Overview
Firstly, let’s take a brief grasp of what GameFi is:
GameFi is a blockchain game model that provides economic incentives to players. Normally, players can earn crypto and NFT rewards by completing quests, fighting with others, and raising levels in the game.
Unlike traditional video games, most blockchain games allow players to move game items out of the virtual world and trade them on crypto exchanges.
As such, the old GameFi projects were outstandingly successful during the bullrun by attracting users with appealing reward mechanisms. However, these projects later failed miserably, and the current GameFi projects using the same method have not achieved any success.
The Cause of GameFi Model Failure
The origin of the development trend of games is based on Maslow’s hierarchy of needs. Using Maslow’s pyramid, we can understand the reasons for the growth and collapse of a game model.
Accordingly, gaming needs to meet the first two levels:
- Level 1 (Physiological needs): Health enough to play games.
- Level 2 (Safety needs): Playing games does not put oneself in danger.
GameFi seems to fulfill these levels. From the first two develop the next levels:
- Level 3 (Love and belongingness needs): Playing games to participate in a certain community, especially online games where you can interact with others.
- Level 4 (Esteem needs): Playing games creates a sense of accomplishment or having achieved something.
- Level 5 (Need for self-affirmation): Express yourself through playing games.
That’s when the problems come out. To make it clearer, here are 3 outstanding issues that GameFi still facing:
1. Tokenomics of a Ponzi scheme is inflationary and unsustainable
If traditional business models often use coupons or money from investors to attract new users and burn a lot of money to success, then The GameFi projects directly issue their own tokens as a reward for attracting new players. In a sense, they have “free money” for this purpose, even if the number of tokens they use to do so will cause token inflation and affect the interests of those who have poured money into that token. Because the market is the liquidity provider that converts those tokens into cash. As the supply of tokens increases, theoretically, the value of them should decrease slightly and equally. Since there is not enough money in the market to always provide liquidity for such hyperinflationary commodities, although in the short term, the investment crazes caused by FOMO will ensure huge liquidity for the tokens being sold, in the long run, the source of money will weaken while the commodities are floating in extremely large quantities.
Attracting players by the play-to-earn mechanism creates a paradox: the more players, the more need to be paid, the more devalued of token. So when everything loses heat, a death-spiral kick in. Liquidity will dry up and cause severe token devaluation, making the rewards less attractive and unable to attract new players, while the old players leave the market and sell their holdings to avoid losses.
This fall is similar to the fall of any other Ponzi scheme.
2. Not invested in the quality of gameplay and graphics, or in general, gaming experience
Because of attracting players with tokens, people who jump into this type of game are usually attracted by the token rewards, not gameplay. In fact, the simpler the game, the easier it is to achieve tokens and the more attractive it is to win. During the GameFi craze, projects saw that simply taking advantage of the “free money” tokenomics model was enough, so a bunch of shoddy game projects were released without focusing on the gaming experience.
But they forget that a successful game needs to have breakthroughs in terms of gameplay, plot, and graphics.
The world can be a little confusing at times, but its essence is still very understandable: people still pursue values.
3. Make users feel vague about the necessity of blockchain
Why would people still be ready to play CS:GO, DotA2, or League of Legends with a blockchain application? It is an obvious fact that successful products are built on the foundation of the old ecosystem that is optimized with the characteristics of the ecosystem. Therefore, the traditional banking system or the traditional game publishing mechanism is still very successful and in fact prevails in many aspects compared to the young blockchain technology.
Blockchain creates more real power for everyone, making transactions faster, more secure, and cheaper, and users have clearer ownership of assets than ever before. Blockchainization, or the application of cryptocurrency and NFT in gaming is a welcome and expected trend. However, the fact that games and blockchain are tied together has nothing to do with the success of a blockchain game. Blockchain was not born with the goal of turning the world upside down or completely replacing the old models. They are created to find more optimal solutions to meet new needs.
The old GameFi craze triggered by the “free money” tokenomics system in the midst of a liquidity-rich bullrun overshadowed all other facts as people took advantage of applying blockchain to successful traditional games only to then… fail.
After the crypto craze passed, as the play-to-earn model was no longer viable, the GameFi community in particular and the large traditional gaming community out there in general, returned to the core value of what they need in the games: enjoyable gameplay, good experience, entertainment, good community, and other lasting values. Meanwhile, the old GameFi models were designed as high-risk investments where players care a lot about ROI (Return on investment), facing the typical feelings of investment: weighing the gains and losses, being greedy for vague future gains, and fearful of current market movements.
Summary
(1) GameFi = Game + Finance. In addition to the quality, the game must also pay attention to the economy of the game.
(2) Currently, there has been no successful and stable GameFi model like in the traditional market. The reason is that there is no suitable design to ensure the interests of players, investors, and developers.
(3) The development motivation of traditional games is to generate revenue, meanwhile of GameFi is to increase asset value. GameFi’s weakness is insufficient demand to create value for the asset.
A game that wants to attract players doesn’t need to meet the 3rd level but should focus more on the 4th and 5th levers of Maslow’s pyramid. Although that game is difficult to maintain for a long time due to lack of sociality, if the game quality is good enough and meets the needs of users, it can completely “storm” similar to other traditional titles such as Call of Duty, Assassin’s Creed, The Sim,…
In short, GameFi developers must stand in the place of customers, helping to enhance their experience and thereby, promote real users and real needs within the decentralized economic ecosystem.
Final thoughts
It will be better if we create a web3 system that improves, protects, and serves the needs of players, such as improving shopping features, increasing security, establishing ownership, and other features. This must be directly related to their gameplay or experience. The excitement of the buying and selling market should be the key to making profit. The focus is on users, not the market.
(Reference: Monster Lab and Coin68)