GameFi is the hottest thing on DeFi
According to Bloomberg, “One of the hottest things in the cryptocurrency world right now is GameFi. One of the reasons its popularity has soared is because GameFi players can trade, lend or rent out their winnings or even borrow against them. However, there is a debate about whether or not this new trend will “remake gaming or just separate the credulous from their money,” as reports come in of people borrowing money to play.
GameFi refers to decentralized applications (“dapps”) with economic incentives. Usually these are tokens given as rewards for in-game tasks. It’s an approach also known as play-to-earn. For example, in Alien Worlds, players earn passive income by letting others mine their virtual lands. They can also earn interest by lending their in-game assets, or by staking them.
At the moment Axie Infinity is one of the most popular and successful GameFi models. Over the last 30 days it had $564 million in on-blockchain transaction volume, according to DappRadar. The Axie economy has two tokens: AXS and the rather cutely named Smooth Love Potion (SLP). It also has NFTs, digital certificates of authenticity representing game characters and digital real estate.
But, as players often start by putting in $700 to buy the game’s monsters called Axies, this sum may strike some as a barrier to play, even if they do get paid SLP for winning battles and completing quests. However, as Bloomberg points out, not all games are as expensive to play as Axie Infinity.
On the other hand, the investment may be worthwhile, as if you earn tokens in a game that grows in popularity, those tokens can grow in value, perhaps even quite dramatically, as was the case with AXS in 2021 which soared from 54 cents to $94.
The difference between Fortnite and Axie Infinity
Whilst there have been tokens in gaming for some time, the difference between Fortnite’s V-Bucks and AXS or SLP, is that the latter are created to work as proper cryptocurrencies. This means that players can theoretically convert in-game winnings into cash on decentralized exchanges. GameFi tokens share the volatility common to cryptocurrencies not pegged to a traditional currency, and this means that when demand grows, a player’s winnings can also grow substantially. For example, the Metaverse Index, which tracks the prices of tokens from 15 different GameFi platforms, has more than doubled since its launch last April.
The number of blockchain games grew to more than 544 active dapps by the end of 2021, up from 200 in 202, and venture capital is pouring money into the development of more. Traditional game makers, such as Ubisoft (Assassin’s Creed) are entering the fray, calling GameFi “one of those revolutions.”
Gamers have pointed out dome of the downsides of GameFi, such as code errors, and ‘rug pulls’, whilst others question whether it is more about making money than gaming, but its supporters see it as a chance for the little guy to win against the big game companies.