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GameFi is more than just a play to earn model

TLDR

The Play to Earn paradigm permits gamers to play and earn and GameFi tokens, Cryptocurrency, or NFTs. It is a Blockchain technology-based idea.

What exactly is GameFi?

The word ‘GameFi’ is an amalgamation of the term ‘game’ and ‘finance,’ and it was introduced in a 2020 tweet by Andre Cronje, CEO of Yearn Finance. GameFi combines blockchain technology, non-fungible tokens (NFTs), and game mechanics to create a virtual world where users can engage and earn tokens.

Until recently, video games were stored on centralized servers, allowing creators and publishers complete control of their games. As a result, gamers had no true ownership or control over any digital things amassed during hours — or years — of gameplay. These objects ranged from weapons and outfits (commonly known as ‘skins’) to avatars and virtual territories, with very few having any real-world worth. As a result, there was no practical method for players to get reimbursed for their online time or share in the value of their gained in-game items without following the professional path( like tournaments, Twitch streaming, etc).

However, this is not the case with GameFi projects. These games allow players to earn in-game rewards by performing activities and progressing through several game levels. These incentives, unlike traditional in-game currency and items, have measurable worth outside of the gaming ecosystem.

GameFi, play to earn

For example, gaming products granted in the form of an NFT or accomplishment tokens can be exchanged on NFT markets and crypto exchanges, earning the sector the ‘play-to-earn’ moniker.

It’s important to note that ‘play-to-earn’ is a well-known terminology, yet playing in GameFi doesn’t come without risk, including possibly high initial costs that a player could lose or neglect to recover.

How Does GameFi Function?

Almost all blockchain-based games have their own in-game money, marketplace, and token economy. In contrast to traditional gaming, there is no centralized authority in charge. Rather, GameFi projects are often controlled and regulated by the community, with players even having a say in decision-making.

While the mechanics and economics of various GameFi projects may differ, there are a few things that they all have in common:

  • Blockchain Technology: GameFi projects are built on the distributed ledger of a blockchain. This maintains track of player ownership and ensures that all transactions are transparent.
  • Play-to-Earn Business Model: Unlike traditional gaming, where users play to win, GameFi projects utilize a P2E business model. These games incentivize players to play and grow within the game by providing rewards outside of the game. These are frequently in the form of in-game cryptocurrencies or NFTs.
  • Asset Ownership: In traditional gaming, in-game purchases are non-transferable investments that are locked within a particular game. P2E allows players to own their in-game tokenized assets.
  • DeFi Solutions: Many GameFi solutions may integrate components of decentralized finance (DeFi), such as yield farming, liquidity mining, and staking. These give extra opportunities for participants to accumulate token assets.

A peek at the GameFi and Play to Earn concepts

The gaming industry has transitioned from centralized to decentralized structures as the world evolves and progresses. What if you could be paid to play games? It was made possible via Play-to-Earn. Players may receive incentives for playing their favorite games using this principle.

NFTs and Web3 can democratize the TV programming

As we entered the Web3 era, it is critical to understand one of the most popular and in-demand areas, GameFi – an amalgamation of gaming and money, often known as Play-to-Earn. Tokens are used to reward players in P2E games, which encourage player ownership over the traditional player-as-consumer business model.

P2E (Play-to-Earn) Model

The Play-to-Earn approach permits gamers to earn tokens, cryptocurrency, or NFTs by playing. It’s a Blockchain-based idea that allows users to take ownership of in-game objects, sell them on crypto marketplaces, and make money. Unlike traditional gaming, gamers may now get incentives for the time and work they put into playing games.

The players can acquire rewards in the following ways:

  • Tokens
  • NFTs
  • Cryptocurrencies

Current status of GameFi

GameFi is enticing, but what happens when the first buzz goes off? Despite all blockchain industries being extremely hot in 2021, gaming won the top rank, accounting for approximately 13% of all investments.

Despite its promise, the GameFi sector confronts a number of significant challenges. As an investor, you should assess if the initiatives have the potential to overcome these challenges.

Currently, the GameFi player population is incredibly limited in comparison to the regular gaming player base – there are over 3 billion traditional gamers, while GameFi has only a fraction of DeFi’s 1.33 million users as of 2021. On-chain games are mostly reliant on the web in the mobile gaming era, which means they are unlikely to penetrate the mainstream until substantial advances in mobile on-chain gaming are made.

Furthermore, regular gamers are not flocking to GameFi in large numbers at this moment since the platform demands users to comprehend concepts such as bitcoin wallets, key phrases, and gas fees.

GameFi is going through a rough patch. This is evident in the drop in transaction volumes and the number of new GameFi users. This pressure is also inextricably linked to the state of the cryptocurrency market, which has been underperforming in recent months.

Conclusion

With an estimated 3.24 billion players globally, GameFi has a big scope for expansion. The blockchain gaming industry is ready to disrupt the vast $175 billion video game market globally with the GameFi and Play-to-Earn ideas. The success of games like Axie Infinity, which has over $1 billion in in-game asset purchases, has attracted the attention of conventional gaming giant like Ubisoft. This indicates that more Web2 games will transition to Web3 in the future years, and more GameFi initiatives will emerge.

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