GameFi, representing the combination of decentralized finance (DeFi) and gaming, operates under a play-to-earn model instead of play-to-win.
In the world of cryptocurrency, GameFi and NFTs have continued to take the world by storm. It is no doubt that nonfungible tokens (NFTs) have come a long way since their humble beginnings when they entered the limelight with the launch of CryptoPunks, the first "digital art marketplace" in the world.
At the time, NFT received little attention outside of the blockchain enthusiast community. One of the major reasons for NFT growth is the industry's ability to transform value for creators, which is seen in new use cases such as video games, more commonly known as GameFi.
A blockchain is a system that stores blocks of data that are linked together in sequence using cryptography. Every data unit on the blockchain is unique and immutable as the modification in one block can affect the whole chain. What distinguishes blockchain games from traditional games is the fact that each digital asset in blockchain games is one of a kind. Each of these digital assets is called a non-fungible token (NFT), which is a unique data unit stored on the blockchain. The segment is referred to as blockchain gaming. One aspect of blockchain gaming is “play to earn” whereby a gamer earns their unique NFT(s) or cryptocurrency from merit-based advances in the game, and can convert it to real money. There is also “play to trade” whereby a gamer earns a token and then can trade it or sell it for real money.
GameFi, representing the combination of decentralized finance (DeFi) and gaming, operates under a play-to-earn model instead of play-to-win. What truly differentiates these two gaming models is the concept of financial incentives being distributed through gameplay and progress through games.
Blockchain games’ play-to-earn model makes them an attractive source of income and investment. The model allows players to earn money by playing, receiving rewards, and trading digital assets for cryptocurrencies, which they can then trade for fiat money and spend in real life. This opens up a new monetization model and it is one that must get integrated with the game design and development. Free to play games use several monetization models, this one will potentially be a big disruption to the traditional models.