GameFi was a trending topic in 2021. So what is GameFi, and what are its components and operating mechanisms? Let's dive in.
If we look back at 2021, we will all remember that GameFi was one of the hottest buzzwords of the time. It not only ushered in a new era of gaming but also helped many investors rapidly increase their accounts in a short time. With the ongoing development of web3, we can expect GameFi to be widely adopted by users, not only in the crypto market but also in traditional gaming.
So, what is GameFi? What elements make up GameFi? Let's delve into the article by AZCoiner to find out.
What is GameFi?
GameFi, also known as 'game finance,' is a new type of game based on blockchain that incorporates elements of DeFi (decentralized finance). Unlike traditional games, these games utilize blockchain technology and non-fungible tokens (NFTs) to create in-game assets, allowing players to own and trade digital assets on NFT marketplaces.
GameFi comes in various complexities, from simple lottery games to full MMORPGs. Whether through quests, trading, or any mechanism, it enables players to earn cryptocurrency assets through in-game efforts.
Components
To operate, GameFi projects typically include the following components:
1. Tokenomics: This is the core of GameFi projects. They often issue their own tokens and build in-game economies around them. Most current games have two types of tokens:
- Governance tokens: These are the main game tokens that grant the community the power to manage the game. They usually have a limited supply and can be used to purchase in-game items, characters, outfits, and other assets. -
Reward tokens: These tokens are earned by users when participating in activities and are used to access game features. They usually have no supply limits.
2. Blockchain: GameFi is built on blockchain platforms such as Ethereum, Polygon, and BNB Chain to facilitate game operations and ensure the transparency and security of all transactions.
3. In-game assets as NFTs: GameFi allows players to own and manage digital assets, such as trading cards, in-game items, etc. Players can also mine resources in the game to earn project tokens as rewards.
4. DeFi activities: GameFi integrates DeFi functions into games, allowing players to profit by participating in investment activities or playing games. DeFi activities can include lending, renting, staking, and providing liquidity.
Overall, GameFi projects aim to provide a new gaming experience, integrating the advantages of DeFi and blockchain into gaming, allowing players to create value and earn rewards.
Operating mechanism
Projects adopt various mechanisms to balance in-game tokens and provide rewards. These mechanisms include:
– PvP (player vs. player) and PvE (player vs. environment) interactions, daily tasks (logging in, completing system requirements, etc.), and other interactions that reward users.
– Token consumption mechanisms, such as breeding (creating new characters) and withdrawal fees.
Finally, NFTs are often key to playing games, and if too many NFTs are generated through breeding, they may also be burned.
Outstanding GameFi project
1. Axie Infinity
Axie Infinity is a pioneer of the Play-to-Earn trend, introducing many to GameFi. The game revolves around unique creatures inspired by the Mexican axolotl. Players need to purchase Axies, which represent game characters, as NFTs on the NFT marketplace. They can then form a team of three Axies to battle against other players in various game modes. Players can earn Smooth Love Potion (SLP) tokens as rewards for fighting and completing quests.
At its peak in November 2021, Axie Infinity attracted 2.7 million daily active users.
2. Sandbox
Sandbox is a unique Metaverse virtual world where players can build, experience, and own virtual assets. Players can use powerful tools to create virtual worlds according to their preferences. They can also rent or sell virtual assets on the NFT marketplace to earn tokens.
3. Decentraland
Decentraland is built on the Ethereum blockchain and is a virtual reality space where users can participate in virtual activities and earn money. Decentraland uses its native cryptocurrency MANA to facilitate the trading and actual ownership of virtual real estate, digital assets, and artworks.
The dynamic virtual economy in GameFi provides participants with opportunities to interact, communicate, and earn income through various activities.
Conclusion
Looking back at the bullish trends of the crypto market in 2020 and 2021, GameFi was a refreshing breeze and a major trend driving market growth. However, in the current downturn of the crypto market, GameFi projects have lost some prominence. Nonetheless, it will certainly make a comeback and continue to grow in the next bull cycle, rather than being forgotten by the community like previous trends.