The GameFi mechanism is mainly based on 4 key pillars: blockchain technology, the play-to-earn model, asset ownership, and non-fungible tokens. The combination of these features and technologies allows users to monetize their actions in a game. Let’s see what each of them brings to the table.
Blockchain
Blockchain is the fundamental basis of GameFi projects, with most games built on smart contract-enabled networks. Ethereum is one of the most popular platforms for GameFi development. But Ethereum’s block space is limited, which imposes significant limitations as the costs of transactions quickly rise as soon as the amount of block space is exceeded. This has made game developers shift towards faster, higher-capacity GameFi protocols like Polygon Network, Solana, and Polkadot.
Blockchain makes sure that all transactions involving buying, selling, and exchanging items will be open, fair, and transparent. This is because all the items and their data are stored on the decentralized public blockchain. The blockchain stores data on who owns which item, which means that the players own the assets and not the game developers.
Non-fungible Tokens
In play-to-earn crypto games, all game items like avatars, land, weapons, and gold are represented as non-fungible tokens or NFTs. Players acquire these items during the gameplay and can further exchange them for cryptocurrencies which in turn can be exchanged for fiat money.
A distinction of NFTs is that they make the characters or game items unique, meaning that they cannot be copied or faked.
GameFi projects have many levels to progress through. Players can increase earnings by dedicating time to improving their characters, monetizing their land assets through the development of structures that other players pay to visit, or battling other users in tournaments.
Play-To-Earn Model
In contrast to play-to-win games that make money through in-app purchases, GameFi projects allow users to receive rewards for completing gameplay objectives, such as winning a battle or tournament. For example, Axie Infinity rewards its players with a portion of the game’s AXS token for achieving the game’s objectives.
Play-to-earn games also allow users to trade their valuable assets and exchange them.
Asset Ownership
As we’ve discussed earlier, in GameFi, the in-game assets are represented in the form of NFTs that belong to users and cannot be faked. Digital ownership of unique assets presents players with multiple extraordinary opportunities. Want to sell or lease your assets for other gamers to use? Not a problem at all! How about trading a game plot on a marketplace? That is also possible.
For instance, in The Sandbox, a user spent $450,000 on a plot of virtual land in the Snoopverse – a digital world that the rapper is developing. There are also other ways to monetize your virtual land, including virtual shops, casinos, concert venues, and many more.
Source >> https://pixelplex.io/blog/what-is-gamefi/
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