GameFi is a term that refers to the merging of game mechanics, blockchain technology, and non-fungible tokens in a virtual environment where players can participate and earn money. This new concept creates a “play-to-earn” platform where players are financially rewarded for playing games and progressing through stages. GameFi projects utilize various DeFi tools like landing pages, farming, loans, token issuance mechanisms, and algorithmic stablecoins.
The traditional model of games involves buying in-game assets that hold no value outside of the game. Although players spend money to acquire these assets, they do not have full control over them. However, GameFi has revolutionized this concept by utilizing blockchain technology, cryptocurrencies, and DeFi products.
These types of games allow users to control and own in-game assets without the intervention of any centralized server or game developer. Blockchain-based games typically come with an in-game currency, a marketplace, and a token economy that is governed and managed by the community. This ownership model allows players to have full control over their in-game items, eliminating the need for server infrastructure and reducing the risk of game hacking or cheating.
GameFi developed based on a DeFi economy structure where users can play a game and earn different types of game assets like avatars, virtual lands, and weapons, alongside crypto and NFT rewards. Users can also rent or lease their weapons to other players to gain returns.
The play-to-earn model is different from the “pay-to-earn” model used in conventional games like Call of Duty, where users pay upfront to participate in the game. Most of these P2E games are free to play, which means users do not have to pay a fee to take part in the game, and often reward users simply for playing the game and reaching certain in-game achievements.
Within P2E models, the rewards a user earns have the potential to be monetized. For example, users can trade their gaming assets or NFTs in crypto exchanges or NFT marketplaces and later swap them for fiat money or any other cryptocurrency.
Asset ownership is one of the fundamentals of play-to-earn games. Unlike traditional games, where game developers have sole authority over the games, GameFi allows you to have verifiable ownership and full control of your assets. Users can also vote and propose future developments in gaming experiences or policies for many GameFi ecosystems.