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GameFi: How Blockchain Based Games Can Enhance Traditional Gaming and Be Profitable for Average Gamers
April 13th, 2022

If you were asked what major sports league has the second most viewers in the U.S., after the NFL, what would be your guess? You can probably rule out the MLS or NHL, which would lead most people to guess either the MLB or NBA. However, with some events reaching almost 100 million viewers, like the League of Legends World Championship Finals, the stunning truth is that Esports takes the silver medal for U.S. viewership. With such high exposure, as well as the expectation for the Esports market to more than double by 2025, it’s no wonder why more kids are seriously considering playing games professionally. In the near future, “okay boomer” may become the appropriate response for many teens when told by their parents to stop playing games and go get a job, and play-to-earn (P2E) blockchain based gaming could be the innovation that allows them to do so on a greater scale than previously thought.

What is GameFi?

GameFi is the combination of the words game and finance, and references the capability of games to be designed with economic and financial incentives, which are made possible through blockchain products such as cryptocurrencies and NFTs. Unlike their traditional counterparts, blockchain games allow for players to more easily trade their in-game items (in the form of NFTs) on a marketplace or trade their in-game currency (in the form of a cryptocurrencies) on exchanges, which can then allow them to deposit the earnings into their bank account. This allows for games to embrace a play-to-earn model, which is perhaps the next progression in gaming, evolving from the traditional pay-to-play or freemium gaming models.

Fortnite: An Example of Traditional Gaming

Fortnite is one of the most popular games that uses, and profitably pioneered, the freemium model; meaning that it’s free-to-play but additional features and upgrades must be purchased through microtransactions. Players make these transactions using V-Bucks (Fortnite’s in-game currency), which are bought with real money, earned through grinding through game play, won in contests, and several other ways. After acquiring V-Bucks, players can then buy various skins/costumes, emotes/dances, and a Battle Pass from Fortnite’s Item Shop that enables them to play the latest Season of the game with updated changes to the map and character features. Akhilesh Ganti, a writer for Investopedia, perfectly dissects how Fortnite and the psychology of this model has led to multiple years of more than $5 billion in revenue, and has steered several games to adopt a similar model.

“Many accessories in the Fortnite shop are available on a limited-time basis, prompting players to purchase coveted items before they disappear from the virtual store. The creators of Fortnite have managed to leverage the concept of exclusivity and merge it with an enjoyable user experience that incorporates a social component. This has proved to be a winning combination. Playing Fortnite for free would be fun for a while, but for many users, whatever sense of accomplishment they get from just playing the game may fade. By purchasing costumes, skins, Battle Passes, and V-Bucks, players can enhance their user experience. This appears to add to their sense of achievement and compels them to continue playing. For example, once a player purchases a Battle Pass, and is exposed to the extra perquisites that it offers, they are unlikely to go back to playing the free version. Aside from the psychological rewards of experiencing something that is exclusive, the prospect of unlocking more content for their avatar appears to produce enjoyment, and users are willing to continue paying for this.”

Making the Switch to GameFi and Play-To-Earn (P2E) Gaming

Now imagine the same mechanics of that model being integrated and enhanced with blockchain technology. Instead of V-Bucks in Fortnite, COD points in Call of Duty, or Halo Credits in Halo Infinite, cryptocurrencies bearing similar names could be used for in-game transactions. Items and upgrades such as skins, weapons, and season passes could be purchased and issued as NFTs, which would allow for a multitude of benefits.

