As people are waking up to the realities of decentralized finance, many others are starting to understand the reality of gaming finance (GameFi) and the freedom and opportunities that it can bring.
For a long time, the easiest ways (and perhaps the major ways) to make money through cryptocurrency were through trading and investment.
But GameFi brought a new dynamic to that. All you had to do was complete a few tasks in a game, and you could earn tokens that you could use as currency and a store of value.
GameFi's Stablecoin Problem
GameFi isn't just a method for people to earn cryptocurrency through gaming. It is also an interesting combination of four important components of the blockchain space; NFTs, DeFi, cryptocurrency, and the blockchain itself.
GameFi isn't stopping there either. There isn't too much advancement on this yet, but it seems pretty obvious that crypto games will eventually combine with the metaverse to ultimately create an inclusive economy for NFTs, DeFi, cryptocurrency blockchain, and the metaverse.
However, the journey there will certainly not be easy. Right now, GameFi has a few infrastructural problems to deal with if it has any hope of increasing its current number of early adopters.
One problem is adoption. GameFi is a great way for crypto gaming enthusiasts to make money — but crypto gamers are sadly the only people who see the appeal in the GameFi space. The reason is largely due to many games having a clunky user experience.
The thing about GameFi is that the developers will often need to split their attention, and some will focus a lot more on the “Fi” aspect, rather than the gameplay itself. This ends up in the creation of a lot of terrible-looking games. Of course, GameFi enthusiasts do not care so much about this.
But people who game primarily because they love gaming, and not because of a financial opportunity, may find it difficult to embrace such games.
A Fortnite player, for example, would be very hard to convince to dump Fortnite to play another game that isn't quite as interesting or colorful.
The second problem has to do with the financial part of the game itself. A team can create an amazing gameplay experience, but they may not be able to navigate the complexity of building a perfect economy around their tokens.
And, as with all ventures, some of these tokens are worth more than others. Since this is crypto, tokens are subject to high volatility due to the unlimited potential of games to create coins. I mean, if there are no set amounts of coins that can be minted, things can get really bad really quick.
This makes it very easy for players to lose the value of their earnings overnight, making it difficult to grow a solid player base.
This is, quite simply, hyperinflation. It's happened in many countries over the years and has led to some terrible things — like starvation, extreme poverty, and even world wars. Thankfully, that's unlikely to happen in a game.
So, how does one solve this problem? Well, the answer is fairly obvious. The same way hyperinflation is managed in the real world— through a reserve currency. It can only be solved by pegging the game's currency to a stablecoin.
Every country has its own reserve currency, and for most countries, it's the US dollar. This means that every country with the US dollar as its reserve currency has huge reserves of the US dollar, despite not really using it for commerce.
Instead, that currency serves as a way to peg the country's currency and maintain its value. For example, if a hundred of that native currency can always be exchanged for one dollar, it would mean that the currency would always at least be worth 1/100th of a US dollar.
For the GameFi space, that currency can be a stablecoin. With a stablecoin pegged to the US dollar, games will always be able to generate demand for their own currencies since it's guaranteed that a certain number of that currency will always be equal to a certain number of the stablecoin.
But that alone cannot cure hyperinflation in the ecosystem since the game can just continue to create coins. That's why it's important that the stablecoin is upgradeable. That is, it can react to the in-game economics rather flexibly and is able to unlock new layers of custom utility for the game itself.
Thankfully, many initiatives are already working to solve that problem, and one of them is
Will it solve the problem of volatility in GameFi? Theoretically, yes. But one would have to see the coin interact with the market before understanding whether it would be able to do it in practice or the extent to which it would be able to do it.
What's The End?
It's easy to dismiss GameFi as yet another crypto fad, but it isn't. People who think of the blockchain gaming industry as an end and not a means often make this mistake. While gaming itself might be an end to the gamers, it is, in the larger picture, a means to an end.
Play is fundamentally a stage of awareness and transition for the wider cryptocurrency community. By building crypto games that work and are worth playing, the ecosystem would attract a lot more attention and allow the larger cryptocurrency ecosystem to be even more robust. And this is important since it's still very early days in the crypto ecosystem, regardless of the volume of transactions and liquidity in the market.
There are still so many products and functions to be built, and the best way to do that is by populating the ecosystem. And one great way of attracting attention to do that is through games. GameFi is doing a decent job at that, but it dearly needs to fix its infrastructural problems for that job to be spectacular.