Why the GameFi breakthrough is far closer than you think

The explosion of play-to-earn is revolutionizing traditional gaming and causing a wave of mainstream adoption of blockchain technology. Research estimates put the play-to-earn industry on a meteoric trajectory, skyrocketing from $9 billion in total market volume in 2021 to $74 billion by 2031. That’s an average annual growth of more than 20% every year for the next decade. Why is there so much investment and interest in the sector?

Play-to-earn in a nutshell

Play-to-earn is a relatively new use case for blockchain technology that offers players a financial edge over conventional gaming. In traditional games, players earn all sorts of digital assets that are immensely valuable within the context of that game. However, despite months and sometimes years of hard graft, the centralized gaming company ultimately owns the assets that players obtain. 

Play-to-earn solves this by offering true ownership of digital assets by incorporating NFTs and crypto tokens. Unlike traditional in-game currencies and items, these rewards have measurable value outside the gaming ecosystem. Players can trade NFT or cryptocurrency game items on marketplaces and external crypto exchanges for other crypto or fiat currencies.

Robbie Ferguson, CEO of prominent gaming blockchain Immutable X, put it perfectly when he said, “The reason we [Immutable X] started with games is that they’re by far the most exciting use case for NFTs. There’s $110 billion spent every year on digital property that people have zero rights to, and it’s a complete scam” Robbie said. Simply put, play-to-earn allows gamers to gain monetary rewards for gaming time.

The Market

It’s easy to see the innate value in true digital ownership and financial rewards for gaming. That is why, amidst all the turbulence, play-to-earn gaming has remained the most buoyant of all blockchain use cases in the blockchain market. A 2022 Q3 report from DappRadar reveals that 48% of all blockchain activity takes place in the gaming sector. Despite the ongoing crypto winter, the number of unique active wallets continues to increase at an average monthly rate of 8%.

Unlike DeFi, primarily occupied with day traders, speculators, and tech-savvy investors, play-to-earn and Metaverse technology have permeated the mainstream. Some of the largest global entities in the world, including FIFA, Walmart, and Amazon, announced and executed plans to enter the industry this year, infusing the retail market with blockchain technology.

It’s not just the major corporations who are seeing the value of this technology; experts in the field and the venture capitalists in the market are backing play-to-earn. Blockchain gaming received $4 billion worth of funding in 2021, which almost doubled to $7 billion in the first nine months of 2022. Gaming giants such as Epic Games, Animoca Brands, and Square Enix have infused the industry with investments.

(Source: Dapp Radar)

The growing pains of an industry in its infancy

Despite the rapid user growth, massive investment, and optimistic market projections, one question remains. Out of 3.1 billion gamers, why are only 900,000 involved in play-to-earn gaming? The answer appears to consist of three major elements. 

The first is related to unsustainable tokenomics. Many GameFi companies use huge reward pools early to entice new players or rely on new players to purchase essential in-game items to provide liquidity for the rest of the gamers. Both models have gaping flaws that lead to reduced rewards, token devaluation, and a loss of player interest.

The second is game diversity and longevity. Many projects provide just one game. In an industry that is evolving rapidly, better games are constantly entering the market, outperforming their predecessors by every possible metric. The third is transparency. Ecosystems conducting business behind closed doors are looked at with skepticism. 

However, the market is maturing, and competent platforms are addressing these problems to create an economic and gaming model that will prove sustainable well into the future. One of which is Nakamoto Games which appears to have hit the sweet spot in terms of profitability, playability, and transparency.

Nakamoto Games solves the economic problem through zero-sum gaming. Players buy tokens and use them as an entry fee for games. Rewards are distributed to each player based on where they finish on the leaderboard, with 1st, 2nd, and 3rd taking the majority of tokens. This system offers significant resistance to token inflation as the players, not the platform, fill the prize pool with tokens.

Zero-sum gaming is transformed into a positive sum model through commissions and fees collected from NFT sales, play-to-earn games, and in-game purchases. Because each in-game asset is tied to an amount in USD, players receive the same rewards in dollar value regardless of the price fluctuation of the native token.

Nakamoto Games avoids becoming obsolete by offering a catalog of diverse play-to-earn games that all use the same token. The influx of new games ensures that the platform can adapt to improving game quality within the industry by consistently introducing new titles on its website. Finally, they solve the problem of transparency by offering weekly development updates straight from the team's desk. These updates provide behind-the-scenes access for gamers who want to know more about the project they are investing in.

The model has proven successful in the last year. As many projects have fallen by the wayside since the bear market hit, Nakamoto Games has remained stable and has proven profitable for many in various regions of the world. The platform has been responsible for supplementing the income of a cluster of gamers in Vietnam and The Philippines, reporting that heavy users are making anywhere from 100-500 USD a month for their play-to-earn endeavors.

Play-to-earn is inevitable

Play-to-earn, as a concept, is not a novelty or a gimmick. It is a way to grant true ownership of well-earned digital assets to the billions of gamers worldwide. It rewards gamers for hours of graft and years of building skills. As the industry matures, so will the models that embody it. Some platforms have learned from the mistakes of past projects. They are now ushering in a new era of professionalism through well-structured economics and game diversity. The significant investment in the industry is sure to spawn more innovation for gamers worldwide as time goes on.