What Is GameFi?
GameFi is an amalgam of two words: gaming and decentralized finance (DeFi). It is also referred to as play-to-earn (P2E) games. The concept of GameFi relies on the intersection of blockchain technology, gaming, and several forms of decentralized financial products, like non-fungible tokens (NFTs), yield farming, borrowing and lending, and algorithmic stablecoins, etc.
The term, “GameFi,” first made its appearance in a tweet from Andre Conje, the father of DeFi, on September 10th, 2020. With the introduction of the term, gaming has lowered the entry barriers in the crypto space and revolutionized traditional gaming by offering participants an opportunity to generate income while playing.
In conventional games, the in-game assets that you purchase have no value outside the game’s universe. Players invest money to procure these assets, but they don’t have complete control over them. GameFi transforms this concept through blockchain technology, cryptocurrencies, and DeFi products.
Almost all of these blockchain-based games are accompanied by a corresponding in-game currency, a marketplace, and a token economy, usually managed and governed by the community.
Players own their in-game items rather than developers with this model, thereby eliminating the need for any type of server infrastructure and preventing the possibility of game hacking or cheating.
By developing an economic model of making money while playing, the concept of GameFi has exposed the world to a new use case for cryptocurrencies.
One of the significant reasons behind GameFi’s popularity is that no centralized authority controls the ecosystem, unlike traditional games.
Additionally, the underlying blockchain technology allows for zero-fee transactions so that players can buy, sell, and trade digital assets without incurring fees.
The in-game currency offered by GameFi games can be swapped for other cryptocurrencies and fiat money.
Players can also purchase (invest in) in-game NFTs and trade, rent, or sell them in open marketplaces to gain returns.
For instance, you can buy a plot in the game and sell it to another player at your set price. Or, you can rent out the “Level 100 armor” to other players and earn extra income.