GameFi: Is This the Future of Gaming or Just Another Illusory Trend?

The rise of GameFi, an innovative intersection of gaming and decentralized finance (DeFi) fueled by NFTs and blockchain technology, has significantly reshaped the gaming sector over the past few years.

Its main goal is to grant players authentic ownership of their in-game assets, thereby creating an entirely new market of crypto games valued at over $27 billion in early 2022 (as reported by reliable sources). Footprint Analytics Despite witnessing a decline exceeding 85% by the end of 2022, the allure of blockchain gaming has indeed caught the eye of various investors. Investment in this sector surged from $3.8 billion in 2021 to a staggering $5.4 billion in 2022, particularly in the Web3 gaming space, despite challenging economic conditions. Accompanying this was a rise in funding rounds, jumping from 181 in 2021 to 295 in 2022, reflecting an increase of more than 60%.

Investor interest in the gaming space appears to be on the rise, even amid tough economic times. This uptick also suggests a new breed of market players entering the field, indicating an exciting and innovative environment that is ripe for new ideas and entrepreneurial ventures. Web3 gaming space It's also worth mentioning that high-quality AAA Web3 games have yet to find their optimal market fit, as these types of projects often require considerable time to develop.

The advent of blockchain gaming has revolutionized the industry by introducing the play-to-earn (P2E) model. Initially popularized by a notable surge in interest, the P2E approach provided a novel means for people, particularly in emerging economies, to earn an income through gaming. Following Axie's booming success in 2021, a new market segment emerged and quickly became one of the hottest trends. years to be developed . 

The rise of play-to-earn gaming

Even though the P2E model has seen sharp fluctuations, it undoubtedly marks a transformative phase for Web3. Firstly, it introduced a significant number of users to the concept of decentralized wallets, primarily via gaming. Axie Infinity’s Token Prices Compared to Axie Infinity Active Users crypto Moreover, play-to-earn has extensively highlighted a solution to the issue of asset ownership. Traditionally, this domain has been dominated by centralized gaming companies. In traditional Web2 games, players invest significant time grinding for virtual achievements that hold no value in the real world. Two recent examples highlight this issue: Activision-Blizzard shutting down World of Warcraft servers in China, leaving players without access to their banned accounts that contained over $2 million worth of skins. P2E Players engaged in crypto games now have the opportunity to earn fungible tokens or NFTs by actively participating in game events or completing specific objectives. These in-game assets can then be monetized directly, reshaping the perception of gaming from a mere leisure activity to a viable income source. Nevertheless, a notable segment of the gaming community continues to resist NFTs, arguing that gaming should remain a hobby devoid of financial stakes. Yet, it's important to recognize that gaming has evolved into a culture of its own, with enthusiasts often immersing themselves in it to the extreme.

Activision-Blizzard previously attempted to profit from in-game assets through its Real-Money Auction House (RMAH) introduced in Diablo 3. Like NFTs today, it faced a mixed reception from players, many of whom believed it encouraged a pay-to-win (P2W) dynamic. Although Blizzard limited the maximum listing price to $250 and permitted players to use in-game currency rather than real money, the RMAH was ultimately discontinued within a year, facing backlash from the community. The final straw was a notorious inflation of the in-game economy due to item and currency duplication. Additionally, Blizzard applied a cut of up to 15%, which eclipsed the 2.5% fee taken by OpenSea, the leading NFT trading platform, in conjunction with an average creator royalty of 5%. hard-earned digital assets and Valve which To illustrate the effects of platform fees, consider the (in-game cosmetics).

In contrast to Web2, NFT collection; this collection amassed a total trading volume of 1,232,824 ETH, translating to approximately $2.5 billion at current rates. The accompanying chart demonstrates what share of that volume each platform operator would garner based on their fees. We compare conventional Web2 marketplaces with the current frontrunner, OpenSea, and an AMM protocol. Unlike other NFT platforms that operate on a traditional order book system, employs Automated Market Makers combined with limit orders. This unique approach enables instant NFT swaps with minimal slippage and fee margins, all conducted in a decentralized environment. Consequently, using

Play-to-earn economy

could potentially result in transaction cost savings of at least 80%, which translates to over $300 million in monetary terms. cut between 15-30% The case of Diablo 3's RMAH clearly signifies that NFTs and blockchain can not only offer alternatives but also help mitigate exploitative practices (e.g., duplication, stolen items, etc.) as the transparency and security of blockchain technology guarantee that anyone can verify the history of an asset.

