GameFi, another investable sector in the crypto universe. is it real Yes. Yes, it is.
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Ever since the fall of the ICO market around 2017 and a roughly two-year hiatus in the crypto hype, the world of cryptocurrency investing has had a moment of getting back to the drawing board. Developers and tech entrepreneurs have created new sectors to attract investors. If the ICO market is dead and the cryptocurrency market is ever going to be more than Bitcoin BTC and few blockchain platforms like Ethereum, a whole new menu of risky assets had to be created. Decentralized finance and yield farming were one of them. The new blockchain protocols are another.
And in recent years, GameFi has become the newest sector in the cryptocurrency economy.
Not just for gamers, of course. The investable universe would be too small if only players were involved. But there are enough blockchain games out there and supporting projects in the non-fungible token space that offer investors a new place to play these US dollar coins in their Coinbase account.
GameFi is no more investor boondoggle than cannabis ETFs or venture capital funds. Some projects will fail, just like any new venture.
This is a real market with billions at play, largely developed around the massive rise of blockchain-based video games in the new Web 3.0 universe (or simply Web3) where developers can go in and create their own worlds. You earn money with it. If you’re new here, they call it play-to-earn.
GameFi’s market cap tops $11.6 billion, with a daily trading volume of around $2 billion, although that number is rapidly declining due to the general sell-off in the market.
Imagine this: You are playing Minecraft. You can create your own world and characters within Minecraft through a creator engine. you sell them This is GameFi in a nutshell.
The game matters. “I should feel compelled and hooked to return to the game because I enjoy playing it. It shouldn’t just be because I can earn tokens,” says Arunkumar Krishnakumar, Chief Growth Officer at Bullieverse in London. They have their own Creator’s Engine for serious gamers who want to build their own worlds within the Bullieverse game to monetize what they’ve created.
“As a gaming platform, an immersive experience allows players to invest more in the game. When they feel more invested, they tend to promote the game and become ambassadors for the game,” he says. “That was definitely our case.”
There are approximately 3 billion online gamers around the world, with Asia accounting for 55% of this market. By 2024, the mobile gaming industry is expected to generate $116 billion from online player spending.
There are 2.5 billion online gamers in the traditional Web 2.0 world compared to only about 5 million estimated in the Web3 world. Due to the developer and consumer incentive mechanisms that Web3 offers, the player base for Web3 is growing rapidly. Web3 gaming still lags behind the games we’re all used to from Xbox in terms of gaming experience, but that’s changing and if GameFi is a part of that, then that’s the growth story.
The Play and Earn Web3 model is about creating and scaling a game that someone else originally developed. Many games are still finding the right economic model to pull this off, one that brings more value to players, especially loyal and high-value players, and attracts investors to their tokens.
“GameFi at a high level is the convergence of video gaming, gambling and investment into a new form of entertainment,” said Dan Nissanoff, co-founder and CEO of Silks in Florida. Silks is a GameFi-style online horse racing metaverse. “We are building a play-to-earn derivative metaverse that reflects the real world of thoroughbred horse racing. Our vision is to deliver the exact economic experience of owning a racehorse in real life… only in the metaverse. If your horse wins a $100 grand prize in real life, the owner of that horse NFT wins the same.”
Wow!
Where do I sign?
Nissanoff says game theory and tokenomics brought him to GameFi a few years ago. He has an economics degree from California State University at Northridge. He’s also a gamer. “I’ve dabbled in a few play-to-earn games,” he says, like Zedrun and Axie Infinity. “I’m not aware of any major traditional game publishers offering play-to-earn yet, but I can tell you they’re trying to figure out how to reinvent themselves and their business model to integrate GameFi before they’re left behind. Think of what Netflix NFLX did to Blockbuster,” he says. “So will it be.”
He likes Axie (AXS) and Pegaxy (PGX). However, both have been killed recently. PGX was trading at around $0.20 a month ago. It’s around a nickel now. AXY cost about $67 a month ago. It’s closer to $30 now.
“These investments can go up or down in value depending on a game’s popularity and its ability to attract new players while retaining existing ones,” said Vijay Pravin, CEO of BitsCrunch in Munich, Germany, a blockchain analytics company that provides solutions for the NFT ecosystem offers.
Pravin’s favorites are AXS, True Flip Token (TFL), Sandbox (SAND), and Decentraland MANA. He owns Gods Unchained (GODS), AXY and MANA. None of that is in the money right now.
One of the most traded blockchain games in the crypto investor universe.
Bucket screenshot of Axie Infinity’s homepage
“These games allow users to earn their playtime by farming rare items or creating powerful characters with unique looks,” says Pravin, including Silks horse racing in the mix. “It’s a potentially lucrative industry. It just needs to be fine-tuned how supplies can be exchanged between buyers and sellers.”
So what is GameFi and is it a candy? It’s a real industry connected to one of the most lucrative industries out there – video games. Some games will fail. Others don’t. Investors have to choose their seats. There will be a lot of gambling in GameFi.
GameFi is a streamlined approach to the play-to-earn model that can allow players to easily connect with other players on blockchain networks and player platforms dedicated to trading in-game assets – be they virtual ones Country, Arms or Thoroughbreds.
Big publishers of traditional games have items for sale in their games, but this is only added value for the publisher and perhaps the platform itself, which may or may not get a cut – like Microsoft’s X Box, for example.
Blockchain games that allow players to create characters, scenes or maybe even entire levels allow for monetization.
For example, I play golf on 2KSports on the X Box. I built a golf course in Sao Paulo, Brazil. At GameFi, I could theoretically sell this course or charge people to play it if it were popular enough. 2KSports would not allow me to make money from it. These types of user creations are free, although this may change.
“We’re still in the early stages of GameFi,” says Nissanoff. “The games are clunky and the experiences are mixed. There is a lot of friction because it’s not easy to onboard players who have never bought crypto before. That will change in the coming years as the tools become leaner and easier to use and understand,” he predicts. This would boost demand, separate winning projects from losers, and give investors a return on their investment.
“I think we’re going to see a massive explosion in GameFi next year,” predicts Nissanoff. “Watch out for major acquisitions in gaming.”
*The author has investments in Bitcoin and Decentraland.
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