By Game-Fi we mean the combination of video games (gaming) with decentralised finance (DeFi). This particular type of digital games uses blockchain technology, which makes them unique and allows players to be the verified owners of virtual items in the game.
In November 2019, the founders of MixMarvel gave a speech at the World Blockchain Conference, which was held in Wuzhen, China. During the various statements, they highlighted the many possibilities of using blockchain technology also in the world of digital gaming.
However, the term 'Game-Fi' was only born in September 2020, when Andre Cronje - founder of Yearn.finance - wrote a tweet describing the specifics of this new trend. From then on, video games integrated with finance, decentralised and powered by blockchain took their current and definitive name, namely Game-Fi.
Recently, the concept of Game-Fi has gained a lot of popularity in the blockchain and cryptocurrency sector; in fact, the total market value of Game-Fi reached $55,38 billion in February 2022 (data: crypto.com).
Play-to-earn, how does Game-Fi work?
Game-Fi games, like all games, use the mechanism of participation with the goal of a final reward, but it is the way in which the latter is generated that changes. Traditional games work on the basis of the play-to-win model, whereby the game has no objective other than winning.
In Game-Fi, on the other hand, players are rewarded for their time and effort, according to the 'play-to-earn' model, which concretely rewards participation in the game. In addition, the items in the digital game (such as avatars, animals, houses, tools, etc.) are NFTs - non-fungible tokens - thus unique, indivisible and with a single owner. This allows for a customisation of the experience and makes it unique and variable from user to user.
They use DeFi - decentralised finance - which does not rely on central financial intermediaries, such as banks, and uses smart contracts on the blockchain. The latter guarantees security and transparency between players.
What are the steps in a Game-Fi game?
Unlike traditional video games, the steps to follow to start playing a Game-Fi are slightly more complex but innovative. Let us look at them together.
- Creating a virtual wallet: unlike traditional games, where one registers with a username and password, in Game-Fi one has to identify oneself through a virtual wallet that works through blockchain technology. Wallets can contain different currencies and be of different sizes: this varies depending on the game;
- Adding funds to the wallet: Game-Fi does not use traditional money but cryptocurrencies, and each game uses a different one. Therefore, they must be purchased before starting to play in order to have a credit to start with;
- Purchasing the basic digital resources to play: in most Game-Fis, the use of an avatar is necessary to generate profits; therefore, the basic tools to participate must be purchased before starting to play.
What are the most popular Game-Fi games?
The number of Game-Fi games is growing steadily, to date there are more than 500.
According to crypto.com's GameFi: Past, Present and Future report, the most popular is Axie Infinity, with a market capitalisation - total market share value of a company - of $3,51 billion (as of February 2022). The game aims to make little creatures, called Axies, fight and collect credits through a play-to-earn mechanism.
In second place we see The SandBox, set entirely in the virtual metaverse and with a slightly lower market capitalisation ($3,41 billion). It is followed by Enjin Coin ($1.59 billion), WAX ($611.58 million) and Ultra ($285.49 million).
Future and Game-Fi
The projected blockchain gaming market is estimated at $50 billion by 2025, with a growth rate 10 times that of traditional games (data: crypto.com).
A practical example can be seen in the launch of the game Axie Infinity, which has seen a significant growth in its value in a very short time. This new type of online game is closely related to the metaverse (if you want to know more, read our article Metaverse: the difference between Meta and the metaverse), which is the virtual world in which people can interact through avatars. In fact, another example is MetaSoccer, a football game set in the metaverse, which raised over $2 million before it was even released.
The question now arises: will the Game-Fi sector continue its global growth or is it destined to be a passing trend?