GameFi, as the name suggests, is a mix of gaming and finance, and it mainly refers to blockchain games. This is a rapidly-growing ecosystem; according to data from DappRadar, over $2.5 billion was raised by games and metaverse projects in 2022.
Despite the harsh market conditions for the overall crypto market, blockchain gaming has grown by over 2000% from 2021, and GameFi projects constitute over 50% of all blockchain activity, notes the report.
The surge comes from increased interest from VC firms and investors in GameFi.
The Rising Popularity of Blockchain Gaming
According to data from Crypto.com, the current blockchain gaming market is north of $8 billion, and it’s estimated to grow to over $50 billion by 2025; so there’s more room to grow in the upcoming years.
The rising popularity of blockchain gaming is also helping to spread crypto adoption among the masses. According to Chainplay’s State of GameFi 2022 survey, at least 75% of GameFi investors initiated their crypto investments after joining GameFi ecosystems.
This shouldn’t be a surprise, since blockchain and gaming have been eyeing each other across the room, they just didn’t meet properly. Here are some ways blockchain technology can benefit and even reshape the way we see gaming.
1. Blockchain Offers Gamers Full Control of Their Assets
In traditional video games, players have to pay first in order to play. But these investments rarely throw any money back to the player.
When players acquire in-game assets, they should be able to own and do whatever they want with them.
This is not the case, however, as most gaming systems today are designed only to allow users to access the game and their in-game assets (which they can’t sell on in-game or secondary markets for real money).
In reality, the developers —and not the gamers— own those games and those items and assets. By contrast, play-to-earn (P2E) games allow players to wholly own the assets they acquire throughout a game and sell them on secondary markets.
This is thanks to blockchain technology, which can provide ownership of proof of authenticity of in-game items.
However, we need to consider a few things before joining the GameFi word:
- First: players should do their due diligence on knowing how a specific game works.
- Study the game’s economic infrastructure and gameplay mechanics —if both are deep and solid, then you have a potential gem.
- Check who the founders are, anonymous developers are always a red flag, and check if developers have a solid reputation in the industry.
- If a P2E requires a significant investment to start and the rewards are small, chances are you will lose your initial investment.
2. GameFi Brings a New Game-Based Economic Model
GameFi uses blockchain, cryptocurrencies, NFTs, and the play-to-earn model to lay the economic foundations of the game. In most cases, in-game assets are NFTs that players can acquire in multiple ways, depending on the game, and then sold across different NFT marketplaces.
Further, GameFi provides an opportunity to create virtual jobs in an emergent market. An early example is the Philippines, where after a two-year COVID-19 lockdown, Filipinos found a way to make an extra income playing Axie Infinity, the most popular P2E game on the Ethereum blockchain.
3. Potential Investment Opportunities
GameFi and crypto are untapped markets by a large swathe of investors and VC firms. The interest in both worlds is at its highest level, the reason why they have poured a substantial amount of capital.
To put this in perspective, DappRadar revealed that Web3 games and Metaverse projects raised nearly $750 million in funds in August — a 135% increase from July.
A leading investor is Andreessen Horowitz, a16z, who invested $4.6 million in a game guild.
Another important player is Sam Bankman-Fried’s crypto exchange FTX, which announced a gaming unit as a crypto-as-a-service platform to support mainstream crypto adoption in February.
Closing Words - The Future of On-Chain Gaming
While GameFi could bring a new era to the gaming industry, certain issues hold back this space from reaching mass consumers, as explained below:
More accessibility: chances are most gamers have heard of crypto but don’t fully understand the basics. Crypto education is the goal to jumpstart crypto adoption.
And since 44% of investors believe the entry of traditional gaming publishers into GameFi is the main driver for GameFi growth in 2022, crypto education should be prioritized.
It’s not all about money: the over-monetization of games can become a bewildering and cumbersome factor that drives away many players from interacting with GameFi apps, hindering blockchain and crypto adoption.
Games should have fun gameplay mechanics and compelling storylines and then create deep in-game economics where NFTs are either part of the game or revolve around it, but not force the topic of money on gamers.
Less cost of entry: some P2E games require substantial investments. Some GameFi titles might choose to go with free-to-play instead of play-to-earn, allowing users to play the game for free and decide if they want to buy in-game assets.