What is GameFi?

Wouldn’t it be great if you could earn money while playing your favorite games? Now that’s possible thanks to GameFi — a relatively new class of Web3 titles that gives players the opportunity to collect valuable cryptocurrencies and NFTs. Any assets earned are owned by the player and can therefore be collected, exchanged, or sold for real cash.

In this AAG Academy guide, we’ll explain what GameFi is, how it works, and how you can get started with GameFi games in more detail. We’ll also cover play-to-earn (P2E), look at some of the best and most popular GameFi games on the market today, and answer some of the most frequently asked questions about the growing Web3 gaming industry.

Until recently, there were very few ways to earn cryptocurrency tokens and NFTs outside of mining them or taking part in staking systems — both of which can be an expensive hobby that newcomers tend to avoid. But GameFi changes that by giving those who enjoy playing games, most of which are available on mobile devices, an opportunity to get paid while they play.

The name GameFi comes from an amalgamation of the words “game” and “finance,” and it is used to describe the entire blockchain-based gaming industry, which includes play-to-earn (P2E) games. Within these titles, users are rewarded for completing tasks and objectives, battling or competing against other players, and progressing through different levels.

That might not sound very revolutionary. Lots of games reward us with fresh content or special items for progressing or completing certain missions. However, traditionally those rewards are stuck inside the game that issues them, and it’s not possible to use them elsewhere. If you stop playing that particular game, or a sequel is released, you usually lose everything you earned.

The assets you earn inside GameFi games are different. Not only can many of them be used elsewhere, like inside other Web3 games or decentralized applications (DApps), but they can also be traded and sold through exchanges and marketplaces. This gives players a genuine way to earn real money — simply for doing something they enjoy.

How does GameFi work?

GameFi essentially merges gaming with Web3 technology. Games are built with blockchain technology at their core, and they heavily rely on cryptocurrencies and NFTs. As a result, many have their own currencies, marketplaces, and economies. Lots of traditional games now have these things, too, but with GameFi, you’re not locked into them.

Any assets you collect or earn — which may come in the form of avatars, outfits, weapons, or even virtual land — can be traded with other players, or converted into NFTs that can then be sold. Alternatively, some GameFi games offer assets that are compatible across different titles, so certain items aren’t stuck inside the game in which they were earned.

For instance, Axie Infinity, one of the first and most popular GameFi titles, gives players the ability to collect and battle virtual creatures called Axies, which are NFTs. Winning battles and completing daily quests lets players earn tokens, known as Smooth Love Potion (SLP), which can be used to breed new Axies or traded on cryptocurrency exchanges.

Many GameFi games are also decentralized, so rather than being controlled by a single entity or a small group — like traditional games — they are managed and governed by the community. Some even give supporters, or those who hold the right tokens, the opportunity to vote on future changes or improvements, so decision-making is a collaborative process.

Axie Infinity also offers Axie Infinity Shards (AXS), another token that is used to govern the Axie Infinity universe. Those who own this token can vote on the direction of game development and updates, and in the future, it will be possible to stake AXS to earn rewards, and use it to purchase items from Axie Infinity’s in-game marketplace.

It’s important to note that not every GameFi game does things in exactly the same way. As the industry grows and the catalog of play-to-earn titles expands ever larger, it is to be expected that different projects will have different ways of doing things. However, the attributes we’ve outlined above are fairly common across the GameFi games that are available today.

What is play-to-earn (P2E)?

Play-to-earn or P2E is the name assigned to GameFi games that give players the ability to collect digital assets through play. Both P2E and GameFi go hand-in-hand, but while GameFi describes the entire industry, P2E is essentially the category of titles that exist within it. This helps distinguish them from traditional games.

Most of the games we’re used to follow a “pay-to-play” model. We hand over some money and then we get to play the game. Sometimes we’ll be able to unlock new content as we progress, but as is often the case, we end up having to spend even more to get our hands on any additional maps, outfits, items, and more. Paid expansion packs are also very common.

There’s also the “free-to-play” model, which is incredibly popular among mobile games but has also been growing on console and PC in recent years. Under this model, access to a game is free, but it is usually filled with ads that are constantly popping up in between levels, or we have to pay to unlock certain things, such as in-game currency we need to progress.

