Why is everyone talking about Game-Fi?
Let's see what's going on, and what it may promise for the future
Note: This is not financial advice. I love gaming so I may be a ~little~ biased but I will try to maintain neutrality. Also; hi mom, told you all those hours would one day be worth it.
TLDR: The gamification of finance is an excellent onboarding mechanic if done right, and there are promising innovations in this field. It is not without its challenges though, which is what makes it so worth exploring. Whoever cracks some of the key problems will build a game to remember and be cherished by millions globally.
OK — Lets get started…
Game-Fi, probably the coolest sounding name in all of crypto. Game-Fi is like that one friend everybody loves, the NFT crowd, the DeFi degens, and the traders all seem to all be buddy buddy with the emerging use-case.
But why? Why would anyone want to bring FINANCE into games? Aren’t games just supposed to be for fun? May seem a little odd at first, but we need to take a look at the history of games and look at what’s really been going on in basements around the world all these years. Soon enough you will realise that the question isn’t “Why Game-fi?” It’s “Wen Game-Fi?”
Non-gamers may be unaware of how virtual in-game economies have been ubiquitous across a myriad of video games. In virtual economies players buy, sell, trade items with one another; the strongest examples of these economies are shown in large multiplayer video games like Diablo, Clash of Clans, and FIFA Ultimate Team. The items that are sold in these economies are so popular that many players even convert their fiat money into the game’s ‘virtual money’ in order to purchase them. This kid actually stole $7000+ from his dad to buy player packs on FIFA’s ultimate team. But trust me, the game economy is not solely held up by young Jamie and other 17 year old card swipers , in fact, EA released their 2021 report which had the following summary for FIFA alone:
Game Sales: $1.6 BN
Live Services and other: $4BN
The biggest slice of the live services pie? Ultimate Team and in-game user-generated revenue (source). This number is so high that FIFA has at times considered to make Ultimate Team completely free to start — because they know that user’s will inevitably dive into their in-game economy…Bullish.
BUT wait a minute, all this money is going to…FIFA? So you’re telling me that billions of dollars are being spent on this virtual economy and the end sum is only being received by EA sports? So, the players are just spenders, and don’t actually get any monetary value returned to them? Once you buy these virtual currencies, there’s no way to transfer it back into fiat unless you go through proxy marketplaces which can be sketchy to say the least and most users aren’t comfortable to do so. Basically for most, once its gone its gone. Feels a bit weird when you put it that way doesn’t it? Also another thing, lets say I buy virtual in-game coins, and then I spend it on an asset, I can only actually trade that asset within the game’s own marketplace — furthermore, I don’t really ‘own’ that asset, its just registered in my account name for the time being. So let me get this straight, I’m putting money into FIFA, getting these virtual currencies in return, I can then use the virtual currencies to buy cards/players which I don’t really own (can be seized at any moment, and have to abide by the game’s own marketplace), and even if I resell them for a higher price somehow, I can never cash out of the virtual currency back into Fiat (unless I’m willing to take the risk on a proxy marketplace)?
Oh, and…
EA releases a new FIFA game every year… So you have to restart your ultimate team from scratch…
honestly, gg @ EA (big respect where its due to the devs though, Ultimate Team is a 10/10 game)
Note: What people can do to make money in this is they actually just sell the account itself to the highest bidder. E.G let’s say I somehow unlocked Cristiano Ronaldo (sorry Messi fans), that’s a high value player card and a team with Ronaldo could sell pretty well. These sales are done via DM, scams abound!
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So is there a world where users can participate in game economies but actually make money in a simpler way?
Enter the world of Game-fi — a model that integrates these in-game currencies with crypto tokenomics to better serve the players of the game’s itself by bringing the economy to the real world.
Game-fi introduces a play to earn/play & earn model to videogames. A model of decentralization that provides user’s with rewards, true ownership and security over their in-game assets. The usage of an integrated dispersed network (blockchain) within the game ensures that all transactions are open and transparent, it also emphasizes ownership via NFTs — so you actually own the assets you purchase and have much more freedom over said assets (to trade).
