How GameFi continues to grow despite crypto winter
GameFi, a portmanteau that combines the words 'gaming' and 'finance', refers to game platforms that enable players to earn rewards in the form of digital assets while playing.
The GameFi market has enjoyed steady and unprecedented growth over the past two years, going strong despite the current crypto winter. The industry has a total market cap of around $9.2 billion and is predicted to hit a $74.2 billion valuation by 2031.
How does GameFi Work?
GameFi products are blockchain-based platforms that use their in-game economies, which reward players with digital items. This is usually in the form of non-fungible tokens (NFTs) that can be traded with other players and collectors on online marketplaces. The NFTs could represent items for player characters, skins, cosmetics or housing/land. It can be seen as tokenising the popular marketplaces that previously grew up organically around popular multiplayer games, such as Runescape and Counter-Strike.
Many popular GameFi platforms, such as Axie Infinity (AXS) and Decentraland (MANA), use a play-to-earn (P2E) model, which offers the base game world for free but requires the possession or spending of certain digital assets to progress through the game systems to high levels, which usually also have more valuable rewards. Thus, the games reward players who invest the most time.
Why GameFi is so important for crypto
GameFi is still only a few years old, but the latest figures show that over 800,000 daily players are engaged in blockchain games, with a recent survey revealing that 75% of these gamers trade or have considered trading their hard-won in-game assets for currency, whether crypto or fiat. The earning potential of these in-game assets is increased by the fact that the games use their own cryptocurrencies for transactions, making these items easy, quick and cheap to trade internationally.
One more advantage of GameFi platforms for players is that many provide outlets for gamers to create or customise their own NFTs for trade, putting a personal touch on the virtual worlds that they participate in.
By presenting a use case for cryptocurrencies beyond pure speculation and virtual worlds to give unique digital items such as NFTs more meaning, GameFi has been driving the adoption of both forms of blockchain tokens. The GameFi industry continues to grow and attract investors in 2022, having raised over $3.5 billion during the first half of the year.
What's next for the industry?
Big names in the game industry, like Ubisoft, Tencent and Zynga, are all making moves into the GameFi space, partnering with Web3 and blockchain development companies to fund innovation in the GameFi space with the experience of mainstream big-budget game studios.
These types of partnerships are important in overcoming the main complaint users have about GameFi, which is that the gameplay experience itself tends to be shallow or unengaging in the long term without the explicit motivation of profiting from earning NFTs and in-game currency. This has led to resistance to GameFi in the mainstream gaming community, with fan backlash prompting walkbacks or reframing after crypto-related announcements from major studios, as was the case with EA CEO Andrew Wilson last November.
Hopefully, collaborations with established game studios will bring about blockchain games that can combine the best elements of modern AAA game industry hits with the earning and trading potential of the GameFi sector. Only then will it shake a reputation for only being interested in a quick profit.
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