“Battle passes” have also become a mostly unwanted addition to lots of modern titles. These encourage players to pay a fee on a regular basis to unlock new content, most of which is cosmetic. Battle passes are often found inside free-to-play titles like Fortnite, but they are also popping up inside paid titles like those in the Call of Duty franchise.

P2E does away with all of that and flips the model on its head. Although players sometimes have to pay to get started — which we’ll look at in more detail later — once you’re up and running, they offer frequent rewards, most of which can be turned into cryptocurrencies and NFTs, and then real cash, just for playing the game.

What are the best play-to-earn games?

Axie Infinity
Axie Infinity, as we mentioned above, is one of the most popular P2E games on the market right now, and that’s largely because it’s also one of the best. Here are some other fan favorites that you should take a look at if you’re new to the GameFi world:

Decentraland
Decentraland is a virtual universe in which players can explore everything from medieval dungeons to space colonies — and everything in between. You can create your own adventures and environments, acquire virtual land and real estate, and play games with friends.

The Sandbox
The Sandbox is another virtual universe that has lots of environments and games to explore. Players can buy land and monetize it, and collect a wide range of virtual assets that they can use to customize their space and their avatar.

Genopets
Genopets is makes it fun and rewarding to live an active lifestyle. It lets you raise digital pets whose growth and evolution is linked to your own. The steps you take every day power your journey through the Genoverse as you explore, battle, and play.

Vulcan Forged
Vulcan Forged is an ecosystem of fantasy titles with a variety of gameplay options. It offers online role-playing games, deck builders, survival and tower defense games, endless runners, battle chess, and more.

What are GameFi tokens?

GameFi tokens are the cryptocurrencies used and earned inside play-to-earn games, such as Smooth Love Potion (SLP) and Axie Infinity Shards (AXS), which we mentioned above. In addition to collecting these through play, most are available to purchase from decentralized cryptocurrency exchanges, such as Uniswap, PancakeSwap, and SushiSwap.

Other popular GameFi tokens include Decentraland’s MANA token, The Sandbox’s SAND token, and the PYR token from Vulcan Forged.

How are GameFi games funded?

At this point, you might be wondering how GameFi games can afford to give away valuable digital assets — and how they’re funded. Well, in addition to consumer investors who buy their tokens, not only to play games but also as an investment opportunity, GameFi titles have become incredibly attractive among big venture capitalists in recent years.

The rise in popularity of the GameFi industry has led many venture capitalists to recognize that funding play-to-earn games can be a lucrative opportunity. In fact, in the year leading up to May 2022, more than $3.6 billion was poured into cryptocurrency projects focused on P2E gaming, taking the total value of the industry to well over $200 billion.

As we touched on above, many GameFi titles also call for an initial investment before they can be played. Titles like Axie Infinity require you to purchase a certain number of Axies (virtual pets) to get started, which ensures a steady revenue stream. For players who can’t afford to do that, there are gaming guilds that can help you get your hands on those assets initially.

For instance, AAG has a scholarship program that provides new players with the digital assets they need to start enjoying some of the most popular P2E games — including Axie Infinity.

How to get started with GameFi

The steps for getting started with GameFi usually depend on the game you want to play, so to begin with, we recommend researching the most popular P2E games on the market and picking a title that’s best suited to your play style. No matter what kind of gameplay you enjoy, you should be able to find a P2E game that’s a perfect match.

Once you’ve done that, you can follow the game’s own process for getting started. This will typically require you to purchase some cryptocurrency tokens from a decentralized exchange, which you can then use to acquire the in-game assets you’ll need to begin with. Of course, you’ll need a decentralized cryptocurrency wallet for this, such as the new MetaOne wallet from AAG.

With the necessary assets ready to go, you can start enjoying the P2E title of your choice. The more time you put into the game and the further you progress, the more rewards you’ll earn. These can then be used to give you an in-game advantage, such as faster progression or new abilities, or they can be traded and sold for a profit.

References

• What is gamefi and how does it work
• What is gamefi play to earn gaming explained
• Buy gamefi tokens
• Money continues to pour into gamefi but will developers follow