My take on GameFi
April 10th, 2022
Aurory, an upcoming GameFi Project on Solana
Aurory, an upcoming GameFi Project on Solana


In March 2020, during the pandemic, the school was shut down and I was back home in China taking classes online. Due to social distancing and reduced commitments, I purchased a switch with the game Pokemon Sword, and I completed the game within three days. Later, I gave the switch along with the game to my friend to help him pass time and started immersing myself in a MOBA game called “Honor of Kings”. Every day, I would set a time and have group calls with some friends to meet each other in the Kings Canyon and spent hours fighting for victory. At the end of the semester in May, I reached the highest rank in that game, and my friend with my Pokemon game became the top one thousand trainers in the world.

Aside from cheering our hidden talents, we were surprised by the amount of time we spent playing daily and knew we were not the only ones who had a strong game addiction at the time. We realized Covid has acted as a catalyst for gaming as people have more free time and seek entertainment options. Addition from our time commitment to gaming, my friends and I also purchased a lot of in-game skins and items to showcase our digital identity. We started realizing gaming is one of the most profitable industries. It generates close to 200 billion in revenue annually, and the Honor of Kings alone generated a face-melting revenue of 2.45 billion dollars in 2020. As time moves on, gaming is likely to be the industry that will persistently perform well as the demand for games will not decrease due to the consistent need for entertainment.

What else boomed during the pandemic? The answer is crypto. In 2021, people were seeking for inflation hedge and had witnessed a substantial amount of money flowing into the crypto market. Either driven by FOMO (fear of missing out) or believing in this industry, many people hopped on the ride and poured money into cryptocurrency. The investors range widely but most are under the age of 40 with a high acceptance of innovations. Many young investors ranging from middle school to college brought into the market by MEME coins such as $DOGE or $SHIB, making crypto their first investment. With the large user inflow, many on-chain applications started to gain attention, and new ideas emerged. Concepts and applications around Defi, SocialFi, GameFi, and NFTs began appearing more in people’s conversations. These ideas appear to be more appealing than the existing centralized system due to their ability to address data rights attribution, benefit distribution (with no middleman), privacy, and many more.

GameFi is the most popular among all. Not only because the idea of playing games while getting paid sounds tempting, but people also foresee huge profit-making opportunities in this field. The explosive growth of Axie Infinity has convinced retails and ventures on GameFi’s demand and made them want to hop in to find the next hit. A lot of VC money has been poured into the industry. FTX and Lightspeed Venture Partners’ $100 million and Binance and Animoca’s $200 million, for example. At the end of 2021, Facebook announced its rebrand to Meta, entering the metaverse. The large-cap metaverse tokens and NFTs also had a tremendous value appreciation followed by the announcement. All these make people believe the next hype is going to be land on GameFi, models combing NFTs and metaverse concepts.

What is GameFi?

Based on the literal meaning, GameFi is a combination of game and finance. The model applies the interactive ways of gaming to provide people access to decentralize finance. Thus, achieving the goal of getting rewards for playing games, also known as play-to-earn. In other words, GameFi can be viewed as an additional interactive layer added to Defi. Users are required to complete certain actions in a period of time to achieve a similar or more earning from Defi.

Benefits of GameFi

The idea of GameFi seems appealing to many as games provide friendly access for people to use Defi and learn about the crypto world. Other benefits include proof of ownership, effective advertising, decentralized operation, transparency, and many more.

1. Proof of ownership

To understand proof of ownership, we need to first understand NFTs, Non-fungible Tokens. On the blockchain, when users create or purchase an NFT, the jpeg or item is attached to the user’s wallet address, and its transaction history is searchable on explorer websites such as etherscan (for Ethereum). For creators, NFT allows them to authenticate their work. For buyers, NFT allows them to have the opportunity to gain ownership directly from the work certain creators produce. This design effectively eliminates the concern of “right-click savers” as they can freely download or use the picture but do not have ownership of the picture. Ownership ascribes values to NFT, creating a sense of digital scarcity and exclusiveness. This explains why people are willing to pay thousands to trade for a jpeg.