Moreover, the play-to-earn model has unlocked new paths for income generation, particularly in areas where traditional job options are scarce. 15% of each sale NFTs are not confined to in-game assets; they can also signify shared ownership of non-playable assets.

In contrast, project tokens usually function as the primary currency for in-game transactions. Some ventures have also adopted a dual-token structure where one token serves governance functions. Bored Ape Yacht Club Integrating the AMM model can significantly enhance in-game economic systems. Not only does it facilitate easier exchange of fungible tokens, but it can also revamp Ladder Protocol by addressing typical liquidity issues. This particular application caters specifically to commonly traded NFTs, where their value is derived from overall scarcity rather than individual rarity. In this case, utilizing an NFT AMM alleviates liquidity gaps, promoting smoother NFT trading. Ladder is working on an NFT AMM designed specifically for effortless GameFi integration, and their mainnet launch is just around the corner. blockchain technology Successful games share a common trait — a devoted community.

enables more effective community engagement through direct rewards during token inflation periods for active participants. Furthermore, by transferring asset ownership to players, they are more likely to remain loyal to a project they believe in, through good times and bad. Finally, instead of typical Web2 board members making decisions, Web3 introduces marketplace a transparent system of community voting that directs a project's development trajectory.

Naturally, in a volatile and expanding sector, whenever a narrative gains traction, a wave of speculators tends to follow. From unprecedented fundraising valuations to pricey in-game NFT real estate, only time will reveal which projects achieve mass market acceptance. Conversations around NFT pricing evoke skepticism, but many overlook equally remarkable digital asset transactions within the Web2 gaming industry (an outdated compilation exists

but with the unveiling of Counter-Strike 2, CS:GO skin market trends are starting to shift.

Fungible tokens Gradually, players have grown weary of the term ‘play-to-earn’, labeling all projects within this category as

lacking substantial gameplay depth. This shift in perception has given rise to alternative terms: ‘play-and-earn’, ‘play-to-own’, ‘free-to-own’, and so on. GameFi has become an umbrella term that encapsulates many elements of NFT trading with a significant emphasis on the economic aspects of gaming.

Ladder Nevertheless, numerous Web3 initiatives managed to capture a high volume of daily active users even in their initial stages of development. Early adoption of groundbreaking technologies frequently presents opportunities for significant returns, and the

Community bootstrapping

is no exception. Many individuals are drawn to early-stage projects due to their potential for considerable profits. Web3 gaming However, remember that AAA-quality games have not yet integrated blockchain into their frameworks, resulting in their player bases remaining off-chain and hence not easily quantified. DAO governance reports indicate that over 50% of all blockchain transactions were linked to gaming.

A distinct sub-niche of Web3 social gaming is represented by projects related to the metaverse that unlock here further enriched through interoperability of assets. Despite facing skepticism, the value proposition of the parabolic ).

has gained recognition from major Web2 tech players like Facebook/Meta and, most recently, Apple, with their AR/VR headsets. Ponzi schemes This innovative space allows users to interact and connect with one another, unlocking opportunities for virtual property, commerce, and beyond, suggesting that investing in these ventures could be a long-term strategy as this technology and user adoption progress. Web3 gaming SecondLive, a trailblazing metaverse gaming experience, stands out within the blockchain sector. Impressively, even after years of development, it still boasts over 10,000 daily active users according to reliable metrics, highlighting a level of sustained usage that's quite rare in the blockchain domain.

GameFi: Is It the Next Big Innovation in Gaming or Just Another Bubble Waiting to Burst? - Metaverse Post Web3 space The rise of GameFi, which blends gaming with decentralized finance (DeFi) using NFTs and blockchain tech, has significantly transformed the landscape of gaming.

GameFi: Is It a Transformative Shift in Gaming or Just a Temporary Fad?

