How do GameFi games work?
GameFi comes in many different forms today. As such, the mechanisms by which players can generate revenue through their gameplay vary. However, there are a few important themes worth mentioning. Many of the most popular blockchain games today use a combination of the following features to monetize the action.
In some blockchain games, players receive financial rewards for completing gameplay objectives. The funds awarded in these play-to-earn titles typically originate from a reserve of native tokens held within a smart contract.
For example, in the hugely popular Ethereum-based game Axie Infinity, a portion of the game’s AXS token is reserved to reward the following behaviors:
- Winning battles and tournaments
- Tending your plot of land
- Trading on the Axie Infinity marketplace
- Breeding Axies
Central to many blockchain games today is the concept of ownership of scarce digital assets. Bitcoin introduced digital scarcity via the blockchain, and NFT technology expanded on it. NFTs can represent all manner of assets — both digital and physical — including in-game items.
Digital ownership of unique assets creates economic opportunities that were not possible before. For example, in CryptoKitties or Axie Infinity, players can breed two creatures represented by NFTs to create a third creature. They can then leverage a title’s play-to-earn capabilities with this new asset, sell it or lease it out for other gamers to use, splitting any revenue generated between owners and borrowers.
Although not exactly games in the strictest sense, online virtual worlds — popularly known as metaverses — also enable their inhabitants to monetize their time via asset ownership. At the heart of spaces like Cryptovoxels, The Sandbox and Decentraland is the concept of land ownership, and these plots trade freely on secondary markets.
Owners can monetize their plots in much the same ways that they can in the physical world. In addition to outright selling owned land, they can develop an attraction that may generate revenue, or lease it out for someone else to monetize. Walk around one of these shared virtual spaces and you’ll see various efforts to monetize land. Examples include casinos, virtual shops and concert venues.
Interestingly, these worlds are starting to see the beginnings of economies emerging. For example, in March 2021, the Tominoya Casino in Decentraland hired real people to greet punters on arrival and act as general support staff. This is a trend that many see continuing. Some even estimate that the “metaverse economy” will eventually dwarf the real-world one as people take advantage of new opportunities presented by these virtual worlds.
Some GameFi projects introduce concepts from the DeFi sector to reward gamers. Concepts like yield farming, liquidity mining and staking will be familiar to anyone with DeFi experience and can provide a passive means to generate income from a blockchain game. If you’re new to DeFi, you can learn more about it and concepts that overlap with GameFi in our DeFi explainer.
Examples of blockchain games that leverage features more commonly found in DeFi include Axie Infinity, Aavegotchi and Nine Chronicles.
Top GameFi protocols
Although the first GameFi titles used the Bitcoin blockchain, most modern blockchain games can be found on smart contract-enabled networks. Of these, Ethereum was the first and remains the most popular for developers and gamers alike.
Yet, Ethereum is optimized for decentralization and security over performance. As Ethereum’s block space is limited, those requiring the fastest settlement times must incentivize miners to include their transaction via the included fee. When demand exceeds the amount of block space available, the cost to transact quickly rises, pricing some users out. This presents a problem for blockchain game developers. A game will simply never enjoy the user base of mainstream titles if many of the actions a player takes require an exorbitant transaction fee.
Hence, many developers are now shifting away from Ethereum’s base layer toward faster, higher-capacity networks. Examples include:
- Polygon Network
Pacific is a decentralized NFT marketplace and an integrated platform for metaverse/GameFi assets. The project has received endorsement from some of the most eminent institutions and investors, including the Web3.0 Foundation, NGC, Gate.io, Krypital Group, PAKA, Candaq etc.