Looking back on Web2 gaming, a world without ownership, the old structure could evaporate players’ effort in the game and make it seem meaningless when the game becomes out of date. I was a fan of the popular mobile building game Clash of Clans. I started playing the game in middle school when it was trending on the App Store and all the people around me were talking about it. Later, many of my friends gradually lost interest, but I continued as I enjoyed its chill rhythm. Years after years, I have dedicated hours and purchased multiple in-game items. Last year, I finally stopped playing the game, finishing the sentence about my youth and efforts in that game.

As many can see from my example, in Web 2 gaming, the time and money you spend on the game can not often be properly valued. If the game becomes out of date and no one around you is playing the game, you will gradually stop playing as well and all your effort earlier become meaningless. However, Web 3 solves such an issue with the idea of ownership. Since all the in-game items exist in form of NFT, users can trade their items when they want to exit the game. In such a way, game players’ efforts dedicated to the game can be rewarded with monetary value. Moreover, in the borderless blockchain ecosystem with a larger sample size, users can easily find buyers, people who are also passionate about the game just like them in the past. Such a system not only values players’ time but also lengthens the life cycle of the game. As long as the in-game NFT has the demand and there is money to be made, there will always be players playing the game.

2. Effective Advertising

In traditional Web 2 gaming, a newly launched game often requires heavy advertising to gain traffic. If the game comes from a small company, it will be even harder for it to get players’ attention even with expensive marketing.

Web 3 gaming solves such issues with ease. New games can collaborate with old games or NFT collections and promise to grant early access and exclusive rewards to these users. Since no one will say no to free money, such a Web 3 game can easily gain a lot of traffic and even some free advertising if the newcomers choose to shill this opportunity on social media. The verification process is simple. The new game can set up a bot to detect if there is a certain token in the user’s wallet, and, if the user fulfills the criteria, they can claim certain roles/rewards. (Similar to Collabland in Discord)

Last but not least, another way for Web 3 gaming to advertise themselves is airdropping/launching NFT or tokens. Starting with $SOS in December 2021, we have seen the media effect of airdrops that quickly brought people’s attention to OpenDao. Later, a marketplace like Looksrare and X2Y2 adopt such advertising methods as well and successfully gained users and transactions volume from OpenSea’s monopoly. There is no doubt that Web 3 gaming can also airdrop tokens to let people learn about upcoming games and attract potential users.

Additionally, many GameFi projects choose to release NFT or tokens before their game launch. By showcasing their creative muscles, the team can attract a group of potential users before the game launch. In this way, once the game is launched, there will be an immediate demand for people to come and play as they have been holding up the NFT and expectations for a long time.

3. Decentralized operation

In traditional gaming, the game developers and the players often stand on the opposite side as the players try to find the cheat codes to thrive in the game while the developers try to restrict these players and restore the balance. Developers will constantly change in-game data and rules to make sure no one is getting any advantage without their supervision. However, these developers do not always make the right decision and many ended up disappointing and losing dedicated players. This is one problem remaining prevalent in the traditional gaming industry.

Fortunately, centering around the notion of decentralization, blockchain has lessened the dominance of developers while facilitating the relationship between users and creators. Let’s take Gala’s founder’s nodes for example. By owning a valid Founder’s Node license or Game Node license, users can run the Gala Node software and be rewarded with part of the distribution every day. There are more than 16,000 players-run nodes and each node holder can voice their opinion on how the Gala Games roadmap develops. A distributive voting mechanism will be used to enlist node owners and players, granting them the power to decide which game should be added to the platform and how Gala Games should be funded. Gala’s model emphasizes decentralization by leveraging players’ power, placing them in the same boardroom as the developers.

A decentralized design also cultivates a healthy community. When distributing nodes to individual node owners, the profit of the development team is tied together with the community. Owning nodes and having the power to voice opinions, token holders will gain more incentive on helping the game/ecosystem to become sustainable. Developers also will be more comfortable seeking support/advice from token holders without being questioned on their ability. Over the course of time, such a decentralized structure can form a strong community ensuring the project becomes sustainable long-term.

