By combining gaming and money under what is now known as GameFi, the gaming industry is utilizing the power of Web3. Through gameplay, developers and players on GameFi can earn cryptocurrency and nonfungible tokens (NFTs) for themselves. These games are frequently offered in online environments known as metaverses.
How Does GameFi Work?
The technology allows users to interact with creators in a decentralized GameFi ecosystem. Developers are free to create engaging games and other interactive content, and players comply. Tokenomics is the term for the strong economic models that are used to distribute value among stakeholders in the form of “in-game tokens” and NFTs.
Play-to-earn (P2E) is a frequent word and model utilized by GameFi platforms. The first company to successfully implement P2E on a large scale was Axie Infinity. The model employs the subsequent methodology.
When using the platform, a gamer purchases an NFT. They then play the game and win gaming tokens. These game tokens can be exchanged for stablecoins, fiat money, Ethereum, or bitcoin. As players improve at the games, so can the NFTs they use to play them. Because they have been updated, these NFTs can be sold on NFT marketplaces for a greater price.
Through the P2E paradigm, GameFi projects grow their player base, which strengthens the token supply side. Conversely, by establishing “in-game” marketplaces, they also develop the demand side (burning mechanisms) for the tokens. These online stores offer props, vehicles, and weaponry that are found in video games.
The platform produces network effects as the game token’s supply and demand scale sustainably. This initiates a positive feedback loop that feeds back on itself and can be recognized as a working GameFi ecosystem.
Although P2E was the first Web3 economic model to become popular in GameFi, it is possible that this model has placed an undue emphasis on growing the gaming community, which is seen as GameFi’s supply side. But because the demand side, which maintains the economy’s equilibrium, hasn’t grown quickly enough, GameFi’s other economic models have started to develop.
For example, “play-and-earn” systems have begun to prioritize the gaming experience over revenue. They postulate that the gaming experience is what would maintain a high rate of gamer retention. Gamers should view their earnings from gameplay as a wonderful bonus.
Scalability and sustainability tests and adjustments are still being made to these models. Since GameFi platforms have been somewhat successful, other participants as support systems have begun to develop in this ecosystem. These gamers frequently concentrate on the particular tasks required to maintain the stability of the GameFi ecosystem.
The main participants in the GameFi ecosystem and their contributions to the field will be covered in more detail in this article.
Stakeholders of GameFi
Knowing the GameFi environment will make it easier for you to traverse the ecosystem if you’re a GameFi aficionado. Even while some of these players identify primarily with one function, they frequently have overlapping roles.
Video Game Companies
What is required for GameFi to launch? Games. The creation of games is the business of game studios. The user experience is developed by creative minds using technologies like Unity or Unreal Engine, and developers then bring them to life on screen.
Most GameFi platforms, such as Axie Infinity and Sandbox, come with this feature built in. GameFi companies must have the best game creation skills in the industry because they thrive on producing captivating gaming experiences.
Metaverse
Video games are released as stand-alone applications or as a component of a metaverse. Metaverses are online communities where users can congregate, engage in gaming, go to events, shop, and generally live it up. To guarantee user retention, a lot of GameFi platforms are a part of a metaverse.
For the GameFi economic model to function, the metaverse and GameFi must have a solid link. The gaming community is drawn to GameFi for its immersive experience, and the metaverse forces them to spend their gaming/ecosystem tokens.
Guilds for Gaming
The majority of consumer business strategies require some kind of distribution system. The platforms that serve as GameFi platforms’ distribution network are called gaming guilds. What role do they play and why are they necessary for P2E to operate?
The NFTs required by players to play the game increased in cost as P2E platforms began to grow. $200 spent on an NFT to play a game is a significant investment for a gamer in Indonesia or the Philippines, two major P2E marketplaces. Gaming guilds use a scholar and NFT rental model to address this affordability issue.
Guilds rent out NFTs to academics, who are gamers, by purchasing them on the GameFi platforms. P2E games are played by scholars, who pay rent to the guilds by splitting the spoils. By renting the NFTs they purchased, guilds gradually recoup their investment.
It was less than a year ago when guilds began to emerge within the GameFi environment. By being picky about the players they rent NFTs to, they have increased their return on investment. Scholarship programs are managed by guilds to welcome scholars. Because skilled scholars typically make more money from effective gameplay, these programs provide better return on investment for the guilds. Among the well-known guilds are Avocado DAO, Merit Circle, and Yield Guild Games.
Platforms for Renting NFT
Guilds amass NFTs, which they then lease to scholars. On the other hand, the act of renting can be mechanized and offered as a software-as-a-service (SaaS) to games, which can then offer to rent to its NFT holders. Some businesses are concentrating on developing this SaaS capacity.
For NFT holders of GameFi platforms, offering a rental feature is an extra benefit for the passive money produced. However, there is a chance that the NFT holder’s NFT won’t be rented out. This demand risk presents a chance for company. Platforms now take on the risk of renting it out (or not) and offer NFT holders a fixed return.
However, under this arrangement, renting it out directly will generate more revenue for the NFT holder than would using the platform. However, the risk of not earning any rental income for a while is lessened by the guaranteed return provided. Additionally, these models are developing into DeFi value propositions for holders of NFT.
Marketplace for Games
In order to select the greatest gaming experiences, players have need aggregation and curation services as a result of the proliferation of GameFi platforms in the last year. Gaming marketplaces search the market, evaluate the top titles, and then list them on their platform.
Their job is to attempt to close the gap by offering assistance to Web2 and Web3 players. By combining the functions of a gaming marketplace and curation engine with an NFT marketplace, a few of them have adopted a comprehensive strategy. One instance of a GameFi marketplace is Rainmaker Games.
Launchpads for Games
Launchpads help new GameFi platforms get off the ground and develop within the ecosystem. Based on a set of criteria, GameFi ideas are selected and given a space to develop and implement their strategy and vision. Launchpads help GameFi businesses locate qualified investors and grow from there as well. The Web2 startup world’s accelerator and incubator models are comparable to this.
GameFi’s Future
A number of stakeholders and their functions within the GameFi ecosystem have been covered. We will undoubtedly witness the emergence of new models or modifications of the current models shortly due to the rapid evolution of this domain. A few more use cases are already being investigated by GameFi stakeholders.
Certain platforms, for example, include the capability to determine the appropriate price for an NFT mint. Others began as guilds but changed or redesigned their structure to become a marketplace for games.
Large-scale trials are being conducted in this rapidly changing field. The main participants in the GameFi ecosystem have been discussed in this article. In addition to these participants, there are exchanges, market makers, investors, and influencers. These participants enrich the overall Web3 environment.