FIFA is still a long way from incorporating Game-Fi (if ever), but this is a TLDR of how some Game-Fi game’s work. I wrote about Crabada in another article, but I’m a fan of what they are doing so lets run it back turbo at a high level.
Crabada is a Game-Fi offering that is soon migrating to its own Avalanche Subnet — The Swimmer Network (more on Subnets in this article). The game has 4 features, and each of them reward users for playing/participating: Mining, Looting, Lending, Breeding and Battles. Each of these features have payout levels where one can expect outsized returns if they play their cards right/get lucky (similar to how users can get lucky unlocking a Ronaldo card in FIFA ultimate team).
To start, users must purchase NFTs (Crabs), they can then idly earn money by ‘mining’ — which is essentially staking, but gamified (more on why the gamification of DeFi terms is important later). They can then go on Looting expeditions where you attack and try to steal someone else’s mining operation (gamified staking!). Then we have gamified lending! This is where you can lend or borrow mercenary crabs; to boost your mining rewards and looting expedition probabilities, you can ‘borrow mercenaries’ from an open market for a fee. Now we also have breeding, you can pay to make your crabs mate — there are 64 breeds! If you’re lucky you may come out with a giga-chad crab mercenary who helps your team do better in battles.
Interested? (Start here. The costs are pretty high to start right now, but you can join CrabadaDAO to get exposure at a cheaper level + they’re starting scholarships soon!)
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What are some of Binji’s favorite things about Game-Fi?
Rewards accrue to players — providing a new way for people to earn passive income.
International wealth oppurtunities. A few dollars being passively earned for people in high-income areas may seem insignificant, but a dollar can go a long way in different places. People in the Phillipines were able to accumulate wealth during the Pandemic despite their jobs being shut down by playing Axie Infinity (a pioneering P2E game).
It make’s DeFi easier. Terminology is a barrier to entry for many people trying to get into crypto. Let’s be real, some terms are pretty complicated. Game-Fi abstracts the complexities of DeFi by simply changing the terminology and the steps required to stake, borrow/lend e.t.c. It’s the same backend, a different front end.
I am a firm believer that the biggest Play To Earn already exists and we call it the capital markets. Imagine if we gamified the capital markets; the sheer amount of people we could onboard and provide oppurtunities to. Game-Fi takes a step towards that.
Where are we now, and where are we headed?
I will not understate how early it is for Game-Fi, we are very much in the most nascent era of building out these systems. Like with any game, incentives are one thing, but we need to create games that people enjoy to play, and the financial incentives become a bonus — that is how we can achieve stickiness. We need the Game part of Game-Fi to be the main focus, not the Fi — until we get there, we may see a barrage of new entrants and people continuosly hopping from game to game.
There are hurdles in Game-Fi, specifically when it comes to shelf-life. With constant innovations in the experimental stage, there is a challenge to retain users. For example, people tend to go to wherever they can earn the most; the way to offset this is to build a game people love for the game itself versus solely the financial elements.
Another problem is there is a stark first-mover advantage. Early adopters have an outsized advantage over new entrants. This makes competition more difficult — game mechanics must be developed that allow new users to catch up to the OGs to ensure parity and incentives for new users to join on a longer time horizon.
Overall, the gamification of finance is an excellent onboarding mechanic if done right, and there are promising innovations in this field. It is not without its challenges though, which is what makes it so worth exploring. Whoever cracks some of the key problems will build a game to remember and be cherished by millions globally.
So to answer the question: What’s going on with Game-fi?
A mix of innovation, heightened interest and experimentation that is worth watching. Game’s are a multi-billion dollar industry, the gamification of finance/the financialization of games can potentially become a trilllion dolalr industry. The smartest minds are taking a keen interest in this space, and it will undoubtedly bring about many headlines in the future. Keep your eyes peeled!
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As always, I think of writing as the single best way to learn. I am consistently trying to become a better writer. Please comment below or reach out to me at 0xbinji on Twitter. Appreciate all of u!