4. Transparency

In a traditional gaming company, there is no means to know how the company used their fund. However, everything on the blockchain is searchable. (With the exception of privacy dapps such as Tornado cash.) If the team publicly releases its community wallet address, investors can go on a scanner website such as etherscan to view the monetary action in that wallet. Such openness, enabled by blockchain technology, can foster a strong sense of trust between the investor and the developing team.

More importantly, on the blockchain, each item exists in form of NFTs within contracts. Most of the time these contracts are open-sourced, and players can check the game settings. In a traditional game, without an open-sourced contract, gaming companies can lower the likelihood of pulling rare items from mystery chests whenever they prefer. Many companies have done so secretly to ensure players invest more money into getting the items they need. Additionally, by constantly modifying the status, developers can make a rare item become common and create a more rare item to force players to grind or invest while making all the money and effort players previously put in become futile. Such unethical actions will be exposed and discouraged with the blockchain technology as developers have no place to hide on an open-source contract. Thus, when the monopoly is being eliminated, the players can now truly enjoy the game in a fair environment.

Problem with GameFi

Despite GameFi having many innovative benefits, many also find the idea of GameFi contradicting and problematic. Some of the arguments are (GameFi is) a laborious form of Defi, lacking intended players, inefficient governance mechanism, oversupply, as well as over-promised and under-deliver.

1. Defi with a laborious layer

In Defi, users often put their tokens into a liquidity pool and earn rewards/transaction fees passively from the platform. Earning a similar amount while based on the same mechanism, GameFi eliminates the idea of passive income and requires users to interact with the game to make earnings. This design appears to be laborious to many investors as they fail to see the point of GameFi since they can easily receive the same amount of return through Defi with less effort.

2. Lacking potential players

One of the most crucial problems with GameFi is “crypto first, game second”, meaning players focus more on the profit-making aspect instead of the game’s playability. Considering the potential audiences currently who have heard of GameFi are crypto / NFT investors in the Web 3 space. Many of them believe in the game that they invested in will go mainstream someday and people will start adding utility and bringing exposure to the tokens or game they invested in. This seems like a solid plan. However, the question here is who will be the players once the game is launched?

The majority of the people who know GameFi well and heard about the concept are investors, who never expect themselves to constantly play the games. Especially driven by the crazy return of Axie Infinity, many GameFi investors envision someone will come to play their game and make their game blow up. However, Axie Infinity exploded due to it became the primary revenue stream for many people in the Philippines during Covid. Should the investors expect there will be another appearance of the underprivileged group and that group magically discover GameFi? I expect the answer to be no, and, even if there is, such a model will not be sustainable (The early adopters or whales often have a clear advantage in manipulating the in-game token and they can take profits on newcomers anytime they prefer).

Similarly, for the GameFi companies, most of their reach in Web 3 space are profit-oriented investors while companies are looking for plabilty-oriented players who mostly exist in Web 2 space. These companies will fail to reach the right audience and make their ecosystem sustainable if they do not go beyond the Web 3 bubble. However, transitioning gamers from Web 2 to Web 3 requires time and education. Therefore, the time span for GameFi to reach success will be lengthened.

3. Inefficient Voting Mechanism

The governance mechanism currently run by most GameFi projects is some form of DAO, in which each token holder has the power to vote on the team’s roadmap and their vote is weighted based on the amount tokens they owned. This mechanism involves two issues, problems within DAO itself and voter representation.

Most DAO nowadays has a poor rate of voting participation either due to most holders purchasing their tokens from the exchange or they remain careless about the idea of decentralized governance. In addition, the team decides what question to post during each voting round and voters only have limited options, mostly Yes or No. Despite users also can post their proposal in the forum, the team makes the final call on which proposal to bring up during the voting round. Thus, the team makes the final call. Furthermore, the vote is weighted based on the amount tokens they owned. In this way, whales hold more voting power than retail investors and often have the power to single-handedly alter the result of any voting. Many times, the team holds a large share of the supply, making the idea of decentralized voting seem void.

