Exploring GameFi

Basics

Since the emergence of Axie Infinity, GameFi has been swiftly gaining ground in the conventional gaming sector. By presenting gamers with a chance to earn while enjoying themselves, it draws them in. What precisely is GameFi, and how does it vary from the video games we are acquainted with?

Understanding GameFi

GameFi is the amalgamation of "game" and "finance," which alludes to blockchain games that operate on a play-to-earn model and provide financial incentives to players. Through the use of cryptocurrencies, NFTs, and blockchain technology, the GameFi ecosystem creates a virtual gaming world. Players can earn rewards by accomplishing missions, competing, and advancing through various levels. They can move their in-game assets to external crypto exchanges and NFT marketplaces.

What Is the Process for Using GameFi?

In GameFi, rewards may be cryptocurrencies or in-game assets like virtual land, avatars, weapons, and costumes. Each project will have a distinctive model and game economy. Most in-game purchases are NFTs based on the blockchain, which allows for trading on NFT marketplaces. For some in-game assets, the process may require conversion into an NFT so players can trade or sell them.

In-game assets typically offer players advantages for accruing rewards; however, some virtual environments include avatars and cosmetics solely for visual purposes, with no effect on gameplay or output.

GameFi offers a variety of ways to get rewards. Whether completing tasks, competing with other players, or building revenue-generating structures, countless possibilities can lead to success. Additionally, GameFi allows players to make money while away from the game, either through investing or by loaning out their in-game assets.

P2E Model

GameFi projects center around P2E, an innovative new way to play the game. Unlike traditional pay-to-play video games — such as Call of Duty, which requires players to invest in licenses or subscriptions before beginning — P2E does not necessitate such financial burdens.

Most traditional video games don't allow players to generate earnings through play; the gaming company manages and owns the in-game assets. However, P2E games give players full ownership over their in-game assets and allow them to make a profit.

It is essential to remember that the level of control players have over their in-game assets mainly depends on the model and design of the GameFi project. Blockchain technology should guarantee gamers complete oversight of their in-game assets, but not all projects can offer this. Always consider educating yourself on how the game functions and who is behind the project before investing in a P2E game.

Notably, some P2E games offer financial rewards to players without charging a fee, while others demand that you purchase an NFT or crypto asset to participate. Before playing, it's wise to conduct thorough research into the risks. You might lose your capital if a P2E game necessitates a hefty investment for a meager return.

Since its inception in 2018, Axie Infinity has increasingly gained popularity as a play-to-earn game. Players collect in-game assets as NFTs, known as Axies, and obtain earnings from daily quests and battling other players through SLP tokens — the game's currency. Players may receive AXS rewards upon achieving a designated Player vs. Player (PvP) standing. Users can generate new Axies using AXS and SLP tokens, and they can play these Axies within the game or exchange them for official NFTs through the game's marketplace.

Players can not only purchase and sell Axies, but they can also loan them out to other players to gain income without necessarily playing the game. This lending system, called a scholarship, enables scholars to use borrowed Axies to participate and win rewards. Owners of Axies can earn money passively, while players can enjoy playing the game without having to invest capital. The game divides the rewards earned from playing between owners and players.

Ownership of Digital Assets

The utilization of blockchain technology enables individuals to possess digital assets, enabling players to capitalize on their in-game possessions in numerous ways.

In GameFi, players can own digital assets, such as avatars, pets, houses, weapons, and tools, similar to how they do in video games. These assets, however, are issued or created as NFTs on the blockchain. This provides players complete autonomy over their assets and makes it possible to verify the true ownership of each asset.

Popular metaverse games like Decentraland and The Sandbox allow players to own and monetize virtual land. In The Sandbox, gamers can purchase and develop digital pieces of real estate to generate revenue. This can be done by charging other players a fee to visit the land, winning token rewards by organizing content and events, or renting the land to other gamers.

DeFi Applications

Certain GameFi projects offer DeFi products and features like staking, liquidity mining, and yield farming. Generally, these projects allow players to stake their in-game tokens to gain rewards, access exclusive items, or progress to new gaming levels.

