GameFi: Future of Gaming or Short-lived Gimmick?

PUBLISHED ON

February 3, 2025

WRITTEN BY

Nabia Sabzwari

DURATION

5 Min

CATEGORY

GameFi Future of Gaming or Short-lived Gimmick

We all grew up playing video games, and if not, then mobile games are something we’ve all played. Don’t skip this if you were once a computer game player as you are not that old either.

But have you noticed a pattern? From playing those old static games to feeling more in control while handling the PS4, and now enjoying an even better experience on mobile by teaming up with your favorite buddies and exploring multiple customization options.

Incentivization has always been a part of the gaming industry, but it’s the experience that truly enhances it. Now, in the world of the metaverse, VR and AR have completely transformed the look and feel of gaming, allowing you to experience more than just 3D, right from your home.

GameFi, a relatively new concept, has emerged as a perfect symbiosis of blockchain, tokens, NFTs, and DeFi. But what does this really mean? How legitimate is GameFi? What are the risks associated with its play-to-earn model? Are all games claiming to be part of GameFi truly credible? And, at the end of the day, is this a viable direction for gaming, or just a short-lived gimmick?

Before diving into these questions, let’s first gain a clear understanding of GameFi as a whole.

 

What is GameFi?

If you mix decentralized finance principles and gaming together, you get GameFi, short for “game finance”. It was first introduced by Yearn Finance founder Andre Cronje to describe DeFi protocols with gaming elements. Over time, the term has come to represent the financial aspect of blockchain games, as they are directly linked to real-world economies.

The GameFi market is a vast ecosystem of blockchain-based games that reward players with crypto incentives for in-game activities, social media promotion, and game progress. Play-to-earn (P2E) gaming combines blockchain, NFTs, cryptocurrency, and DeFi, allowing players to interact with their favorite games and other users in new ways.

 

Here’s how P2E gaming differs from traditional gaming:

  • Players earn rewards for playing, rather than just aiming to win.
  • In-game assets are fully owned by players, meaning they can buy, sell, and trade them freely.
  • Many P2E games are part of the metaverse, offering unique virtual experiences.
  • There is no central authority, players have equal control and can form guilds for a competitive edge.

 

It’s no secret that in-game items and currencies can hold real-world value. Some of the rarest CS:GO (Counter-Strike: Global Offensive) skins are worth thousands of dollars. Many unofficial marketplaces exist today to facilitate the buying and selling of in-game assets, allowing players to exchange items, currencies, or accounts for real money.

There are two main sides in this exchange:

  • Sellers – Players who own valuable digital goods as a result of their time, effort, and investment in the game.
  • Buyers – Those willing to pay real money for these items, often due to limited availability, social status, or a lack of time to grind for them.

A well-known example of such a marketplace is BitSkins, a third-party platform for trading CS:GO items for real-world currency.

 

How Blockchain Tokens Enable GameFi

GameFi isn’t an entirely new concept, it builds on the existing economy of digital item trading. The key difference is that it uses blockchain technology to bring transparency, security, and decentralization to a system that has historically been difficult to access and often restricted by game publishers.

Blockchain tokens offer a way to replace traditional in-game assets, including items, currencies, and even accounts, by ensuring true ownership and free exchange.

 

Traditionally, in-game assets are controlled by game publishers, and stored on their private servers. This means:

  • Game developers own the digital assets, not the players.
  • They can modify, delete, or restrict access at any time.
  • Players have limited control over how they use, sell, or trade their items.

 

Blockchain gaming changes this model by using decentralized networks instead of proprietary servers. Here’s how:

  • Blockchains act as global, decentralized computers that store and secure game assets.
  • Smart contracts run on these blockchains to facilitate transactions and enforce game rules automatically.
  • Tokens represent in-game items and currencies, which can be either:
    • Non-fungible tokens (NFTs) – Unique, collectible assets like rare skins or characters.
    • Fungible tokens – Standardized digital currencies used within the game.

 

Blockchain-backed game assets set a new standard for digital ownership. When an in-game item is an NFT, the player truly owns it, meaning:
✔ It can’t be deleted or altered by the game developer.
âś” Players can sell, trade, or buy assets freely without restrictions.
âś” The marketplace is open and transparent, without relying on centralized platforms.

 

What are the use cases of GameFi?

GameFi, a fusion of gaming and decentralized finance (DeFi), offers various innovative use cases that enhance player experiences and introduce new economic models. Here are some notable examples:

1. Play-to-Earn (P2E) Gaming

Play-to-Earn (P2E) Gaming

 

Players earn rewards, often in the form of cryptocurrencies or NFTs, by participating in games.

In Axie Infinity, players collect, breed, and battle creatures called Axies. Successful gameplay rewards players with tokens like AXS and Smooth Love Potion (SLP), which can be traded or sold.