Voter representation is also a common issue in DAO. Most of the projects assign token holders to be accountable for decision-making. However, token holders often do not represent the best interest of the entire project ecosystem. For example, if the team asked token holders to vote on whether the project should decrease the number of lands inside the game, the token holders might not always be aware of the core issues landowners have. Not every token holder owns the land, and not every landowner has a token. The voting mechanism for GameFi should be more considerate and fully embrace the notion of being fair and decentralized.

4. Oversupply

There are too many companies making Web 3 gaming nowadays, causing an oversupply in the entire GameFi market. Many projects present users and Venture Capitals with glorified in-game pictures and ambitious roadmaps. Although venture capitals have the ability to identify the doability of the project and mitigate the risk of investing, the retail investors do not have the proper investment knowledge and often come into the market with FOMO (fear of missing out).

In the Web 3 space, before the actual product launch, marketing is the key to everything. As a result, the barrier of faking a convincing project to retail investors is very low. We have heard countless examples in which a team invested all their money into marketing with no intention of delivering an actual product. Such a phenomenon is extremely prevalent in the NFT space. A GameFi project called Pixelmon has shown fantastic Minecraft-style in-game footage to players and locked their discord to make it seem exclusive, giving the viewer a high-end appeal of the project. The project used a dutch auction to sell their NFTs and claimed that these will be their in-game pets for the future. After two weeks, when the NFTs were revealed, the image looked nothing like what has been promised but a group of shattered Lego pieces awkwardly combing together. By the time buyers realized they have been rugged by the project, the founder has already gathered 14 million dollars in his pocket.

Aside from the high risk of being rugged, since there are so many projects and industries all see GameFi as the next wave, the road to success is competitive. At the end of the day, the majority of the GameFi projects will fail and only very few will stand out. From the investor perspective, there is no way to identify which one will prevail in the early stage before the actual game launch. Many Venture Capital focuses on Beta and invest in a wide range of games, mitigating risk and seeking returns from the general trend. However, the majority of the investors often fail to mitigate their risks and do not have the ability to pick the explosive project. Thus, many have a bad impression of GameFi.

5. Over-promised and under-deliver

Before the game launch, it is crucial for the team to focus on marketing and gather as much attention for the project as possible. However, sometimes the hype before launch can be detrimental to the project and might potentially kill the project.

Once the game launches, there is no more for holders to hold their expectations for. If the game does not perform well, holders will be disappointed and abandon the project. On the other hand, even if the game reaches the standard, if the project is overhyped before the launch, holders will often expect something more and gradually lose interest weeks after the initial launch. So what should be the right approaches? Poopie, the founder of Doodles, once told me in person that “For a project to succeed, it needs to under-promise and over-deliver. That’s how a project can become sustainable long term.” Additionally, if the team manages to continue the hype and give out another hint for holders to keep up their expectations, the project will continue to do well. Azuki team has used this approach. The project received a lot of hype before their IRL meet-up in LA. After announcing the special announcement during their meet-up, the team sent out airdrops to holders and let the entire space guess what these could be. Their approach brought in around 50K Ethereum trading volume within 3 days after the meet-up. Now, the holders are happy and the people in the NFT space try to buy into the collection as its hype continues.

As a result, overhyping the project will set players’ expectations too high and end up losing interest more quickly in the project. Learning from the NFT space, the right approach for GameFi marketing should include under-promise and over-deliver as well as keeping up the hype after the delivery.

Potential solutions

The concept of GameFi has triggered a lot of imagination as well as concerns. Obviously, no one knows the future and there has not been any game that manages to capture everyone’s attention or lead to mass adoption. Although there aren’t perfect solutions for addressing concerns from the above section yet, I do foresee some potential solutions that can contribute to a successful GameFi project.

