The intersection of gaming and finance in an environment driven by blockchain, non-fungible tokens (NFTs) and smart contracts is often called GameFi.
It is often cited at the crossroads of decentralized finance (DeFi) and play-to-earn (P2E) blockchain gaming, creating a self-serving ecosystem beyond gaming and altering the control from gaming studios to players.
Axie Infinity – a blockchain-based online video game which uses non-fungible tokens to collect monsters, or ‘Axies’, to compete against other players – has emerged as a significant source of income in the Philippines and globally, professional gamers, as well as digital content creators, have been known to earn quite a salary given the scarcity of this skill set.
Within the gaming world, game finance or GameFi is giving rise to NFT marketplaces for selling game-in assets such as hard-to-obtain in-game weapons and props with real money or for swapping them with another player giving propriety and proof of ownership to the game wins. Depending upon its trajectory, GameFi tokens may be used for ownership and speculative trading or may even pave the way for a more decentralized metaverse, which may not be owned by one giant corporation.
GameFi thrives on team expansion and game development user acquisition. Additionally, like initial coin offerings (ICOs) or an initial public offering (IPO), GameFi initiatives raise funds through initial decentralized exchange offerings (IDOs) funded by venture capitalists. Once the games are functional, GameFi projects create their tokens and gaming rules around them, either through a utility or a governance token which also needs to be earned, creating a revenue model for the GameFi.
The recently proposed Responsible Financial Innovation Act in the US intends to categorize a “majority” of cryptocurrencies as securities. As per the proposed draft, any token invested with “an expectation of profit” is likely to be classified as a security, as would all the projects that stimulate the liquidity pools, which will impact the DeFi ecosystem and GameFi projects.