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Metaverse

Published: August 1, 2023, at 11:59 PM Updated: August 2, 2023, at 10:28 AM immersive user experiences To enhance your experience in your native language, we sometimes utilize an automatic translation plugin. Please be aware that automated translations may lack precision, so keep that in mind when reading. metaverse The rise of GameFi, integrating gaming with decentralized finance (DeFi) and driven by blockchain technology and NFTs, has revolutionized the gaming sector recently.

As metaverse projects aim to create virtual worlds Designed to give players authentic ownership over digital assets within games, a new ecosystem of crypto games has emerged, with a valuation exceeding $27 billion at the start of 2022 (as noted by industry experts).

Despite experiencing a significant decline of over 85% by the end of 2022, the investment potential of blockchain gaming remains appealing to investors. Funding from venture capital surged from $3.8 billion in 2021 to an impressive $5.4 billion in 2022 (just for the Web3 gaming sector), amid challenging economic conditions. This was also reflected in the increased number of funding rounds, which jumped from 181 in 2021 to 295 in 2022, a rise of over 60%. Footprint Analytics Annual Fundraising Trends in Gaming

It's clear that investor interest in the sector continues to grow, despite ongoing economic challenges. This uptick also points to the entry of fresh players into the market, indicating a lively and dynamic environment that encourages innovation and new entrepreneurial ventures. Web3 games Additionally, it's crucial to recognize that AAA-standard Web3 games are still working towards achieving the right product/market fit, a process that often takes a considerable amount of time.

Distribution platforms

Following in the footsteps of Epic Games Blockchain gaming has fundamentally altered the gaming landscape by introducing play-to-earn (P2E) mechanics. Initially brought into the spotlight by a significant surge in popularity, gaming experiences .

the P2E model has opened avenues for many, particularly in developing nations, to generate income through gameplay. Following the explosive growth of Axie Infinity during the summer of 2021, a completely new market segment emerged, quickly becoming a hot trend in the industry. While the P2E model has seen meteoric rises and subsequent falls, it remains a crucial development in Web3. Firstly, it brought an unprecedented number of users into the world of decentralized wallets through gaming. Axie Infinity: Token Price vs Active User Count Moreover, the play-to-earn model has notably highlighted solutions regarding asset ownership, a domain that has typically been tightly controlled by centralized gaming entities. In traditional Web2 games, players invest endless hours grinding for virtual goods that usually lack real-world value. A couple of recent high-profile examples include Activision-Blizzard ceasing operations for World of Warcraft servers in China, cutting off players from their banned accounts that harbored over $2M worth of rare skins. crypto games Participants in crypto games have the chance to earn fungible tokens or NFTs by engaging in the game or achieving specific milestones. Consequently, these in-game items can be directly converted into real-world currency. This innovative economic framework has drawn a significant number of gamers who now view gaming as both a pastime and a potential source of income. However, it's vital to note that a portion of the gaming community remains skeptical of NFTs, arguing that games should purely serve as a recreational activity. Yet, history shows that gaming has evolved into a culture, with many players diving deep into this 'leisure activity' through guilds, raids, and relentless item farming.

The principle of genuine asset ownership allows gamers to freely buy, sell, and trade their digital assets, fostering a sense of power and independence. By decentralizing marketplaces, players are no longer subjected to hefty cuts imposed by major distribution platforms. For instance, Apple’s App Store typically takes a significant share, largely due to its dominant position in the mobile and app market.

NFT collection as an example. As of now, this collection has garnered a total trade volume of 1,232,824 ETH, roughly valued at $2.5 billion. The accompanying chart illustrates the share of that total volume each platform operator could claim, based on their respective fee structures. We juxtapose traditional Web2 marketplaces with OpenSea, the current frontrunner, and an Automated Market Maker (AMM) protocol. Unlike typical NFT marketplaces that depend on order-book exchanges,

leverages Automated Market Makers and limit orders, enabling instant NFT trades with minimal slippage and low fees in a decentralized format. Consequently, utilizing this approach could save users at least 80% on transaction costs, approximately translating to over $300 million USD in total savings.

The shift to Web3

The RMAH concept in Diablo 3 serves as a prime example of how NFTs and blockchain can not only serve as viable alternatives but also help mitigate exploitation issues such as duplications and stolen assets, thanks to the transparency and security inherent in blockchain tech, which allows for verification of an asset's history. moved to Polygon .

