In 2018, the two main ways video game players could make a living were through esports and livestreaming, or perhaps a successful YouTube channel. But with the rise of blockchain technology, the financial side has never been more interwoven with the gaming industry. Most users are familiar with one or two aspects of game finance, such as earning rewards and cashing out by completing Axie Infinity game quests, but the cryptocurrency market is thriving. There is a new vertical called GameFi.
CryptoKitties in 2017 was the first known game to use blockchain technology and introduce non-fungible tokens (NFTs) to allow players to make verifiable claims against virtual assets. Then, in 2019, the introduction of an in-game currency called Smooth Love Potion (SLP) made Axie Infinity more popular and paved the way for other decentralized finance (DeFi) components to penetrate blockchain games. .. Similarities between GameFi and DeFi include staking, liquidity mining, NFT trading, and NFT fractionalization.
Last year, the cryptocurrency market’s gaming subsector exploded, shortly after the NFT market boom. In December, it surpassed the Bitcoin (BTC) and DeFi sectors. While the upward trend has slowed in recent months, popular games such as Axie Infinity, DeFi Kingdoms, Megaxy, MOBOX and Bomb Crypto continue to earn millions of transactions per day.
Much of the excitement about games in 2021 also stems from growing interest in venture capital. For example, Solana Ventures and Lightspeed Venture Partners launched the $ 100 million GameFi ecosystem fund in November 2021. A month later, the BNB chain, formerly known as the Binance Smart Chain (BSC), and Animoca Brands also set up a $ 200 million fund dedicated to the GameFi project. It is built on BSC.
Games have elements of DeFi that have attracted investors and players alike, and these are discussed below.
NFT component
As mentioned above, NFT was started by CryptoKitties. This allows players to assign value and ownership to specific assets in the game. Take Axie Infinity as an example. This Ethereum-based video game NFT acts as the entry cost for the game. To start playing, the user must have three “Axies”. This is a game character acquired from other players through the Axie Infinity marketplace.
The axis is NFT and its price depends on its rarity and usefulness. Players can earn money from Axies by finding buyers who can make a profit and sell. In other games such as Splinterlands, NFTs take the form of trading cards, the market value of which is also determined by their rarity.
Subdivision
NFTs and the concept of fractionation are intertwined, but fractional NFTs make it easier for everyone to access the game. Fractionation essentially divides the entire NFT into smaller pieces, providing a claim of ownership to multiple people, as in Gustav Klimt’s paintings. kiss, Its digital version was sold as 10,000 fractional NFTs. Subdivided NFT owners can make money by trading assets in the secondary market.
This is similar to crowdfunding in real estate. By the way, this is another growing use case for NFTs. In games, on the other hand, to democratize the ownership process, it’s best to sell rare and expensive in-game assets in fragmented NFTs.
For example, another play-to-earn game, Waves Ducks, integrates subdivision through “collective farms” aimed at reducing entry costs. One “duck” costs 3.3 Waves Duck (EGG) to hatch, which is close to $ 700 at the time of writing. However, by joining the farm, players can play the game for only 0.01 EGG and receive tokens that represent their investment in the farm.
Staking
The staking feature is a common theme of DeFi and is also entering the realm of blockchain games. Axie’s staking support, which allows users to lock in AXS tokens to protect their networks and receive rewards, was released in September 2021. Mobox also allows you to earn MBox tokens through staking.
Apart from this, staking rewards can also be used to purchase in-game items and upgrades, and to generate keys to unlock new NFTs. To stake in Mobox, users must add to the liquidity pool and earn tokens based on the pool’s APY. Some small GameFi projects have also introduced staking into their games.
On the surface, staking benefits users by earning more tokens, but some of the tokens earned by staking are also used for governance, with owners in specific directions for the game and the community. You can vote for. But most importantly, it encourages users to hold tokens, which in turn promotes a real vibrant economy.
Liquidity mining
Liquidity mining components can also play an important role in GameFi, as in the example of the game DeFi Kingdom. Built on the Harmony blockchain, DeFi Kingdom provides a series of DeFi aspects from the beginning of the game, appealing to DeFi fans and providing the game aspect as a secondary feature.
The DeFi Kingdom’s liquidity mining pool is offered in the form of an in-game “garden”. LP shares are represented as plots filled with flowering plants that grow with yield. Users will earn JEWEL tokens, which are the main tokens of the game used for in-game NFT purchases and out-of-game liquidity mining.
These are just a few of the DeFi technologies included in the game, but innovation in this sector hasn’t stopped. GameFi is also accelerating the realization of Web3 as it moves previously centralized entertainment to a more decentralized domain, connecting more communities and controlling the gaming ecosystem. Some people think. In fact, this is already done because the game’s DeFi feature is already a prelude to Web3.
All future reports from Cointelegraph Research are about GameFi. stay tuned.
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