 

2. Virtual Real Estate Ownership

Players earn rewards, often in the form of cryptocurrencies or NFTs, by participating in games. Virtual Real Estate Ownership

Players can purchase, develop, and monetize virtual land within game environments.

Decentraland is a virtual reality platform on the Ethereum blockchain where users can buy plots of land, build structures, and create experiences. These virtual properties can be leased, sold, or used for various activities, generating income for the owners.

 

3. Creation and Trading of In-Game Assets

Creation and Trading of In-Game Assets

Players have the freedom to create, own, and trade unique in-game items, enhancing customization and economic interaction.

In The Sandbox, a blockchain-based virtual world, players can design and monetize their own games and assets. These assets can be traded as NFTs on various marketplaces, allowing creators to profit from their designs. Sandbox exemplifies the integration of Metaverse and GameFi well.

 

4. Decentralized Game Marketplaces

Decentralized Game Marketplaces

Platforms facilitate the buying, selling, and trading of in-game assets in a decentralized manner, ensuring transparency and security.

Rainmaker Games serves as a GameFi marketplace, offering a platform for players to discover, play, and earn across various blockchain games. It aims to bridge the gap between traditional and blockchain gaming by providing a comprehensive ecosystem.

 

5. Staking and Yield Farming

Staking and Yield Farming

Players can stake in-game tokens to earn rewards or participate in yield farming, integrating DeFi mechanisms into gaming.

In Illuvium, an open-world RPG adventure game, players can stake the native ILV tokens to earn yield. Additionally, players can capture and collect Illuvials (in-game creatures), which can be used in battles or sold as NFTs.

 

Future of Gaming: A Short-Lived Gimmick or a Transformative Shift?

The emergence of GameFi has sparked both enthusiasm and skepticism within the gaming community and beyond. The fusion of GameFi and the metaverse is not just a technological advancement; it’s a paradigm shift in how we perceive and interact with digital spaces.

This convergence is creating immersive virtual environments where players can socialize, trade, and even earn real-world value through gameplay. As blockchain technology continues to integrate with gaming, we can anticipate a landscape where players have unprecedented control and opportunities within these virtual realms.

While GameFi introduces innovative opportunities, it also faces significant challenges that could influence its longevity and impact on the gaming industry. Let’s have a look at a few of them.

 

Advantages of GameFi:

  • Alternative to Traditional Models: GameFi’s play-to-earn (P2E) model offers players the chance to earn tangible rewards, such as cryptocurrencies or valuable in-game assets, transforming gaming into a potentially profitable venture.
  • Enhanced Ownership: By making use of non-fungible tokens (NFTs), GameFi promotes virtual asset ownership without centralized control, allowing players to have true ownership of their in-game assets.
  • Community Engagement: GameFi platforms often enable players to actively participate in game development decisions, building a more inclusive and engaged gaming community.

 

Challenges Facing GameFi:

  • Economic Stability: The integration of DeFi mechanisms introduces complexities in maintaining a balanced in-game economy, with risks of market volatility affecting both players and developers.
  • Regulatory Scrutiny: Regulatory bodies, such as the SEC, have expressed concerns about the risks associated with GameFi projects, including potential vulnerabilities to hacking and exposure to high price volatility.
  • Perception Issues: Some critics view the P2E model as a speculative venture, likening it to gambling, which has led to bans in countries like South Korea, Japan, and India.

 

Integration of AI and Decentralized Ecosystems:

Advancements in artificial intelligence (AI) are poised to enhance GameFi platforms by introducing embodied AI agents that provide proactive and contextually rich interactions within games. This integration aims to move beyond traditional scripted responses, making AI agents integral to the game’s narrative and economic systems.

By combining AI with blockchain technology, a consensus-driven, decentralized GameFi ecosystem can be established. This approach addresses current limitations in GameFi platforms, such as the lack of immersive AI interactions and mechanisms for community engagement or creator monetization.

A recent study found that over 90% of GameFi projects have ceased operations, highlighting the volatility and challenges within the sector. Despite these challenges, the GameFi market is projected to reach $2.8 billion by 2028, growing at a 20.4% compound annual growth rate (CAGR) from 2022 to 2028.

 

Conclusion

While GameFi introduces innovative concepts that could transform the gaming industry, its future depends on addressing economic stability, regulatory compliance, and public perception. 

The integration of AI and decentralized ecosystems offers promising avenues for enhancing player engagement and creating sustainable economic models. However, the sector must navigate significant challenges to establish itself as a lasting and transformative force in gaming.

BlockApex is here to navigate challenges and usher in a new era of gaming, both in experience and design. Reach out to us today to consult on your GameFi project!

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