Understanding how GameFi contributes to the growth of Crypto and NFTs
In 2018, a craze for breeding CryptoKitties (his early
NFTs) nearly brought the entire Ethereum network to a standstill. However,
GameFi is becoming more prevalent as the hype of cryptocurrencies and NFTs
increases. Moreover, increasingly sophisticated games are built on networks
such as Enjin, Polygon, and Flow. GameFi is a blockchain-powered game that
allows players to earn rewards. As such, the industry has retained momentum, and
its valuation is expected to hit $74.2 billion by 2031.
What is GameFi?
GameFi is a platform that combines blockchain technology, non-fungible tokens (NFTs), and game mechanics to build virtual worlds that users can interact with to earn tokens. Video games were stored on centralized servers, giving publishers and creators complete control over everything in the game. This meant that the digital objects you collected in the game over hours, even years, were not yours. Few of these objects were used outside games, from avatars and virtual realms to weapons and clothing (sometimes called "skins"). As such, there needed to be a practical mechanism for a user to get refunds for online time or access the value of earned in-game items without embarking on a professional gaming career.
Players earn in-game rewards by completing objectives
and moving through different stages of GameFi games. These prizes have monetary
value outside the gaming industry, as opposed to traditional in-game money or
equipment. The industry is called "play and earn" because of the
gaming products he offers in the form of NFTs as "achievement tokens"
that can be exchanged on NFT marketplaces and cryptocurrency exchanges.
Although "play to earn" is preferred, participating in GameFi comes
with risks, including potentially significant upfront fees that players may
lose.
How does GameFi work?
GameFi enables existing and evolving blockchain technology to design special incentives for gamers via Play-to-Ene (P2E) and NFT mechanisms. A gaming company with a large audience can create in-game assets that reward gamers with their NFTs on the blockchain. These NFTs can also have rarity ratings depicting anything from in-game currency to badges, weapons, and distinctive traits preferred by the users. Gamers are utilized to earn such compensation in virtual environments. Striving toward goals is an integral part of many video games, so making rare items through gameplay is ingrained in the game's mechanics. The best example of this is the Pokémon era and everyone trying to catch them all. This aspect of video games, where collectibles of varying rarity and stats can be earned through gameplay, is particularly well-suited for cryptocurrencies and NFTs. Owning rewards related to objectives also creates status and prestige for people within the gaming community.
Almost every blockchain-based game has an in-game
currency, a marketplace, and a token economy. In contrast to traditional games,
there are no centralized powers. Instead, the community typically manages and
manages GameFi projects, and users participate in decision-making.
Each GameFi project has its mechanics and economics but shares similar characteristics. A blockchain-distributed ledger powers the GameFi initiative. This maintains a record of player ownership and ensures the openness of all transactions. In contrast to traditional games where players play to win, the GameFi initiative employs his P2E business model. These games encourage players to play more by offering measurable and valuable incentives outside the game. These incentives usually take the form of NFTs or in-game money.
In traditional games, in-game purchases are immutable
investments locked within a particular game. A player owns tokenized in-game
assets via his P2E. Most of the time, people can exchange them for
cryptocurrencies and, eventually, money. On the blockchain, assets are
tokenized, including anything from a suit of armor to virtual real estate.
Decentralized finance (DeFi) solutions such as yield
farming, liquidity mining, and staking could also be part of many GameFi
initiatives. These will give participants more ways to increase their
investment in the token.
Decentraland, The Sandbox, Axie Infinity, and Gala are
well-known blockchain gaming networks using P2E GameFi architecture.
Why GameFi matter for cryptocurrencies?
GameFi is only a few years old, but according to the latest figures, there are over 800,000 players engaged in blockchain games every day, and a recent survey found that 75% of these gamers are hard-earned. It has been revealed that you have traded or considered in-game trading assets you purchased. Virtual currency or fiat currency? The earning prospect of these in-game acquisitions is increased because the game utilizes its cryptocurrency for trading, making it easy, fast, and cheap to trade these items internationally.
Another advantage of her GameFi platform for players is
that it adds a personal touch to the virtual worlds gamers participate in,
giving many gamers an outlet to create or customize their own NFTs for trading.
By presenting cryptocurrency use cases beyond pure speculation and virtual
worlds to make unique digital items such as NFTs more meaningful, GameFi will
push the adoption of both blockchain tokens. This industry continues to attract
investors and expand in 2022, raising over $3.5 billion in the year's first
half.
What is next for the industry?
