What is GameFi?
GameFi is a market segment within the decentralized finance (DeFi) ecosystem that combines blockchain technology with elements of game theory to increase interest in a particular blockchain project and deepen users’ relationship with a specific cryptocurrency.
One of the key aspects of the GameFi ecosystem is a play-to-earn (P2E) business model that provides gamers with tangible incentives for their time and effort. Popular incentives include in-game cryptocurrencies and non-fungible tokens (NFTs) that can be traded, sold, or used as collateral in other financial applications.
How GameFi Works
GameFi platforms are supported by smart contracts that automatically execute specific actions when certain conditions are met. The flexibility and programmability of smart contracts make them a powerful tool for creating unique and innovative GameFi experiences.
Each game typically has multiple smart contracts tailored for a specific purpose or function within the game. For example, a game might have one smart contract to manage the creation and distribution of in-game assets, a second contract to manage player rewards and incentives, and a third contract to manage asset trading and the in-game economy.
Game developers can leverage the P2E business model to create new revenue streams and incentivize user engagement while also gaining access to a large, dedicated user base that includes traders and investors as well as traditional gamers.
Some platforms allow developers and investors to earn a share of the transaction fees when players trade, sell, or stake their digital assets within a specific GameFi ecosystem.
According to Cryptonews.com, GameFi is likely to become one of the biggest sectors in crypto and has become a key focus of early backer attention, with analysts predicting that the sector will be valued at $104.5bn by 2028.
Popular GameFi Activities
Some of the most popular P2E gaming activities online or in a metaverse app include:
- Creating and selling virtual assets: Gamers can design unique in-game items, such as digital pets or virtual real estate, and sell them to other players in exchange for digital assets. This activity can be particularly lucrative for developers who have the design skills to create desirable in-game items.
- Trading: Gamers can trade in-game virtual assets with other players. This activity can be particularly appealing for gamers who are interested in collecting rare or unique virtual items.
- Staking: Some GameFi platforms allow players to stake their digital assets in exchange for participating in a game’s governance or participating in certain in-game activities. Staking can provide players with a way to earn passive income while also contributing to the development and growth of the game or metaverse.
GameFi has become controversial for several reasons, but one of the main concerns has to do with Environmental, Social, and Governance (ESG) risks.
For example, there are concerns about the environmental impact of GameFi, particularly as it pertains to the energy consumption of blockchain networks.
Despite the controversy, GameFi continues to grow in popularity and attract interest from gamers, developers, and investors. As the market segment evolves, however, it’s likely that regulators will need to address concerns about the relationship between GameFi and gambling and develop appropriate safeguards to ensure the gaming ecosystem complies with local laws and regulations.
How To Start Earning Money by Playing Games Online
Earning money through GameFi requires a combination of skill, strategy, and luck. To find trusted GameFi activities, it’s important to research popular and reputable GameFi platforms and learn about the tokenomics (economic models) they use before joining.
Crypto experts also recommend that new gamers start by investing a small amount of time and resources to test the platform’s withdrawal policies and procedures and gauge its reliability without risking a significant loss.
Once a player selects a GameFi platform, they will need to create an account. This typically involves providing some basic personal information and setting up a wallet address to receive and store winnings.
After playing, the process for cashing out earnings varies depending on the platform. Some platforms have minimum withdrawal limits that have to be met before earnings can be cashed. Platforms may also charge players a withdrawal fee for converting earned tokens or cryptocurrency into fiat currency or other digital assets.