Understanding the GameFi Model

Let me begin by briefly defining GameFi. It essentially refers to play-to-earn blockchain games which give players economic incentives. So, while playing the game, players are effectively amassing digital assets that have a real-life value unlike the tokens in typical video games that can only be used within the game. These economic incentives can take the shape of cryptocurrencies or NFTs and can be traded on the respective marketplace.

Several games built around this model have garnered huge success because people nowadays understand the importance of their time. Even while spending their time on something that is considered entertainment, they want to create assets that have monetary value to them. But obviously, just like any financial market, GameFi is not a very straightforward procedure. It requires thorough understanding; so let’s explore this concept a little in this article.

As you may have figured out already, GameFi is a combination of two words: Game and Finance. GameFi models rely on rewarding their players in an attempt to motivate them to keep playing the game. As mentioned before the reward can either be a cryptocurrency or an NFT. Cryptocurrency could be the token earned in the game by winning or passing levels. This token is usually listed on the stock market, so players can easily trade it like other cryptocurrencies e.g., BTC or ETH. NFTs could be in-game collectibles like avatars, costumes, and avatars. While these NFTs may not sound appealing to you at the moment but think about the value of a car NFT from Need for Speed. And now think about what the value would be if it’s a limited-edition car that only ten players own in the game.

There are two main features of a GameFi model.

1- Play-to-earn

Play-to-earn is a recently coined word due to the influx of blockchain games. Play-to-earn is exclusive to blockchain games because unlike other video games, players who play blockchain games are earning tokens or NFTs that have real life value. In typical games, the in-game earnings are limited to the game only and cannot be exchanged outside the game. However, it is important to note one similarity between these two types of games. Video games require you to make an initial payment. And sometimes P2E games do too. You need to purchase an NFT to begin playing the game. However, this is quickly changing; because NFTs derive their value by being limited in quantity. This only limits the active players in a game.

2- DeFi

Decentralized finance (DeFi) uses modern, emerging technology that replaces traditional financial services. By integrating decentralized finance into blockchain gaming, players have better access to their assets. They can exchange their digital assets without the need for a third party and can avoid any hidden costs. This streamlines their experience and gets rid of unnecessary hassle.

In conclusion, GameFi is a revolutionary step in the world of blockchain. It helps players use their time efficiently even when playing a compelling video game. Perhaps, blockchain gaming is the future of games because of this fascinating GameFi model.