Big names in the gaming industry, like Tencent,
Ubisoft, and Zynga, have become a part of the GameFi space, collaborating with
Web3 and blockchain development companies to utilize their knowledge and
expertise in this area with mainstream big-budget game studios to innovate in
their GameFi space. These partnerships are essential in overcoming users' main
complaints with his GameFi. This means that with a clear incentive to earn NFTs
or in-game currency to make a profit, the gameplay experience becomes more
attractive in the long run. This has shown an unwillingness to accept GameFi in
the mainstream gaming community, leading to major cryptocurrency-related
announcements from his studio, as did his CEO of EA, Andrew Wilson, last
November. Later, fan backlash prompted walk backs or reconstitutions.
Collaborations with established game studios will produce blockchain games that
combine the best elements of modern AAA gaming industry hits with the revenue
and trading potential of the GameFi sector. Only then will it shake its
reputation of being only interested in short-term gains.
GameFi rewards and NFT interoperability
NFTs can be shared with another game on the same
blockchain and potentially with other blockchains. In-game rewards appear in
your wallet or are ported to another game system. In the future, this
interoperability means that gamers can see their NFTs referencing game items that
can be used in multiple game worlds. For example, a gamer can trade any item
earned for a specific character from one game to another. To stress move over
this, NFTs can also be liquidated and turned into fiat currency by utilizing a
P2E model to develop a real-world income from their accomplishments in the game
world. For example, by allowing gamers to convert their in-game earned
crypto assets into fiat currency that can be spent offline, the game Axie
Infinity has provided users in the Philippines with enough cash to make a
living.
Meanwhile, assets such as Decentral and's virtual land
is somewhere between video games and virtual reality environments and are
becoming serious investments. GameFi's growth fuels the idea that investing
time and energy in a digital web3 environment can generate profit and wealth
outside gaming. The GameFi sector has been one of the significant contributors
to the explosive growth of the cryptocurrency market over the past few years.
Gamers can earn incentives while playing thanks to her GameFi, a combination of
the words "finance" and "gaming." Consistent growth brings
the market capitalization of tokens to almost $9.2 billion. Notably, the GameFi
network survives and thrives despite the crypto winter.
What contributes to GameFi's popularity?
It is a virtual currency backed by the profits of the game industry. So what does that mean? Now, the company is entering a $109.9 billion market. Furthermore, it is not just a market but an exponentially growing market. The thing is, the gaming industry is one of many experiencing this growth. It is expected to grow as more people join the game and connect to the internet. The gaming industry is expected to grow by 7% by 2021. There was already a sizeable growth rate of 6% back in 2016-2017. This may seem small but is staggering when converted to dollars and cents. Moreover, with new platforms emerging, there are plenty of ways to play your favorite games and make money. It offers a unique approach to cryptocurrencies by creating a fungible ecosystem that allows you to easily manage your virtual assets without the need for cryptocurrencies.
How is GameFi boosting the growth of cryptocurrencies and NFTs?
What challenges does the GameFi industry continue to face despite the massive market?
Investors will continue to pour billions into blockchain gaming companies in 2022, but the GameFi sector has yet to solve its biggest problem. Experts believe the problem lies in the complicated onboarding experience for new players and games that focus too much on tokenomics and revenue over gameplay. A recent study by Coda Labs found that traditional gamers still need to familiarize themselves with web3 games. The survey found that only 12% of his 6,921 respondents in five countries had tried blockchain games, and only 15% of those had never tried them before.
Not only are these games a low bar for entertainment, but the requirements to start playing often need to be more complex and comfortable for users. The setup process is complicated for those unfamiliar with blockchain games, who have to download a wallet and buy NFTs to play the game. Game companies assume that people will be comfortable downloading crypto wallets. Blockchain games are so new that they should be very easily accessible if users want to try them out but do not want to spend hours doing them. The game is much more focused on value transfer and profit sharing than it should be, and it is a fun experience.
The dawn of the GameFi space and the cost of entry is high, and the odds of winning and having fun are low, hindering the mainstream adoption of GameFi. The ability to play and earn, and to create actual player ownership of virtual goods, is a worthy goal that seeks to remedy several deficiencies in the current gaming industry. However, that fact is the selling point itself. The needle these gaming companies need to sew is a happy medium in which the utility of blockchain technology adds value to the gaming experience but not the experience as a whole. The virtual economy is tough to manage, and further regulation will improve adoption in the blockchain gaming space, which will be a challenge for development studios to consider.
It is clear that GameFi has excellent potential, but blockchain game companies must fix user experience issues to get closer to mass adoption. Chainplay stats show that 58% of global investors say poorly designed in-game economies are the only reason GameFi's profits decline. The need for blockchain game developers to improve the entertainment user experience for their users, with 81% of GameFi investors prioritizing the fun factor over revenue when it comes to their GameFi projects in the future.
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