Players could grind and level-up a character or collect rare items and then sell them on an open marketplace to recoup a portion of their money or even make a profit! While this has been done before with popular games like Farmville or Pokémon Go, it has often been impacted by bad actors through unofficial marketplaces and is also frequently in violation of the terms of service of the game, which could lead to a permanent ban. In contrast, a game designed with the ability to sell in-game assets as NFTs mitigates these issues and is a win-win for both players and game developers. Director of Esports at Champlain College, Christian Konczal, explains that “we all have accepted that microtransactions are here to stay. The ability to tokenize those assets [i.e. create an NFT] will open up more avenues for revenue generation to the benefit of all involved parties; smart contracts can dictate that the publisher receives a percentage of each transaction in perpetuity, and consumers will be able to sell their unwanted items to other users. Expand that thought into the realm of streaming and competition and I believe there will be an insane demand for the ownership of intangible assets. Imagine being able to own and prove authentic ownership of the item your favorite streamer won in a tournament the same way Football fans can proudly frame and hang the jersey that their favorite quarterback wore for a match.” It’s no wonder why large companies like Nintendo and Microsoft are dipping their toes into the NFT waters in order to determine how they can utilize the new technology and maximize profits while keeping their customers happy. The Sandbox, one of the most successful NFT gaming platforms, has forged the way in showing how traditional games can adopt blockchain technology and establish themselves as an innovating gaming powerhouse; which may be why they were recently listed on the TIME100 Most Influential Companies of 2022.

The Sandbox: An Example of P2E Gaming

The Sandbox is a virtual world (aka metaverse) where players can build, own, and monetize their gaming experiences in the Ethereum blockchain with the goal of “disrupting existing game makers like Minecraft and Roblox by providing creators with true ownership of their creations as non-fungible tokens (NFTs) and reward them for their participation in the ecosystem.” For a more in-depth explainer of the The Sandbox’s entire ecosystem you can read their Medium article HERE. You can also use this referral link to play and build in The Sandbox for yourself. Moving on. . . there are several ways you can earn $SAND, the The Sandbox’s in-game cryptocurrency, which can then be traded on an exchange for fiat currency (U.S. dollar, British pound, Indian rupee, euro, etc) and deposited into your bank account. Some, but not all, of these ways to earn money include: building your own asset, minting it as an NFT, and selling it on their marketplace; creating games and experiences that you can charge others to play; buying and selling, or even renting out your virtual LAND for others to use; earning NFTs and $SAND tokens by completing experiences or winning social contests; and staking cryptocurrencies in order to generate a yield.

To illustrate how players have already been able to make money, two scenarios will be given; one where a gamer played and earned $SAND by fully completing and winning an Alpha Pass in both Seasons that The Sandbox has had so far, and the other being closer to my experience of also winning/earning $SAND via Alpha Passes, in addition to purchasing a virtual LAND and actively utilizing my earned $SAND to earn more money.

Scenario 1: Reactive and Passive

In both Alpha Season 1 and Alpha Season 2, if you completed a required number of quests in the game and won or bought a Season Pass, you earned 1,000 $SAND tokens for each season. However, if you completed ALL of the quests in Season 2, you were also airdropped an additional 120 $SAND. Below is the breakdown of money earned (minus gas fees) if you would have sold your earned $SAND around the time you received them.

  • Alpha Season 1: 1,000 SAND x $5.50 USD/SAND =
  • ~$5,500 USD
  • Alpha Season 2: 1,120 SAND x $3.50 USD/SAND =
  • ~$3,920 USD
  • Total =$9,420 USD

Sweet! Imagine being a teenager able to earn almost $10K by playing a game that has had a total playable time of less than two months! To put that in perspective, when I worked at the Parks and Rec department during summer break making only $7.00/hr, I barely made $2,500 for the entire summer. If I had the choice back then to make more money playing games and creating experiences instead of weed-whacking and cleaning bathrooms in the hot sun all day, the decision would have been a no-brainer.

Scenario 2: Proactive and Active

Even more mind blowing is what can happen if you were strategically proactive and purchased some virtual LAND, were up to date and active in The Sandbox community Discord and Twitter, and likewise won the Alpha Passes. In my experience, by doing so, in addition to earning $SAND I was able to buy LAND at a much lower price than what I could sale it for now, stake earned $SAND to earn even more $SAND, and gained access to a couple of allowlist/whitelist NFT mints that allowed me to purchase popular NFTs at a much lower price than what they’re currently worth. Below is a breakdown of the additional economics and benefits earned from more fully embracing these financial aspects of GameFi.

