What Is GameFi And How Does It Work?

As you might have already guessed, the name “GameFi” comes from a combination of the words “gaming” and “finance”. GameFi combines cryptocurrencies, blockchain, NFTs, and rules and mechanics in gaming to create a virtual world where players participate, have fun, and earn money in the process. The origin of the term “GameFi” is unclear, but the concept is believed to have been first introduced by Chinese blockchain game developer Mixmarvel in 2019 during the World Blockchain Conference in Wuzhen, China.

Before the conference, Mixmarvel had already released Hypersnake which was the world’s first multiplayer as well as real-time competitive blockchain game. HyperSnake was discontinued in September 2020, but the game served as a template for future development of GameFi games.

How does GameFi work?

As mentioned earlier, the way the reward changes depends on the game. However, most GameFi projects share the following characteristics:

1. NFTs — NFTs are digital assets created using blockchain technology. Different fungible tokens, NFTs are unique, indivisible, and have an owner. As in traditional games, users can own avatars, animals, houses, equipment, etc. depicted in NFTs. From there, users can spend their resources on improving their digital assets and later exchange them for cryptocurrencies, thus generating an additional profit.

2. DeFi — DeFi is an experimental form of finance that does not rely on central financial intermediaries such as banks and instead uses smart contracts on the blockchain. For example, in some GameFi projects, gaming is allowed. Thus, players can block some of their tokens to earn some interest.

Benefits offered by GameFi

Now that we have understood what GameFi is, let’s see what benefits it offers. The most obvious is the ability to earn money and generate revenue through gaming crypto tokens. The game-based economic model, which includes blockchain and cryptocurrencies, enables users to earn money simply by using the Internet. Blockchain-based games can also provide new employment opportunities, thus tackling the problem of unemployment and existing economic challenges.

History of Gamefi

GameFi originated from factors that challenged the emergence of the NFT event cryptocurrency which was built on the Ethereum network. The NFT economy proved to be a viral success, with the cryptocurrency peaking at over 14,914 users in a single day. Unfortunately, the success of these NFTs shut down the Ethereum network, resulting in a huge increase in transaction fees and slowing down transaction confirmation times. Since then, developers have moved to advanced blockchains that promise faster transaction speeds, greater scalability, and cheaper fees. These include BSC, Solana, Polkadot, Polygon, Wax, and Cardano.

The Future of GameFi Games

Although the origins of GameFi can be traced back to the early development of cryptocurrencies, it is only now beginning to see mainstream adoption. An often-cited example that illustrates the development of this exciting new trend is the massive success of Axi Infinity. The popular GameFi project became the first to cross $1 billion in token sales in August 2021 and has seen over one million daily active players.

Why should you invest in GameFi development?

Using attractive themes, game tokens, and DeFi elements, the GameFi project has rapidly attracted both investors and gamers. The opportunity to own your digital assets, enjoy games and even earn money from them will certainly attract traditional gamers and regular users, thus contributing to the growth of the GameFi community. The growing popularity of the Metaverse will be another factor in the mass adoption of GameFi, turning it into a profitable niche for both investors and game developers.

Final Thoughts

The GameFi concept is an improvement on existing online games. The play-to-earn mechanism is ultimately the passport to widespread crypto adoption as blockchain and NFT games indicate what lies ahead. So it should come as no surprise that this explosive trend shows no signs of slowing down. At this rate, GameFi and NFT will become a rallying point for DeFi. With rising public interest and capital influx, the possibilities for this budding industry are limitless.