and completing quests. Axies can also spawn and the player can sell them. AXS is seen as a token that the administration can grant permission to participate in discussions about the future direction of the project. AXS tokens can also be staked for profit.
GameFi pay to play?
Not really, there are many other games out there that don’t charge upfront fees. Also in some cases games can be extremely rewarding. Essentially, if a player earns tokens in an increasingly popular game, those tokens will be able to grow in value enormously. In 2021, the price of AXS has increased from 54 cents to $94, which shows that the game is not only a war against digital dragons, but also a form of currency speculation.
Whether it’s a sustainable model or not, Axie Infinity’s development has attracted many players in low-income countries – they can’t afford to pay upfront for the game. should often hire existing Axies from previous players. In many cases, they pay by sharing their earnings from the game. Last year, there was a flurry of social media posts about Filipinos earning more through Axie than through traditional jobs, which shows the potential of this market, encouraging creators Create a game and players show off its appeal.
Always have tokens in video games?
Most are so? For example, Robucks in the virtual world Roblox can buy a virtual Gucci wallet as an avatar; Fortnite’s Battle Royale allows players to use V-Bucks to buy pickaxes; Pokemon Dollar in Pokemon World is a bonus for winning battles and can be used to buy medicine and clothes. But those digital currencies and goods have not been legalized outside of the game to convert to cash.
Tokens in GameFi are different from traditional games?
The tokens are designed to function as a full-fledged cryptocurrency. That means players could theoretically convert in-game tokens into cash on a variety of decentralized exchanges. GameFi tokens share common volatility with cryptocurrencies, which are unrelated to traditional currencies. If demand grows, the modest amount of tokens in the game can also increase significantly. The Metaverse Index has tracked the value of tokens from 15 different games including Axie Infinity and Decentraland, which have doubled since their launch in April 2021. The holdings of the assets, of course. volatile can lead to capital loss, and players can get stuck if they try to make money during a severe slump. Some tokens can also be used in a multitude of DeFi dApps, where they can earn interest by being used as collateral for debt financing, that’s just an example.
How do GameFi companies make money?
Game developers usually get tokens for their work, so the more people play the game and trade, which increases the token price, the more money they will earn. Many games also charge fees for certain transactions and the money flows to the companies, from which the developers also get paid.
How far has GameFi evolved?
The number of blockchain games grew to more than 544 active dApps by the end of 2021, growing to around 200 dApps year-over-year. According to DappRadar, in the first week of January alone, the top 10 games of which handled over $841 million in trading volume and attracted more than 2 million exclusively active crypto wallets. While many of these games are pretty basic, venture capitalists poured $4 billion in last year alone to nurture efforts like Forte, which provides the tools to make money-making games. . The result is high-quality video games with stronger graphics and more exciting gameplay than the current season, as well as greater monetization. Traditional video game makers are also entering this market:
- Assassin’s Creed producer Ubisoft has invested in Animoca Brands – its own blockchain game production company and an investor like Axie. Ubisoft’s Yves Guillemot recently called GameFi “one of those revolutions”.
- Square Enix, the maker of Final Fantasy, recently said that it will consider issuing its own tokens.
- Mobile game maker Zynga has just been acquired by Take-Two Interactive, it’s exploring the NFT, and Take-Two CEO Strauss Zelnick said in January that they can address related opportunities to the blockchain in a more efficient way.
As game publishers consider adding NFTs and blockchain-based features to their games, many gamers worry that it will simply be a way of “sucking blood” from players. Then besides the token drop, a lot of things went wrong in GameFi like:
- Longtime gamers can lose out to bots – computer programs designed to make games profitable and make millions of trades every day.
Sunflower Agricultural, a game that rewards players for growing and harvesting digital crops, recently had to take down its website to fix a security vulnerability caused by bots: Their SFF token was reduced from 5, $25 on Jan 2 down to 8 cents on Jan 13.
- Lots of errors in the code, which means loss
- There is also the possibility of developers “running away with money”. That’s what happened to a game based on the Netflix show Squid Game, whose currency fell from $2,860 to near zero in a single day in November 2021 when the game’s creators spent more than $3 million in funds.
This is the value of GameFi greater than making money
Many advocates see GameFi as an opportunity for them to make money under the control of traditional game makers. Many players dislike certain game companies because of their sexist culture or the way they entice players to pay for additional content. GameFi apps (ideally) would be governed by a community of players, who would decide things like in-game costs. Through tokens, gamers also contribute to the development of the game. They also have avatars and other NFTs.
Are regulators looking at GameFi?
At this point, regulators are still trying to catch up with the previous wave of crypto developments. They have announced concerns about the free world of DeFi and may introduce additional rules in 2022. Games with DeFi-like features would be subject to the same rules, if those with DeFi-like features were to follow. Success stories like Axie Infinity will continue to play out.
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