As reported by Newzoo, the games market in 2021 generated total revenues of $180.3 billion, up 1.4% over last 2020. GameFi was the dominant sector with the number of related transactions increased by 2,934%. Investors have poured $3.4 billion into GameFi in the last year. So, what is GameFi and which will be the next trend in this market?
What is GameFi?
GameFi is a combination of the words “game” and “finance”. GameFi often refers to games developed on the blockchain in which players can participate and earn profits.
The GameFi ecosystem uses cryptocurrencies, non-fungible tokens (NFTs), and blockchain technology to create a virtual gaming environment. Players can earn in-game rewards by completing tasks, battling other players, and progressing through the different game levels. They can also transfer their assets outside of the game to trade on crypto exchanges and NFT marketplaces.
Play to Earn – P2E
Play to Earn is the most popular model in GameFi. Players play games to earn money by selling items or rewards. While Pay to Play (P2P) requires customers pay to access, P2E asks players to invest an amount of money in characters or assets like tokens to participate in the game.
When it comes to P2E, Axie Infinity, a game inspired by Pokemon, is a name not to be missed. In most cases, traditional games will not generate any financial returns to the players and their in-game assets are controlled and held by the game company. In contrast, a P2E game can give players full control over their in-game assets while also offering them the opportunity to earn money.
However, keep in mind that it all depends on the game model and design adopted by the GameFi projects. Blockchain technology can give players full control over their in-game assets, but not always. Make sure you understand how the game works and who is behind the project before getting into a P2E game. Another thing to note is that P2E games are free to play and still generate financial rewards for the players, but some GameFi projects require you to purchase NFT or cryptocurrency before they can be played. So, it is necessary to carefully consider and evaluate the risks to avoid losing your initial investment.
Free to Earn – F2E
Free to Earn (F2E) is also a game model that can make money, but players only need to register and join the game, reducing the barrier to entry. In theory, players should not have to pay to play F2E games, but in fact, some of them will still encourage players to buy tokens. The cash flow of this model comes from advertising, Tokenomics, community influence or the option to pay to win a game. Because F2E games do not require players to invest much, the profits from F2E games are not as much as P2E and players have to spend more time if they want to make money in games. Some typical games adopt this model: Thetan Arena; Gods Unchain, Blankos, Berserk.
Move to Earn – M2E
Move to Earn can be considered a new form of Play to Earn where users, instead of playing games, can earn money by doing exercises or participating in specific challenges related to fitness. The aim of M2E projects is to encourage users to exercise, improve health, also give them an opportunity to earn an income.
The way these apps generate rewards can vary but almost all will pay users in the form of native utility tokens after they complete fitness related tasks like running, swimming, etc. This data is usually tracked by mobile phones or fitness trackers, then uploaded to Move to Earn apps and evaluated if it qualifies for rewards. The tokens can then be used to purchase in-app goods or services, or sold/traded on the internal marketplace or external exchange for other cryptocurrencies. Some of the standout M2E projects are: StepN, Calories, Sweatcoin, and Genopets.
GameFi models in the future
Some gamefi models may become trends in the future:
Learn to Earn – L2E
Learn to Earn aims to play, learn, and earn money at the same time. Some projects have adopted this model such as GOGA, PomPak or Meland.ai. GOGA introduces itself as a Web3 app that combines 2 elements of GameFi & Social Fi and helps players learn English effectively. This project was launched in Q3 2021 but only until Q1 2023, IDO and IEO will be conducted.
Another project, Meland.ai, is built on the Polygon blockchain. In this game, players can build and develop their own real estate and answer multiple choice questions to receive rewards. In Q3 and Q4 2022, Meland has gone through the development of decentralized infrastructure and has many plans for the future.
Create to Earn – C2E
This model is quite popular in the NFT Art segment. Mytheria or Overleague on the KardiaChain blockchain are two prominent projects that have adopted this model. In Overleague, players use BUSD to buy secret car accessory boxes. Each car part is classified according to attributes from normal to rare and players are allowed to build cars based on personal preferences.
To encourage creativity, Overleague offers a $1 million prize pool for 10,000 of the most unique and distinctive cars. This project has impressed with the eye-catching graphics as well as the algorithm that measures the attributes of the cars. In Q4 2022, the project will start organizing 10 tournaments that last until Q2 2023.
According to a report by Newzoo, the market cap of the gaming industry can reach $218.7 billion by 2024. The global gaming market size is also anticipated to reach USD 504.29 billion by 2030, exhibiting a CAGR of 10.2% during the forecast period, according to a study by Grand View Research. Currently, GameFi projects tend to use NFT and Metaverse to improve user experience. As McKinsey reported, Internet users will spend about 6 hours a day on Metaverse by 2030. 95% of executives believe that Metaverse can positively impact industries. Therefore, GameFi projects have a chance to become a trend in the future if they know how to take advantage of Metaverse.
Besides, DeFi runs on a decentralized network of computers while Web3 is focused on privacy. That is why many businesses have jumped into Web3 space through blockchains. Decentralization and Web3 are probably also elements that need to be included in GameFi projects in the future.
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