Purchased Premium LAND for 0.9 ETH

  • Could sell Premium LAND for ~4.0 ETH
  • Airdropped 100 SAND for New Years for holding a LAND NFT
  • Won allowlist spot for World of Women Galaxy (WoWG) NFT Minting for owning LAND
  • ~Minted (WoWG) NFT for 0.3 ETH
  • ~Average sale price is 1.9 ETH

Purchased Snoopverse Early Access Pass for 525 SAND

  • Gained access to The Doggies avatar pre-minting
  • ~Minted The Doggies NFT for 150 SAND
  • ~Average sale price is 0.72 ETH
  • Airdropped Snoop’s OG Tactical Vest NFT for owning Pass
  • ~Average sale price is 0.07 ETH

Won Season 1 Alpha Pass

  • Able to claim 1,000 SAND by completing quests
  • ~Staked 1,000 SAND for 4 months earning ~55% APR to earn ~185 SAND
  • Airdropped Alpha Sword NFT for owning Season 1 Alpha Pass
  • ~Average sale price is 0.06 ETH
  • Airdropped Alpha Dragon NFT for owning Season 1 Alpha Pass
  • ~Average sale price is 0.11 ETH
  • Airdropped Alpha Gate NFT for owning Season 1 Alpha Pass
  • ~Average sale price is 0.02 ETH

Won Season 2 Alpha Pass

  • Able to claim 1,000 SAND by completing quests plus 120 SAND for completing all quests
  • ~Staked 1,000 SAND for 1 months earning ~42% APR to earn ~40 SAND

Net Results

  • Net ETH: 6.22 ETH x $3,500 USD/ETH =
  • ~$21,770 USD
  • Net SAND: 1770 SAND x $3.50 USD/SAND =
  • ~$6,195 USD
  • Total = $27,965 USD 🤯

Believe it or not, there’s your proof that there is some serious money to be made in the world of GameFi for the average gamer.

Side Hustle or Full-Time Career?

While those calculations have some rough estimates and don’t account for gas transaction fees, they also don’t account for additional investments that could have been made (and that I luckily took advantage of) such as buying multiple LANDs, minting multiple NFTs, staking more $SAND than what was just earned from the Alpha Passes, and then re-staking earned $SAND to compound earnings! Also, if you’re a crypto enthusiast, you’re more than likely assuming that the price of both $SAND and $ETH will be higher in the future, allowing for held assets to be even more valuable in the future.

Just stop and think about that, ~$28K in profit over four months equates to about $7K/month. If your commitment and luck were to continue at that same pace for an entire year you could potentially earn $84K/year; well above the average US salary for 2021 of $52K/year! Consider the potential and adoption among developing countries, where earning even a fraction of that amount can lift someone out of poverty. That’s just the case for many in the Philippines that have used the Axie Infinity P2E game to put food on the table, clothes on their back, and a roof over their heads; or like this player from the Philippines, two roofs!

Is Blockchain Based P2E Gaming the Future?

Even though I want to enthusiastically shout “YES!”, there has been pushback from game developers and gamers alike who feel that utilizing the NFT tech is just another cash grab to take their money while providing little to no benefits. However, it’s safe to assume that as education about NFTs and the underlying technology grows, moving out of the “NFTs are just expensive JPEGs” phase, adoption will grow as well. I’m optimistic that large legacy companies in the traditional gaming market will adopt the technology in a way that is mutually beneficial for them and their customers. I believe that instead of blockchain based gaming completely replacing traditional gaming, the two will more fully merge and transform the overall industry for the greater good. We won’t have to make the distinction between traditional gaming vs. blockchain gaming; it will just be called gaming. And with that transformation, there will be more economic incentives and opportunities for all gamers to earn money, in addition to playing the games for fun or bragging rights. Who knows, if adoption and popularity continue to rise, on Thanksgiving Day, instead of sitting down with full bellies getting ready to watch the Packers play the Rams, maybe we’ll be watching a competition of the video game that we were told years ago to put the paddle down and stop playing.

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