What is GameFi?
The term ‘GameFi’ is a combination of the words ‘game’ and ‘finance’, that combines the mechanics of online games of different genres with decentralized finance, in which players may participate and receive tokens.
A wave of GameFi popularity came in 2017 when DapperLabs launched CryptoKitties on the Ethereum network and attracted thousands of users. This success did not keep other blockchain developers waiting.
Therefore, in the near future, a number of other decentralized games on the blockchain were launched and the process of gaming’s blockchain industry was set to fly.
How Does GameFi Work?
The main idea of GameFi projects is that they are usually managed and governed by the community, with players even able to participate in decision-making.
As we explained earlier, in GameFi, almost all blockchain-based games are accompanied by a corresponding in-game currency, marketplace, and token economy, allowing you to receive your own native tokens for performing various actions. So you’re able to earn items and have the option of trading them, opening up new monetization avenues.
Before we move forward, let’s break down the main components of GameFi:
- Blockchain: GameFi projects run on a blockchain’s distributed ledger such as Ethereum, Polygon, Polkadot, and Solana network. Running a game on a blockchain’s distributed ledger not only enables player ownership but also ensures that all transactions are transparent, fair, and open.
- Non-fungible Tokens (NFTs): In P2E games, NFTs are used to represent assets and enable transactions in the marketplace. Unlike traditional online games, P2E NFTs ensure that all in-game assets are unique and that they cannot be duplicated or fake in any way.
- Play-to-Earn Business Model: In contrast to traditional gaming, where users play to win, GameFi projects adopt a P2E model. These games incentivize players to play and progress within the game by offering rewards that have measurable value outside of the game.
- DeFi Solutions: Many GameFi projects also integrate decentralized finance (DeFi) elements which allow players to earn passive income and increase the number of tokens through yield farming, liquidity mining, and staking.
The Present State of Gaming
The gaming industry has been growing continuously for many years: industry researchers estimate the size of the entire gaming industry from $175–200 billion ( 1, 2 ) to a whopping $300–335 billion ( 3, 4 ) at the end of 2021.
One of the reasons for the increase in the size of the gaming sector is the growth in the number of players, annually updating historical highs: from 2015 to 2021 the number of active players increased by more than 45% and reached 3 billion ( 5, 6 ). The bar chart below shows that by 2024, new players are expected to grow by 100–130 million people annually.
This analysis provides an opportunity to familiarize yourself with the market, and to get acquainted in more detail, here is the link to an article in which analytical data is presented.
Mobile gaming is the most popular form of gaming in the world today, ahead of PC and console gaming. According to the analytical portal Statista, the annual revenue growth rate of the mobile games segment will be 8.74% in the next four years.
Blockchain gaming
Blockchain gaming activity grew 2,000% in the past year from Q1 2022, according to the recent DappRadar x BGA Games report. The first half of 2022 saw top funds in the NFT and blockchain gaming space raise a cumulative $10.5 billion in capital. GameFi is set for explosive growth both in terms of market cap and the number of gamers.
GameFi is also highly related to the metaverse, one of the hottest emerging trends with many major companies heavily invested in it. If the metaverse succeeds, GameFi will likely experience great success as well.
There will be numerous new blockchain games released, and there is a huge untapped market of gamers who can potentially transition from traditional games to blockchain games.
Overall, the next few years will be very exciting for GameFi and blockchain gaming.
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