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GameFi: How Play-to-Earn Cryptocurrency Games Work

GameFi: How Play-to-Earn Cryptocurrency Games Work

GameFi is a portmanteau of the words “gaming” and “finance” and refers to video games developed using blockchain technology. As well as being an umbrella term for blockchain gaming, GameFi is a movement that is rapidly gaining popularity. Cryptocurrency research firm DappRadar reported more than 800,000 unique daily active wallets on the GameFi marketplace Exchange in August 2022. Business Activision Blizzard is one of the most popular video game companies, with a market cap of over $56 billion.

But games have increased in recent years, and their market cap could reach $74.2 billion in 2022 by 2031, according to an analysis by market research firm ReportLinker.

What is the game?

Traditionally, the video game industry comprises games you play to win or, more specifically, to play. Historically it was the players and the payers. In recent years, some video game developers have added paywalls within games, requiring players to spend additional money to unlock certain features of a game they’ve already purchased. Games games, on the other hand, are win-win games where players can earn crypto by playing the game. “With traditional games, you put money and time into the game and have fun out the other end,” said Jason Brink, blockchain president of Gala Games, which is developing an ecosystem of 14 games.

“GameFi is unique because you may alter the time-to-money ratio to obtain a different level of fun and possibly some financial gain. How much money can you make?

Many of the games on the blockchain networks are free. So, can someone with a game talent win a massive amount of money? Not, at least not without a significant investment of time. Although the cryptocurrency tokens created by GameFi developers for the gaming economy have real value, they are usually worth pennies, if not fractions of a cent. But they can have more excellent value within a video game ecosystem.

Suppose you play a game and accumulate a war chest with an insane amount of crypto tokens,” says Jean-Paul Faraj, head of community and partnerships at Unstoppable Games, a company developing its first game. Even if these tokens have almost no dollar value, they might have value compared to another game because we’re in a decentralized market where tickets can be traded and exchanged.” For example, he notes, you could use earned tokens in a game or a different game. Your decisions also influence your financial success during the game.

“In traditional games, each player-controlled character has the same experience. But what if you had a player who could own a city?” Brink says. “Or a player who owns a ship and can transport 20 players back and forth to different locations? Could you make a lot of money? Sure. But your result can be drastically different depending on what you want to do.

How do GameFi companies make money?

Because many games are free to play, most GameFi companies make money from NFTs or non-fungible tokens, digital identifiers typically tied to an image or video. NFTs in the GameFi space are often avatars that you can use for your game character, but they can also be tools or items you can use in the game universe. Companies like Gala Games will make these NFTs available to the public, and they can then be traded on exchanges like OpenSea or LooksRare. When an NFT is bought or sold, Gala charges a 2.5% royalty.

Since some NFTs are listed on these sites for hundreds of thousands of dollars, royalties can add up quickly. Some companies do not charge royalties for NFTs but retain a small percentage of every transaction in-game. 

Possible scams

Be careful if you’re considering using GameFi games to earn crypto. Although some games are legitimate, there have been several complaints against various GameFi development companies for cheating players. In late 2021, a game called Squid, inspired by but not affiliated with the Netflix show Squid Game, ended with an apparent carpet-pulling. Squid advertised itself as a play-to-win game but didn’t allow players to sell the tokens. This increased the price of each ticket from 1 cent to over $2,800.

The developers raised more than 3 million dollars. Avoid games that don’t sell chips or don’t have followers. “It’s probably not genuine,” adds Brink, “if you learn about something that’s GameFi and you can’t even play it, or at least allow other people who aren’t part of the development team to play it.”

How to get started

Most games in the GameFi space are free to sign up and play, so all you need to do is set up an account and password. Sometimes, you may be asked to set up a cryptocurrency digital wallet. You can win during the game. Keep your login details safe to verify that you own everything in your wallet. You don’t have to be a seasoned gamer or cryptocurrency expert to get started, but it helps to read game reviews beforehand. If you are new to GameFi, you should look for games with an established following and a large user base.

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