In 2020, Decentralized Finance (DeFi) took the world by storm. The total value locked in DeFI and number of dApps has also grown exponentially since the start of last year with new types of lending, investment, and trading decentralized applications spurring up consistently. In 2021, DeFi is still going strong, even as the cryptocurrency market itself is taking a dive.
DeFi is Leading the Way
While the earnings brought about by the new types of investment products created by this nascent technology have brought in massive amounts of investment by a select number of savvy crypto users and even some institutional players, the entry barrier for typical retail investors is still quite high.
While DeFi aims to open the doors to the financial world to the masses, the aforementioned entry barrier exists due to the complexity of these investment products which, although more profitable, are even more complicated than those offered by traditional financial institutions.
These products often require the user to interact with unintuitive platforms, volatile crypto assets and leave them exposed to risks of misuse where no centralized party can revert items or retrieve private keys in case of these being lost.
Enter GameFi – A Familiar Approach to DeFi
This is where GameFi comes in. In order to bridge the gap between the common citizen and bring this new class of high yield investment products through the use of gamification and Non-Fungible Token (NFT) technology.
The gamification of investment products like liquidity provision, yield farming, lending and borrowing, trading and others, makes them more intuitive to the user and allows them to engage in investment in a fun and relaxing manner. This also brings some level of education to the world of DeFi. As users become more accustomed to these products, they can move on to less gamified versions of them.
GameFi also brings in a whole new value proposition to the table. The concept of “play-to-earn” replaces old models, where players were usually motivated to spend money or view ads in order to play or have certain advantages within the game. Instead, GameFi gives users new revenue streams, rewarding them for their expertise when playing.
The World of GameFi Unlocked
The world of GameFi takes on many shapes and sizes. Perhaps the most basic form of GameFi are collector-based games like CryptoKitties, where players collect and breed NFTs that can then be traded according to their rarity.
Some platforms focus on pure gamification of financial products like yield farming or trading. This is the example of games like DeFi Land and Mobox, where users interact with financial products through gamified metaverses.
Other projects are building in-game economies on top of games through the use of cryptocurrency tokens and NFTs. The upcoming GoldFever game is a good example. Their developers are building a fully-fledged online survival RPG game with Unreal engine graphics while implementing a blockchain-based economy on top of it where every item is an NFT that can be bought, sold, and even borrowed or lent for revenue.
Another platform applying the concepts of DeFi to the world of gaming is YAY Games. This platform is home to a host of games where users can play to earn tokens in the form of YAY tokens. Many of these games also leverage NFTs in their mechanics.
Perhaps the most fascinating example of the power of GameFi at the moment is Axie Infinity, a Pokemon-inspired game that has captured the attention of the whole cryptocurrency world. It has over 350,000 players daily and has been able to generate over $25 million in daily volume and sold over 50,000 daily NFTs.
Axie Infinity is currently ranked the number one game on the Ethereum blockchain in terms of active users and it has become quite popular in the Philippines, where many have turned it into their main source of income. In the game, players earn for competing in PVP battles, breeding and selling Axies (which are pokemon-like characters), and more. Still in early access, Axie Infinity will introduce other revenue streams for players and may further help usher in the age of GameFi.
GameFi is most certainly an interesting phenomenon and it may be one of the key aspects in the mainstream adoption of blockchain technology. Not only that, it may have an extremely important role in opening the doors of financial literacy to millions across the world by turning investment into something that is much more fun and engaging than it was before.