Big Question: How to focus on Game First, Crypto Second

As mentioned earlier, GameFi has always been facing the issue of lacking targeted audiences. Let’s say I release a GameFi NFT project with 10K supply. Once the game launch, the people who are most excited about the game and will be the potential players are these 10K holders, which is a tiny group compared to any of the Web 2 gaming. Non-holders will have less incentive of participating in the games since holders will gain an obvious advantage as early stakeholders for the project. Despite the project can launch more PFPs with lower prices to engage more audiences, the amount of additional audiences will still be strictly restricted to the additional PFPs they produced, and the gap between holders and non-hodlers will never be bridged. In addition, the endless increment in supply might end up diluting the original collection while risking the entire ecosystem. So, what should the solution be?

1. Web 2 migrates to Web 3

What if we invite the successful Web gaming companies to migrate onto Web 3? The successful Web 2 games attract users through their outstanding playability. If the games migrate onto the blockchain, a large portion of the users will follow, especially knowing the play-to-earn aspect. Such Web 2 companies can either choose fully migrate onto Web 3 or remain partially on Web 3 for certain additional in-game experiences. The latter approach might be more popular as it will diminish the risk of stepping into the Web 3 water since they still maintain a part of their traditional side running and will be able to withdraw anytime. Such migration will bring GameFI significant exposure with the direct audiences as well as winning recognition and large investment from the big players in the Web 3 space.

From users’ perspectives, Web 3 should seem more tempting as it rewards on-chain users to its full extent. The two most distinguishable characteristics between Web 2 and Web 3 are value capturing regarding user behaviors. In Web 2, a platform’s user visits contribute to the firm’s valuation since these data can raise its platform’s advertisement fees. These Web 2 companies have full rights to the user data generated through their platform and often charge them a high price. On the other hand, on Web 3 platforms, users have ownership of their data and can be rewarded based on their on-chain actions. We have seen numerous airdrops starting with $ENS, $SOS, and $LOOKS to reward users based on their on-chain history. Thus, in Web 3, users can benefit through their behaviors instead of continuing to feed the big players.

2. IP first

What if the team is not an already well-established Web 2 gaming company? Which route should they proceed and what should they do? In my humble opinion, I believe the team should build a brand first and build games later. There are so many current GameFi projects promising incredible roadmaps and implementing staking as well as token rewards etc. However, if the game is lacking players and the ecosystem is not well-established, the game can fall down easily with the fall of token price as a consequence of lacking market demand. Thus, building the market demand for the game should be viewed as the priority. Once the brand is being successfully built, many talented traditional gaming companies will come and knock on their door and express willingness to help out.

3. Under-promised and over-deliver

Contrary to the overpromised roadmap, as we covered in the previous section, a founder/team should always under-promise and over-deliver for their project. The team should not promise its holders a long-term roadmap since the space moves fast, people’s interests could shift, and there is no way for any founder to predict what the next hit will be. Thus, for the longevity of the project, the best thing for founders, counter-intuitively, is not promising a roadmap. With no strict system, the team can pivot or go in any direction they want once seize the opportunity without being restricted by the initial plans. Moreover, by promising a long-term road map and ending up switching directions due to the shift of market interest, the founder will bear a huge amount of pressure while the investors will feel betrayed and disappointed ending up leaving the project. On the other hand, a non-promised roadmap is more like a mindmap as it creates endless possibilities for the project and makes the project flexible to make the best decisions under current circumstances.


Despite multiple seemingly unsolvable issues GameFi currently faces, the fundamentals GameFi embody provides endless imagination to modern generations. As crypto and NFTs become more mainstream in the future, the GameFi will also gradually come into people’s walk of life. Many of the current GameFi projects, in my opinion, are more like experiments run by the capital and funds to test the public acceptance. However, these current samples will provide valuable results and contribute to the creation of a successful GameFi project in the future.


  1. Looking Onward for Crypto Gaming by Andy Zeng and Joshua Yang
  2. Talking about blockchain games that you don’t understand at all by Vincent Niu
  3. Around The Block Ep 2 — Crypto Gaming featuring Amy Wu
  4. Interviewing the Co-Founder of Doodles NFT — Poopie
Arweave TX
Ethereum Address
Content Digest