Jul 17, 2022
GameFi: Future of Gaming or Short-lived Gimmick?
GameFi, an amalgamation of the field of gaming and decentralized finance, is the newest use case of blockchain technology seen today. By combining the traditional thrill associated with earning game rewards with the monetary value of cryptocurrency, GameFi provides players with the opportunity to own their earnings. These can then be utilized as an asset within the game for things like lending, trading, renting, or borrowing.
On the surface, the GameFi industry sounds revolutionary. However, digging a little deeper reveals several questions about its legitimacy. What are the risks associated with its play-to-earn model? Are all games which claim to be a part of GameFi credible? And, at the end of the day, is this a viable direction for gaming, or nothing more than a short-lived gimmick?
Before we get into discussing the answers to these questions, let us first try to understand the concept of GameFi as a whole.
What is GameFi?
GameFi is used to describe any game which has some element of financial incentives within it that can be utilized by players to achieve further success. Typically in the form of dApps, these games may involve concepts like cryptocurrency, blockchain, and NFTs, or even a combination of all three to fulfill their promise of granting economic rewards to their players.
Games that are part of the GameFi space typically follow a play-to-earn model, allowing players to gain rewards in return for playing and advancing levels within the game. Sometimes these rewards are in the shape of assets like NFTs- resulting in players being able to earn an ownable asset with real-world value. They can then use whatever they have acquired in any way they wish, spending their tokens even outside the game they have earned them from. Some players may even use these games as a way to earn a full-time income, in exchange for fulfilling common gaming tasks like mining resources, winning battles, or growing digital crops.
GameFi and The Metaverse
Talks of an all-encompassing virtual reality coined as the metaverse have been going on for a while now, with many offering drastically different viewpoints about its opportunities and pitfalls. Interestingly enough, some believe that GameFi has the potential to keep the power imbalances expected within the metaverse in check.
A recent statement made by Outlier Ventures, a UK-based blockchain startup, stresses on the importance of having a crypto decentralized core within the metaverse, stating:
“The defining characteristic of a true Metaverse is that it needs its own economy and currencies native to it, where value can be earnt, spent, lent, borrowed or invested interchangeably in both a physical or virtual sense and most importantly without the need for a government.”
Many believe the key to building such a model which is both sustainable and accessible to all is to adopt the model currently implemented by GameFi. Anndy Lian, Chairman of crypto trading platform BigOne has also expressed his views on this, stating:
“While there is room for many different visions of the metaverse I believe GameFi is showing the way, with a decentralized model for gaming and earning money based on trading tokens and NFTs. This is the metaverse where people have greater choice and opportunity, to come together to form their own communities and economies.”
Future of Gaming or Short-lived Gimmick?
From a historical standpoint, gaming has typically been regarded as a recreational activity that people are drawn to for entertainment purposes. In fact, some may even argue that it is nothing more than a time-wasting scheme in society, with excessive participation in gaming being something that is frowned upon.
The GameFi industry has the power to shift this narrative- creating opportunities within this industry for players to earn valuable assets and perhaps even a full-time income. Coming in place of the typical “play-to-win” model that games have been based on for decades, the recent “play-to-earn” model brought about by GameFi is much more lucrative. Along with this, GameFi allows players to participate actively in the development of game updates by allowing token holders to propose proposals that customers and game fans can then vote on. As a result, a more welcoming gaming community can be seen.
However, not everyone is so optimistic. Recently, regulators like the SEC have been cautioning users against the risks associated with GameFi projects. According to them, games following the “play-to-earn” model may be making digital wallets more vulnerable to hacking, exposing traders to risks from high price volatility as well. Some countries in Asia such as South Korea, Japan, and India whose citizens are typically highly active within the gaming community have also presented bans on GameFi- comparing it to the likes of gambling which is deemed illegal.
Some users also claim that the “play-to-earn” model is nothing more than a scam and may actually just be a way to make users contribute their capital into games- taking their investment as they lure them with the possibility of earning more.
The Bottom Line
As the popularity of blockchain technology increases, the number of new entrants into the space will only increase. GameFi is just one of the many trends about to unfold. However, despite the hype, it is imperative to be aware of all possible associated security risks. In the case of GameFi, it is difficult to tell right now whether this industry will prove to be a legitimate source of income or a passing fad. Until then, it is best to do your own research so that an unfavourable outcome can be avoided.
References:
Centieiro, H. (2022, March 9). GameFi 101 and why I think gamefi is the future of gaming. Medium. Retrieved April 18, 2022, from https://medium.com/geekculture/gamefi-101-and-why-i-think-gamefi-is-the-future-of-gaming-cb63a3d5ce62
https://blockapex.medium.com/consumer-privacy-data-breach-part-ii-is-web-3-0-the-cure-6807c843e293
crypto.com. (2022). (rep.). GameFi: Past, Present, and Future. Retrieved April 3, 2022, from https://content-hub-static.crypto.com/wp-content/uploads/2022/03/GameFi_Past-Present-and-Future_Overview-with-Comparisons-to-Traditional-Gaming-Industry-2.pdf.
