GameFi explained

GameFi, as its name suggests, is the intersection of gaming and finance. It is considered a Web3 sector because ownership is decentralized between builders, investors, and players. These two industries met on the blockchain through an exciting ecosystem of in-game tokenomics and NFTs (non-fungible tokens) for games.

In this context, nft games they are simply a record of ownership of game assets on a public blockchain like Ethereum, Cardano, or Solana.

GameFi decentralization allows game assets (or NFTs) to be transferred between games. This transferability gives assets value outside of the gaming ecosystem. And because the ownership status of an NFT is tracked on the blockchain, they can be bought and sold as collector’s items on third-party exchanges.

This evolution in gaming is not about game mechanics. Rather, it’s about bringing game monetization closer to Web3’s ultimate vision. Many large GameFi developers hope that these games will evolve into blockchain marketplaces where the free market places value on game assets within an ecosystem owned by players.

So what are the real-world benefits of NFT games?

It’s not just about digital collectibles. NFT games bridge the digital worlds by ushering in a new era in the collection of gaming assets. It is the technology that will facilitate a unified metaverse, and Web3 games will bring several benefits that traditional games lack.

Property: In traditional games, in-game purchases are non-transferable investments locked into a single game world. Gaming NFTs grant ownership of game assets to players. That property is more significant as it is not restricted within the walled garden of the game publisher.

Demonstrable shortage: The scarcity of NFTs for gaming can be proven through the immutable records of the blockchain. This is important when considering that rarity and authenticity are valuable traits in the minds of collectors. Additionally, gaming NFTs cannot be tampered with or duplicated due to the immutable record generated on the blockchain upon issuance of digital assets.

Interoperability: The traditional online gaming model is based on centralized servers. These games operate on disparate systems. When it comes to NFT games, they can be designed to be portable, interconnected, and interoperable with other games built on the same underlying blockchain. The player is then free to use them in other games (if other games support those assets) or sell them to other players.

Obstacles for GameFi

A wrinkle that needs to be corrected is flaking. Currently, most gaming NFTs are issued on the Ethereum blockchain. Ethereum gas fees are making transaction costs impractical. This bottleneck has meant that chains that achieve much higher throughput, such as Polygon and Solana, are becoming increasingly popular for blockchain-based games. This is likely to remain the case until the eth2 update.

There is resistance to blockchain-based games from many gaming communities. Previously, attempts to use microtransactions to monetize games have met with backlash. Due to bad experiences in the past, many gamers assume that a move to NFT games is purely profit-driven and a mechanism that top game publishers will use to sell games.

Another fear is that a ‘pay to win’ model will be followed, resulting in more significant repercussions. If a player manages to buy his way through the game, he gains unfair advantages over other players.

Leading game publishers are interested in NFT games, but need to innovate ways to integrate monetization without sacrificing gameplay. Top ten Ubisoft game companies recently experienced a backlash from the community when he tried to introduce NFT through one of his games. As a result of the community response, the company reversed its intention to use NFT.

The future of NFT games

While Axie Infinity has been a breakthrough for the play-to-win blockchain gaming model, more innovation is needed to bring the advantages of blockchain-based gaming to the mass market. An evolution towards a model of playing and winning it’s already running. This approach focuses on both gameplay and tokenomics.

This does not mean that playing to win will go away anytime soon. It will continue to be an attractive segment of Web3 gaming for participants who are already crypto-native. These games will continue to attract participation through their tokens more than anything else.

This controversial yet exciting fusion of DeFi and gaming has a lot of untapped potential. As players, developers, and investors find solutions that satisfy all parties, they will expose the remaining users of a $155 billion gaming industry income. to DeFi.

How to invest in Web3 games

Investors can take various approaches to investing in this space.

Play and win: Blockchain gaming models play to win and play to win are one approach. Axie Infinity developer Sky Mavis was the first big innovator in this space. With this model, players can invest their time and effort in exchange for game tokens and NFTs that have value outside of the Axie ecosystem.

This is particularly relevant in developing countries with significant potential income relative to the local economy and per capita income. The Philippines represents 40% of Axie Infinity players. As of October 2021, the total number of in-game Axie tokens that had been minted represented 1.7% of the Southeast Asian country’s GDP.

Whether it’s play to win or the more recent advent of play to win, playing games based on these models represents one of the easiest ways to invest in NFT games.

Rent to win: As development in this space continues, many of the most popular NFT games now require a substantial investment to start playing and winning. At its peak, the average price for an Axie Infinity NFT it costs around $355, and a minimum of three are needed before a new player can play the game.

Guilds of games like UniX Games have emerged to help players invest in NFT games by offering newcomers the option to rent under a scholarship program. The profits are then shared between the guild and the player. This is yet another approach that removes the barriers to entry for a player to enter and win.

Game Currency: A blockchain-based game will have an in-game token that will function as the in-game currency. It is possible to invest directly in these tokens. However, the degree to which the token supply is limited is a factor that should be considered when deciding whether to take this approach. Games with limited token supply are more likely to appreciate, given the game’s sustainability and demand.

Governance Tokens: Blockchain-based games are also likely to have governance tokens. A governance token allows the holder to vote on changes to the smart contract code and treasury management items. Taking Axie Infinity as an example, it uses Axie Infinity Shards (AXS) as its government tokens.

Stakeholders have a strong incentive to obtain governance tokens: they have influence over the tokenonomics of the game. Some of these tokens provide voting rights on the strategic direction of the protocol. Additionally, these tokens will often include cash flow rights similar to stock dividends.

Game Guilds: Many consider it risky to invest in individual games due to the assumption that most fail. Gaming guilds offer investors a risk-averse strategy.

Take the UniX Games Guild as an example. UniX conducts due diligence on games it believes will be successful and purchases NFT assets in those games. Thus, UniX token holders benefit from professional NFT curation much like an ETF or index fund. In addition, the holder shares in the income from NFT academic rentals and asset price appreciation. All these assets are managed in a decentralized way through a DAO. And diversification spreads risk across all investments.

Initial Game Offering (IGO): Invest in an IGO through launch platforms like UniX Gaming Final Round offers an opportunity to get NFTs or tokens in upcoming games at a discounted price. If the game catches on with listings on major exchanges, investors can expect a significant return on investment.

Other readings

The sponsor of this Investment Guide, UniX Gaming, has partnered with DAO Maker and SL2 on Final Round, its multi-chain launch pad, which is due to launch imminently. More details can be found here.

Relevant Podcasts

The Future of Play-To-Earn Games | Felix Sim and Gaby Dizon — Empire Podcast by Blockworks

Why NFT Games Will Be Bigger Than Twitch | Justin Kan — Blockworks Empire Podcast

FTX Game Strategy | Amy Wu – Empire Podcast by Blockworks

How Web3 will change the gaming industry | Carra Wu – The Unstoppable Podcast

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This content was sponsored by UniX Games.

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