The intersection of gaming and finance in an environment driven by use of blockchain, non-fungible tokens (NFTs) and smart contracts is often called as GameFi.

It is often cited at the crossroads of decentralized finance (DeFi) and play-to-earn (P2E) blockchain gaming, creating a self-serving ecosystem that goes beyond just gaming and altering the control from gaming studios to players.

As per the Metaverse Awareness Survey, 40% of respondents stated that they are “interested in pursuing a mix of both the ‘playing’ and ‘earning’ aspects of the metaverse”. While 11% indicated they are more interested in earning, and 49% stated they are only interested in playing.

Another interesting finding of the survey was that more than half (53%) of respondents stated that they would happily work in virtual game worlds if they were able to earn digital currency from their labour.

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 big source of income in 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.

In traditional gaming environments, usually, players do not have the ability to own the in-game assets. With GameFi, however, tokens related to blockchain based games are blurring the boundary between in-game resources and real-world assets.

In such a gaming environment, users can acquire NFTs or crypto assets for participating and accumulating resources while playing the game, be it in-game currency or in-game assets. These, like any other digital asset, can then be stored in a digital asset wallet or traded in a secondary market.

What are GameFi tokens used for?

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.

These weapons can also be leased and rented to other players for a fee and the objects won in one game can be incorporated into other games.

Outside the gaming world, GameFi NFTs can be used as surety for DeFi lending protocols and are permissible for staking, liquidity mining and yield farming.

An increasing number of NFT games are establishing an on-chain metaverse by selling virtual lands as NFTs and are successfully integrated with cryptocurrencies, thus giving real world interoperability for the value of their time spent in-game.

Depending upon its trajectory, GameFi tokens may be used for ownership, speculative trading or may even pave the way for more decentralized metaverse which may not be owned by one large corporation.

Below is a snapshot of the GameFi ecosystem.

The future of GameFi?

While there has been a lot of interest in GameFi till last year, the crypto winter and many other factors appears to have slowed its growth.

As per Cointelegraph: “The number of users interacting with Axie Infinity fell from a peak of 744,190 on Nov. 26 2021P, according to blockchain data aggregated by DappRadar, to 35,420 on Aug. 20, 2022 — a decline of 95%. DFK [DeFi Kingdoms] players, meanwhile, declined by 85%, from a peak of 36,670 in December 2021 to 5,290 as of Aug 2022”.

Having said that, the total GameFi market cap was estimated to be $55.38 billion, as of 11 February 2022 and over a four-year period from 1 January 2018 to 1 January 2022, the compound annual growth rate (CAGR) of the total GameFi market cap was 180%, as per a report from Crypto.com.