The Rise of GameFi in Crypto

Feb 8, 2024

The creation of Ethereum, one of the most influential platforms in the crypto space, can be traced back to an unlikely source – gaming. 

Vitalik Buterin, Ethereum's creator, found his inspiration following an incident where his World of Warcraft character was significantly weakened by the game's developers.

It highlighted a fundamental issue in gaming: the complete control game developers have over the gaming experience.

Despite investing time, effort, and often money, players have limited control over their in-game assets and experiences. Game developers can make sweeping changes or revoke access with little to no input from the players.

Buterin's experience with "World of Warcraft" was a catalyst in realizing the potential for a more decentralized and player-centric gaming model.

The rise of GameFi in the crypto world directly addresses these issues. Blockchain technology and concepts like Non-Fungible Tokens (NFTs)  and “Play-to-Earn” models empower players with true ownership and a stake in the gaming universes they invest in.

The Evolution of GameFi

The concept of GameFi began in 2017, with the first instances of blockchain-based games launching on Ethereum. Games like "CryptoKitties" demonstrated the potential for blockchain in gaming, focusing primarily on collectibles. 

Such early ventures tested the waters for the integration of blockchain technology in gaming, proving that there was a market interested in digital collectibles and assets that could be owned, bought, and sold just like physical assets.

The Emergence of NFTs and Digital Ownership

This early groundwork led to NFTs soon becoming a cornerstone of GameFi, introducing the concept of verifiable digital ownership into gaming. 

NFTs allowed players to own, trade, and sell their digital assets within games, a major departure from traditional gaming models where in-game assets remained the property of game developers. 

The Rise of Play-to-Earn Models

As GameFi continued to evolve, the “Play-to-Earn” model emerged as a defining feature. This model enabled players to earn real-world financial rewards through their in-game activities, such as completing quests, winning battles, or trading assets. 

This was a significant evolution from the “pay-to-play” or “free-to-play” models prevalent in traditional gaming, offering a new incentive structure and attracting a broader player base.

Mainstream Attention and Growth

The increasing popularity of GameFi caught the attention of both gamers and investors, leading to a surge in the development of GameFi projects since 2020. 

Games like Axie Infinity became household names in the gaming community, and the influx of capital and interest is set to propel the sector to new heights in the coming years.

A report from Grand View Research projected blockchain gaming is the fastest-growing sector within the gaming industry, expected to grow at a rate of 68.3% from 2023 to 2030. 

This is significantly higher than the expected growth rate of the overall online gaming industry, which is at 13.4% over the same period.

How GameFi Works

Play-to-Earn (P2E)

At the core of GameFi is the Play-to-Earn (P2E) model. It allows players to earn tangible rewards by participating in the game. These rewards range from in-game tokens to rare collectibles, all underpinned by blockchain technology.

These rewards have real-world value and can often be traded on various cryptocurrency exchanges​​. This encourages active participation by transcending beyond the confines of the game itself, adding a new layer of engagement to gaming.

The Role of Non-Fungible Tokens (NFTs)

The use of NFTs to give players verifiable ownership of unique in-game assets is integral to GameFi. These assets can include anything from virtual land to character skins and equipment. 

NFTs in GameFi are owned by the players and can be bought, sold, or traded outside of the game.

Players who wish to advance in the game with minimal effort can buy these NFTs to get ahead, while those willing to put in the time can earn such NFTs and sell them for profit.

Tokenization and In-Game Economies

Certain games have also evolved to introduce complex in-game economies powered by tokenization. In these virtual economies, in-game currencies, often in the form of tokens, hold value both inside and outside the game. 

Players can earn these tokens through various activities like completing missions, winning battles, or trading in-game items. 

The unique aspect of these tokens is their cross-platform capabilities. They can often be used across different games and platforms, enhancing the utility and value of players' in-game achievements​​​​.

Gaming DAOs and Community Governance

Another important aspect of GameFi is the incorporation of Decentralized Autonomous Organizations (DAOs) and community governance models. In this setup, players have a say in the game's development and decision-making processes. 

Through DAOs, token holders can vote on various aspects of the game, such as updates, rule changes, and the allocation of resources. This democratic approach ensures a fairer and more transparent gaming environment, where players are directly involved in shaping the game's future​​.

