What is GameFi?
The term GameFi is derived from two words; gaming and finance. It refers to the intersection of gaming and finance powered by blockchain technology.
The Long Definition
GameFi refers to a fusion of gaming and finance. It describes a gaming ecosystem where users earn monetary rewards from gaming. This ecosystem consists of blockchain-based games, crypto coins and tokens, non-fungible tokens (NFTs), and various decentralized finance (DeFi) elements.
Gaming has been a popular hobby for decades. For the majority of this time, the industry can be described as pay-to-play. You, the player, typically have to make some sort of payment/investment in order to play. For example, to play a game like FIFA, you must purchase it for $70.
Even free-to-play games like Fortnite have some pay-to-play elements. This is because they operate on micro-transactions. Players are encouraged to buy in-game items in order to unlock the full gaming experience, whether they help you win or just make your character look better.
But the biggest criticism of traditional gaming, according to GameFi, isn’t so much the pay-to-play element, it’s the lack of financial returns for the players. Despite investing in video games, most players don’t get a monetary return on their investment. They also don’t truly own in-game items they buy or earn while playing.
GameFi’s goal is to change this by allowing the user to reap monetary rewards. It uses blockchain technology to introduce elements of finance that the user can take advantage of to earn real money.
How Does GameFi Work?
Although games may vary depending on their preferred designs and model, here are the main components of GameFi:
GameFi video games reward the user for playing. As you progress through the game, you earn crypto tokens and digital collectibles, like NFTs. These assets have value outside the game and can be sold in the game’s marketplace.
Note that this doesn’t necessarily eliminate an initial investment. Some games require you to buy a certain amount of in-game assets in order to start playing. The difference with traditional gaming is that you earn money that you can then use to offset your initial investment and even return a profit.
Typically, all collectible items in a P2E game are tokenized. Tokenization refers to converting an asset into non-fungible tokens (NFTs). Turning them into NFTs ensures that each in-game item is unique and cannot be forged in any way. This, in turn, gives an item some monetary value, allowing you to sell/swap it for profit.
GameFi is all about true ownership. All tokenized items that you collect in-game are linked to your wallet address. That way, your avatars, weapons, tools, potions, health items, etc. belong to you. This is why you’re able to sell them for profit or exchange them with other assets in a marketplace.
Blockchain is central to GameFi. In fact, every element mentioned above would be impossible to achieve without blockchain technology.
- Each game in the GameFi ecosystem is built on a blockchain network.
- NFTs and other tokens earned in-game live on the blockchain.
- The marketplaces where players trade NFTs and tokens are built on blockchain.
- Thanks to blockchain, GameFi games are open to everyone. There are no gatekeepers guarding the space.
Most P2E games exist on Ethereum. Its smart contract capabilities allow developers to create and deploy game ecosystems on the network. Other blockchains, like Polygon and Binance Smart Chain, are also home to budding GameFi ecosystems.
How Do I Get Started With GameFi?
Getting started with GameFi is relatively straightforward. All you need to do is:
Find a Game
Today, there are many GameFi games available to play. The biggest and most popular are Axie Infinity, Sandbox, and Decentraland.
It’s important to do some research before picking a game. Check the requirements for playing the game and make sure that you’re comfortable with them. For example, some games require you to purchase their tokens to get started.
You also want to ensure that it’s a legitimate project. The last thing you want to do is commit to a scam. So, look into the creators and listen to what other users have to say about the game.
You can do this by joining the game’s discord channel. The channel provides a platform where you can speak with the team and community directly. You can ask questions, request updates, and more to get an overall vibe of the project.
You also want to look at the project’s Twitter page. Specifically, focus on the account’s activity and follower count/demographic.
Create a Crypto Wallet
In GameFi, your crypto wallet is like your gamer ID. It connects your blockchain address to the game. It’s also where you save your progress, including all the items you’ve earned so far.
Your choice of wallet depends on the blockchain you want to play games on. You need a wallet that’s compatible with that particular network. Generally, since most P2E games are on Ethereum, a Metamask or Trust Wallet will do.
Connect to the Game
The final step is connecting your wallet to the game. Unlike in traditional gaming, you don’t have to create an account with your email address, geo-location, and password. Instead, your blockchain address is your account, so you’ll only have to sign on to your wallet to connect to the game.
But before you sign, make sure that the game’s website is the correct one. Some scammers make copies of legitimate GameFi websites. They then use these fake sites to trick unaware users into connecting their wallets and sending them crypto. Such scams are known as phishing scams.
Remember, no legitimate web3 project will ask for your wallet’s seed phrase. If anybody asks for your seed phrase, it is most definitely a scam.