What is GameFi?

Blockchain games are creating a new status quo — a status quo defined by the three characteristics of an open economy, user ownership, and players as important players.

**These next-gen games feature tokenized in-game items, characters, and currencies, enabling players to freely trade among themselves. **

GameFi provides a normalized market that has historically been frictionless, inaccessible, and monopolized by the vast majority of game publishers to the detriment of players.

This is in stark contrast to most video games today. The characters you play, the skins you buy, and the items you earn are often conditional. They typically operate under strict, technology-enforced rules that often prohibit players from exchanging in-game assets. It's this rule that has led to the emergence of video game gray markets -- unofficial and unsanctioned marketplaces where valuable game assets (or even player accounts) are traded for money.

Blockchain games provide an open in-game economy with sovereignty over digital items and currencies

What is GameFi?

**GameFi, also known as "Game Finance", originally coined by Yearn Finance founder Andre Cronje, refers to a decentralized finance (DeFi) protocol with gamified elements. **However, given the direct connection of blockchain games to the real economy, GameFi later evolved into a term referring to the financial nature of blockchain games.

It's no secret that game items and currencies are valuable. With the rarest CS:GO (Counter Strike: Global Offensive) skins worth thousands of dollars, there is now a large gray market for in-game currency, items or accounts to be exchanged for real money. On one side of the equation are the sellers - the ones who own these digital goods for the time, money and effort they spend in the game. On the other side are buyers - people who, for any number of reasons (limited availability, social status, not having enough time to hone in, etc.), are willing to trade their money for the seller's hard-earned item.

BitSkins is a widely used third-party marketplace for buying and selling CS:GO items for real money

In this context, GameFi is not a new concept. It simply uses blockchain technology to regulate a market that has historically been fraught with friction, difficult to access, and sometimes outright banned by game publishers. Tokens are a transformative technology designed to replace these thresholds, currencies and even accounts.

How blockchain empowers GameFi

Today, in-game currency and items are typically stored and distributed by game publishers on proprietary backend servers. Basically, these game items and currencies live on the computer where the game publisher can change them at will. They control what players can do with their digital assets, deciding who owns them and how they use them. Not so with blockchain games.

In crypto games, a blockchain is a global decentralized computer network that acts as a centralized server. Smart contracts are applications running on top of blockchains that create and facilitate the movement of tokens — typically non-fungible (NFT) or fungible (FT) tokens.

What does it mean? In-game assets based on blockchain tokens, then, set a new standard for digital asset ownership. When an in-game item is an NFT, the player owns it. It can't be taken or erased, and anyone should be able to do things with their stuff -- like sell it, trade it, buy things with it -- without explicit permission from the game developer.

**Why should you know about GameFi? **

Games that offer GameFi capabilities are more attractive to players for a number of reasons.

Asset Ownership

The blockchain allows players to have sovereignty over digital assets: no one can take away the assets you own in the blockchain wallet. While this is not just a perk of GameFi, but a characteristic of any blockchain-based asset, **in-game asset ownership is a core feature that GameFi offers players. **This is a huge part of what makes blockchain games unique.

Before blockchain, ownership was a gift — a decision considered and approved by the game publisher. For blockchain gaming and GameFi, this is a fundamental right. GameFi and Blockchain Gaming By changing the default setting of player ownership to "yes" where the previous norm was "no", GameFi and blockchain gaming are reshaping the way players think about the value of their time, effort and attention.

Open Market

In-game items and currency are often obtained as rewards for playing the game. Whether it's an MMORPG, MOBA, or any other type of social game, reward mechanics (along with the core game loop) are a key way to give players something to strive for and keep them coming back for more.

Because these items or currencies are inherently bought, sold and traded on an open blockchain marketplace, players can hypothetically earn real money by playing the game. While there's no guarantee that players will turn a profit, or even that the items will be worth money in the long run, given the right circumstances and gameplay, the inherent connection to the larger economy makes this economic design possible.

Game Incentive

You have two games in front of you. Both are the exact same game, except one offers GameFi functionality over the blockchain and the other doesn't. All things being equal, you'd go for the GameFi option because it offers the same benefits as the other games, if not more.

This is one advantage GameFi offers blockchain games over today's games: players have an additional incentive to play. While this should never take precedence over the intrinsic desire gameplay brings to the player, the added incentive of being rewarded for the effort you put into the game makes GameFi even more appealing than its non-GameFi counterparts.

GameFi Example

All items, creatures, cards and currencies mentioned below are tokenized and can be traded on the marketplace.

Axie Infinity

Axie Infinity is a strategy game centered around Axies, unique salamander-inspired digital pets.

Players buy Axies from other players on the open market, form teams of three, and battle their teams in different game modes. They are rewarded for winning battles and completing quests using the game's native in-game currency, SLP, which is used in a variety of ways in the game, such as crafting runes and breeding new Axies.

Gods Unchained

Gods Unchained is a Trading Card Game (TCG) where a variety of rare NFT cards can be openly bought, sold and traded. Different cards have different abilities and stats, and players can mix and match cards to create their favorite deck.

Players use their decks to fight each other in the game. By playing and winning games, players progress on the leaderboard and earn GODS tokens - tokens that can be used to purchase new packs or staked as part of the in-game governance mechanism.

Sister

Sorare is a fantasy sports game where fans from all over the world can collect NFT player cards and participate in tournaments based on the performance of real players in famous sports leagues around the world, just like regular fantasy sports leagues.

Sorare players join the league and pick their roster for each game day. Points are earned for their roster performance as well as the rarity of each card -- as the rarity of the card increases, so do players. New cards are sold in an auction and awarded to players who win the game.

What exactly is GameFi

While GameFi introduces a novel concept of monetary incentives to gaming, the most important element of any game is its ability to entertain, immerse, and connect.

The GameFi economy simply created a new standard for game developers to empower players who love games and strive to progress in them. Often, gamers will hear that GameFi heralds a new player economy - one where gamers replace their day jobs by playing games. While the future is unpredictable, the bigger story behind GameFi is that it brings a usage scenario to digital assets.

All physical products are tradable. Handing someone a pen at school, selling your Magic the Gathering card to a friend, giving your child an old school uniform - these are all examples of transactions that can't be stopped because that's how the real world works. GameFi brings the same concept to the digital world. Players can now build economies around in-game items and currencies that rightfully belong to them.