Introducing DeFi components to the crypto gaming world can lead to greater decentralization. In contrast to the centralized control usually wielded by traditional game studios over the updates performed on their games, certain GameFi projects allow the community to participate in the decision-making procedure. Community members can suggest and vote on future updates through decentralized autonomous organizations (DAOs).

For example, players of Decentraland can vote on in-game and organizational policies by locking their governance tokens (MANA) in the DAO. The more tokens they lock, the greater their voting influence. This gives gamers direct communication with the game's developers and enables them to impact the game's future.

Are Traditional Video Games Part of GameFi?

Traditional video game players often accumulate in-game currency and digital assets to improve their characters. While these tokens and items may have some value within the game, they are usually not permitted to be traded out of the game environment and usually have no value outside the game. In rare cases, when such assets do have real-world value, players are generally not allowed to profit from them in any way.

Blockchain games often feature cryptocurrencies and NFTs as in-game tokens and assets. For gamers who prefer virtual tokens, there is still an option of converting these tokens into NFTs. Players can cash out their winnings by transferring their assets to crypto wallets, then trading them on crypto exchanges or NFT marketplaces. Finally, they can turn their crypto profits into fiat money.

Where to Start? 

It's important to be mindful when considering playing a blockchain game – there are thousands of different offerings, many of which could be unreliable. Scam projects and untrustworthy websites might look legit, so create a separate wallet for blockchain gaming that only has access to funds you can afford to lose. Once you're confident the game you're interested in is safe and legitimate, you can safely navigate the steps needed to get started.

Set up a Cryptocurrency Wallet

To enter the realm of GameFi, you'll need a cryptocurrency wallet compatible with the network, like Trust Wallet or MetaMask. Depending on which game you're trying to play, you might need to set up different wallets or connect to other blockchain systems. 

To play blockchain games on the BNB Smart Chain, you must first link your MetaMask wallet to the BSC network. For more information about compatible wallets, consult the game's official website. You can connect your cryptocurrency wallet to the Ethereum blockchain, granting access to many games on the Ethereum chain. However, for some fun, such as Axie Infinity and Gods Unchained, projects will build customized wallets to minimize fees and maximize performance.

Axie Infinity was created on the Ethereum blockchain, and its team also cultivated the Ronin network as a sidechain. Therefore, the requisite to interact with the Axie Infinity universe is the Ronin Wallet. The Ronin network's status as a sidechain considerably decreases the expense of trading and breeding Axies, thus reducing the cost of engaging in the game.

Link Your Wallet to the Game

If you'd like to play a blockchain game, head to the game's official website and look for the option to connect your cryptocurrency wallet. Double-check that the website is legitimate, not fake, to avoid scams. Once you have confirmed it is the real deal, you can securely connect your wallet.

Most blockchain games don't utilize the traditional user account setup using a username and password but instead use your crypto wallet as your gaming account. You should sign a message on your wallet before connecting to the game.

Check the Requirements

Before getting started with any GameFi project, you should consider the earning potential, risks, and time required to return your initial investment and start earning profits. Every game may have different requirements, like purchasing their cryptocurrency token or in-game NFTs, so read the game's instructions carefully to understand what is needed to participate.

To start with Axie Infinity, you'll need three Axies in your game wallet. You can purchase them from the Axie Marketplace using Wrapped ETH (WETH) stored in your Ronin Wallet. You can buy ETH from a crypto exchange such as Binance, ByBit, and others, then deploy the Ronin bridge to transfer it to your wallet.

If you are hesitant to spend money or take risks, you may want to explore scholarship programs. Through these programs, you can borrow NFTs and use them to play, but you will have to give a portion of your winnings to the token owners.

Conclusion

From the inception of Bitcoin, there have been individuals attempting to earn Bitcoin profits by playing basic browser games. Though these games are still popular, Ethereum and its use of smart contracts have revolutionized blockchain gaming, providing dynamic and sophisticated experiences. It is clear why gamers are drawn to GameFi with its combination of entertainment and financial perks. As the popularity of blockchain games continues to grow, more and more corporations are likely to invest in developing the metaverse.