What is GameFi: A beginner�s guide to GameFi
The adoption of blockchain technology ignited the growth of different industries with decentralized finance (DeFi) being the most popular. DeFi has infiltrated the blockchain gaming world to give rise to GameFi or game finance which is a combination of gaming and DeFi. This post provides a beginner�s guide to GameFi including critical things like what is GameFi and the key stakeholders in the industry.
What is GameFi?
GameFi is the coming together of gaming and decentralized finance. GameFi brings financial opportunities to gamers by enabling them to earn tokens or in-game items depending on their engagements in a game.
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It also taps into non-fungible tokens or NFTs where game developers offer in-game items in the form of NFTs. The NFTs enable gamers to prove ownership of their items and sometimes progress in the games.
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GameFi leans heavily on the play-to-earn (P2E) gaming model which rewards players for completing quests and obtaining the top spot on a leaderboard. Leading GameFi platforms include Axie Infinity, Illuvium, Decimated, Heroes of Mavia, Pixel Heroes Adventure, and Decentraland.
A Beginner�s guide to GameFi: How does it work?
The mechanics around game finance is basically very simple on the surface. Because we�re focusing on a beginner�s guide to GameFi, let�s look at the basics. GameFi is powered by blockchain technology. The technology gained its popularity by being immutable. This means that data recorded on a blockchain cannot be changed.
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On the blockchain, game developers use smart contracts that define self-executing instructions and manage players' activities. Smart contracts also define how tokens are distributed among players.
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Players receive their rewards in the form of external NFTs, in-game characters, in-game tokens or coins, or tradable tokens that can be traded on a cryptocurrency exchange. Smart contracts also help games adhere to blockchain ethos like decentralization ensuring that gamers are decentralized across different jurisdictions.
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To get started in the GameFi world, you need to first understand how GameFi works and then test the waters with a simple blockchain game like Axie Infinity.
A beginner�s guide to GameFi: Key players
The GameFi ecosystem has different key players that provide guidelines for running different aspects of blockchain or web3 games. These stakeholders include:
Game developers
Also called game studios, they sit at the heart of the GameFi world since the ecosystem is incomplete or non-existent without games. Web3 game developers use existing game engines like Unreal and Unity to design the interactive aspects of their games.
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To bring more people to the web3 gaming scene, blockchain game developers are matching their games playability to that of convectional games. They are also abstracting the complexities of blockchain like creating and funding their wallets to accommodate even those migrating from centralized or traditional games.
Guilds
They can also be referred to as game distributors. Gaming guilds soften the financial burden that players may face in a game. For example, an in-game item may be priced at $100 which is a lot of money for players in some jurisdictions like the Philippines.
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Guilds purchase the item and then rent it to players at a lower cost, subsequently reducing the cost of interacting with P2E blockchain games.
Gaming marketplace
Gamers need to purchase or trade their in-game assets hence the need for marketplaces dedicated to blockchain games. This aspect makes gaming marketplaces an important part of the GameFi ecosystem.
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The marketplaces also list existing and upcoming games providing a central place for gamers to select the type of games they wish to play. Gaming marketplaces aren�t a new thing in the gaming world becase they�re also found in the traditional or web2 gaming world.
Launchpads
Game launchpads are another key entity in the GameFi ecosystem. As the name suggests, launchpads help launch games by supporting upcoming game titles and developers.
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These platforms provide a conducive environment to create games. They also help game developers to seek for financing from investors or locate strategic partners to help grow their games.
A beginner�s guide to GameFi: Advantages of GameFi
- GameFi provides gamers with more earning opportunities compared to conventional video games.
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- It promotes decentralization making it hard to be manipulated by a single entity.
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- It�s accessible across borders and has no limit on supported countries.
Disadvantages
- It requires gamers to have an idea of how the virtual or blockchain world operates.
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- In-game items like NFTs are mostly valued in cryptocurrency whose value is highly volatile.
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- GameFi is yet to be adequately regulated. This presents some regulatory risks when engaging with in-game assets.
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- It can be exploited by malicious actors like hackers and scammers.
Conclusion
In our above guide to GameFi, GameFi can be thought of as normal games but powered with blockchain technology. The technology opens the possibility of gamers earning more from their activities. The technology also removes geographical restrictions allowing anyone anywhere to play.
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GameFi is supported by key stakeholders like game studios, guilds, marketplaces, and launchpads. These lower the entry barriers to blockchain games and enhance user experience.