GameFi in 2024

Advancing Beyond Blockchain Gimmicks

The year 2024 is pivotal for GameFi's evolution, with a pressing need to transcend its current focus on blockchain and DeFi gimmicks. 

Critics have pointed out that the industry, in its eagerness to adopt blockchain technology, often neglects the core aspect of gaming: engaging and high-quality gameplay. 

For GameFi to truly resonate with the wider gaming community, it must prioritize captivating gameplay alongside its blockchain features. This will not only enhance the player experience but also foster wider acceptance and credibility within the gaming industry​​.

Earning a Living Wage With GameFi

The most enticing aspect of GameFi is the ability for players to earn a real-world income. Everyday players can monetize their time and skills spent in the game, opening up ways for people to earn a living wage just from gaming.

Throughout 2021, games like Axie Infinity became a primary source of income for many players in the Philipines. Amidst economic challenges and low wages, Filipinos leveraged GameFi platforms and the Play-to-Earn model to support their livelihoods. 

In 2024, this aspect of GameFi could rise to another level. Rather than just users committed to the grind in poorer nations being able to earn a livable wage, casual gamers worldwide will also be able to subsidize their earnings by playing the games they enjoy. 

Integrating Advanced Technologies

A major hype point surrounding GameFi in 2024 is the potential for integrating advanced technologies such as AI and digital twins. These technologies could revolutionize GameFi by creating more immersive and interactive gaming experiences. 

However, seamlessly incorporating these technologies into games that are both entertaining and financially rewarding could be a challenge. Successfully achieving this balance could lead to a new era in gaming, where GameFi is recognized for both its technological innovation and gameplay quality​​.

Maturing in the Financial Landscape

GameFi's financial aspect is both a unique selling point and a challenge. The fluctuating value of cryptocurrencies and NFTs poses risks to players, particularly during periods of high market volatility. 

Additionally, the industry has seen its share of scams and fraudulent activities, highlighting the need for more robust security measures and player education. 

Ensuring a stable and secure financial environment will be a focal point for games launching throughout 2024.

Leading GameFi Projects

Axie Infinity (AXS)

Axie Infinity stands out as a flagship project in the GameFi domain. Launched by Vietnamese game developer Sky Mavis in 2018, this blockchain-based game has revolutionized the Play-to-Earn model. 

In Axie Infinity, players breed, raise, and battle creatures called Axies, each represented as a unique NFT. This innovative approach combines gaming with blockchain-based economic principles. 

Axie grew a massive player base and has achieved significant financial success since its launch. It also proved the profitability of GameFi projects and highlighted their ability to provide economic opportunities in regions with limited access to traditional jobs, such as the Philippines.

The Sandbox (SAND)

The Sandbox is another key player in the GameFi space, offering a virtual world where players can create, own, and monetize gaming experiences. 

On this platform, players can buy, sell, and trade virtual real estate, represented by “LAND” tokens. The Sandbox ecosystem also has its own currency (SAND) that can be used for transactions within the game (e.g., you can use SAND to buy LAND).

Sandbox models how creative expression, gaming, and finance can be merged. It demonstrates the potential of GameFi to reshape digital ownership and be an avenue for entrepreneurs.

Invest in the Future of Gaming

The potential for GameFi extends beyond just gaming. It's about creating a new economic model within the gaming industry, where players are not just consumers but active participants with financial stakes. 

This shift could lead to a redefinition of what gaming means, blurring the lines between entertainment and investment. The year 2024 and beyond could see GameFi evolving into a more mature, user-centric platform that balances the thrill of gaming with the practicalities of finance.

You can get started on your GameFi journey with Bake’s Fun & Games bundle. The bundle ties Axie Infinity’s native token AXS with The Sandbox (SAND). Together, these two tokens represent the power of blockchain in the gaming industry.

DISCLAIMER: Please note that the information on this blog and in any articles posted on this blog is for general information only and should not be relied upon as financial advice. Cake Pte. Ltd., Bake, UAB, and its affiliates (the “Cake Group”) are not licensed financial advisers. You may wish to approach your own independent financial advisor before making any decision to buy, sell or hold any product and/or digital assets mentioned in this blog.

Any views, opinions, references, assertions of fact and/or other statements are not necessarily the views held by the Cake Group. The Cake Group disclaims any liability whatsoever that may arise out of or in connection with such statements. Always do your own research before investing in any financial assets and consult a qualified financial advisor if necessary.

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