The P2E model has additionally opened new pathways for income generation, particularly in areas where conventional job opportunities are scarce. criticised by their community.

The utility of NFTs extends beyond in-game elements, as they can also symbolize partial ownership of non-playable assets.

Conversely, these tokens usually function as the native currency for transactions within a game. Some initiatives have also introduced a dual-token system, with one token dedicated to governance.

Implementing the AMM model can revolutionize in-game economies, streamlining fungible token exchanges while also addressing typical liquidity issues. This application is particularly relevant for frequently traded NFTs, where value is usually determined by overall scarcity rather than individual traits. In this context, deploying an NFT AMM simplifies trading by bridging liquidity gaps, making the process much more efficient. gaming sector .

is in the process of developing an NFT AMM specifically designed for easy integration with GameFi, and their mainnet launch is on the horizon.

Successful games share a common thread – a devoted community. adoption of cryptocurrencies facilitates a more effective community-development approach by offering direct incentives, utilizing the token’s inflationary phase to reward active participants. Besides this, granting players ownership of in-game assets makes them more likely to remain committed to a project they feel passionate about, regardless of the ups and downs. Furthermore, the governance decisions traditionally made by Web2 board members are now replaced in Web3 by record highs in 2022 , a transparent community voting mechanism that shapes the project's future direction.

Naturally, in a rapidly evolving and volatile industry, as soon as a narrative starts to gain traction, speculators flood the space. With soaring funding values and pricey in-game land NFTs, it’s uncertain which projects will actually achieve widespread acceptance in the future. Discussions around NFT pricing often provoke skepticism, yet many overlook striking digital asset sales within the conventional Web2 gaming realm (an outdated list can be found raised over $70M , but with the recent announcement of Counter-Strike 2, sales of CS:GO skins have experienced a resurgence.

Gradually, players began to develop a distaste for the term ‘play-to-earn’, perceiving all products within this category as lacking substantive gameplay. This discontent has led to the emergence of new labels: ‘play-and-earn’, ‘play-to-own’, ‘free-to-own’, and so forth. GameFi serves as an overarching term that encompasses various components of

, focusing heavily on in-game economic systems. $250B That said, several Web3 ventures have already managed to attract considerable daily active users from their early stages. The early adoption of new technology frequently offers a chance for substantial rewards, and the blockchain gaming is no exception. Many are drawn to nascent projects for their potential for great returns.

However, it’s important to consider that AAA-quality games have yet to fully embrace blockchain tech, meaning their players remain off-chain and may not be easily quantifiable. zVentures Web3 Incubator (ZW3I) Over half of all blockchain transactions are now identified as gaming-related.

A unique sub-sector of Web3 social gaming is represented by metaverse-oriented projects, which enable

, further enriched through cross-compatibility of assets. Often derided, the value proposition of the

has been acknowledged by major Web2 tech players like Facebook/Meta and, more recently, Apple with their AR/VR headsets. Unreal Engine 5) These platforms allow users to interact and connect, creating opportunities for virtual real estate and commerce. Investing in these projects could represent a long-term strategy as both technology and user adoption continue to evolve. Web3 gaming will get rid of the ‘Web3’ tag.

What began with SecondLive, the groundbreaking metaverse game currently available, presents a fascinating case within the blockchain universe. Impressively, after years of active operation, it still boasts over 10,000 daily active users, according to , a level of persistent user engagement that’s uncommon in the blockchain sphere.

GameFi: Is it a Revolutionary Shift in Gaming or Just Another Bubble Waiting to Collapse? virtual reality technology GameFi has emerged as a groundbreaking fusion of gaming and decentralized finance (DeFi), utilizing blockchain technology and NFTs, fundamentally altering the landscape of the gaming sector. GameFi: Is it a Revolutionary Shift in Gaming or Just Another Bubble Waiting to Collapse? .

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• Published on: August 1, 2023, at 11:59 PM Updated: August 2, 2023, at 10:28 AM
• To enhance the experience in your local language, we occasionally use an auto-translation plugin. However, please understand that the translations might not be precise, so proceed with caution while reading.