A Guide On Gamefi And Its Potential
Although the ideas of GameFi have been applied before, it was not until Axie Infinity became a billion-dollar project in terms of capitalization that GameFi was noticed by many people. Since that event, it has achieved certain successes and gradually became a trend in the cryptocurrency market. So what is GameFi and what potential does it have? Let’s discuss this with Tokenize!
What is Gamefi?
GameFi, which stands for “Game” and “Finance,” is an online game with financial elements from which participants can benefit from playing. DeFi, which stands for decentralized finance, is comparable to this definition.
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GameFi initiatives, which let players own virtual in-game things, are typically built on a blockchain platform. Many games, for example, offer mission systems in which players are rewarded with tokens for completing objectives. Other games may reward players with in-game products (in the form of NFTs), which they can then sell on the market for profit.
The GameFi project is usually built on a distributed blockchain platform, allowing players to have ownership of virtual in-game items. For example, some games have systematic quests, which, when completed, can give the player certain coins. Or some other model may pay with in-game items (in the form of NFTs), and players can exchange items on the market for the money.
How it works
Traditional online games monetize through app store item trading, marketing, or advertising. As a player, you have to spend money to buy items to increase your win rate or have an advantage over other players. Those expenditures will directly generate revenue for the game publisher.
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The history of Gamefi
The potential of GameFi was first presented at the World Blockchain Conference held in China in November 2019. In it, the founder of MixMarvel emphasized the applicability of blockchain to the video game industry.
However, the name “GameFi” was first mentioned in a tweet by Andre Cronje, creator of Yearn.finance, in 2020. Since then, the phrase has come to mean video games with features of blockchain-based decentralized finance. GameFi has transformed video games into a highly appealing space because of this unique combination.
Going back in history, in 2013, Minecraft was the first game to integrate and apply peer-to-peer services that allowed gamers to make money from traditional games. Later, projects like Huntercoin used blockchain technology not only to make payments but also to allow players to earn money by mining the project’s coin.
Early GameFis used Bitcoin’s blockchain, but high transaction costs and low transaction speeds became barriers to development. Gradually, other GameFi projects switched to using other blockchains that support smart contracts like Etherum. So far, Etherum is still the popular blockchain of GameFi titles, however, it also has certain limitations, related to performance due to block space. The highlight is the CryptoKitties event that clogged the Ethereum network at the end of 2017, causing transaction fees to skyrocket.
And of course, high transaction fees are a huge drawback, difficult to attract users. To solve that problem, some developers have turned to larger blockchains such as Solana, Polkadot, Polygon, Wax, and BSC. The above networks also support NFT applications to determine ownership of virtual assets of video games. Now, NFT is getting more and more attention from developers. At the present time, we can see, that the GameFi market is growing very fast and is gradually becoming a trend in the crypto world.
The potential of Gamefi
While blockchain games in the past struggled to find players, GameFi is now growing explosively. Typically, the resounding success of the game Axie Infinity, which is being reported a lot by the media recently. Axie Infinity became the first GameFi project to surpass $1 billion in token sales in August 2021, with over 1 million daily active players.
The success of Axie Infinity is the premise for the mass development of GameFi on various blockchain protocols. However, the future of gaming market is also very difficult to predict. However, with the current rapid development of blockchain technology, breakthroughs in the coming time will certainly be applied to games, bringing new ways of making money and experiences for the gaming community.
With benefits beyond traditional online gaming, blockchain technology empowers players, and it affects GameFi in a positive way – both financially and in terms of the development of a game.
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