GameFi Crypto is Expected to See Huge Growth: GameFi Spotlight

GameFi crypto is one of the most exciting sectors in the crypto industry with many projects expected to outperform the broader market. This article is going to cover what GameFi is, the impact on gaming in crypto, and why GameFi is expected to see huge growth in the coming years.

Key Highlights

• Breakdown of the GameFi space – From CryptoKitty beginnings to recent, more advanced use cases. We also explore the different models GameFi can use, such as P2E, Click-to-earn, and Move-to-learn.
• Analysis of the gaming industry – The gaming industry is worth more than music and movies combined – could GameFi tap into this?
• Which blockchain projects dominate GameFi and the potential winners and losers in the space.
• Our top picks are GALA, Immutable X, Enjin SuperVerse, and Yield Guild Games.

What is GameFi?

GameFi, a blend of “game” and “finance,” allows users to earn crypto by playing video games. It includes various models like Play-to-Earn, Click-to-Earn, and Move-to-Play, along with the traditional Pay-to-Play and Free-to-Play ones. The term “GameFi” was coined by Andre Cronje, the founder of Yearn Finance. GameFi often uses NFTs as in-game characters or items, necessary for gameplay and typically sold through fundraising campaigns and peer-to-peer marketplaces. Players are rewarded for in-game activities and can spend tokens in various ways, such as breeding new characters, covering withdrawal costs, and purchasing in-game items.

With the gaming industry earning an estimated $184 billion in 2023, it stands to reason that GameFi has huge potential as a growing sector.

Since 2020, GameFi has gained significant attention from gamers and investors, leading to a surge in GameFi projects. Games like Axie Infinity have become widely recognized, and the sector is poised for tremendous growth. Grand View Research predicted that blockchain gaming will be the fastest-growing sector in the gaming industry, with an expected growth rate of 68.3% from 2023 to 2030, compared to 13.4% for the overall online gaming industry.

So, here’s how it works. Gamers either start playing the game or may need to buy NFTs which are sometimes required to play. Then, once they start playing the game, they can earn tokens. Players can then convert these tokens into the crypto of their choice, such as Bitcoin or Ethereum, or convert them to fiat. This is referred to as a play-to-earn (P2E) gaming model. GameFi projects often have their tokenomics set prior to game launch, or alternatively, they can then manage the supply and demand of their gaming token by issuing new tokens or burning existing ones.

Exploring the Rise of GameFi in the Digital Era

As virtual reality (VR) and digital spaces become more prevalent as we spend more time on the internet (estimates put the average time spent online at 6.3 hours a day per person in 2023), GameFi has the opportunity to capitalize on the fact that more and more of our daily lives are becoming more digital with people spending increased amounts of time in virtual worlds. 

The link between crypto and gaming has been long established. Vitalik Buterin, Ethereum’s founder, claimed that he was inspired to develop decentralized governance structures after his World of Warcraft character was nerfed in an update. What this highlighted was the lack of control that gamers feel over their gaming profiles after investing countless hours to level up their character.

In the real world, status and wealth are often demonstrated by the car you drive or the watch you own. However, on the internet, this isn’t quite the same. Blockchain technology affords people with the opportunity to showcase their favorite in-game items – such as skins, weapons, and unique items – with an immutable proof of ownership on the blockchain. Blockchain technology also allows for the real-time transfer of assets that can be bought and sold between players in online marketplaces.

This would be a game-changer for online gaming communities, especially if the next generation of VR games breaks into the mainstream. Ever seen the movie Ready Player One? In the film, the online world is where most people spend their time. This may sound like a dystopian nightmare for some, but for others, this is an inevitability as VR technology continues to grow. 

CEO and Founder at MetaTrace had this to say on the topic:

“In my opinion, GameFi is something of a godsend as it presents us with one of the most concrete use cases for blockchain technology. This industry is an opportunity for projects to show the world how revolutionary decentralized finance can be.” –Source

This vision of the future is one some well-known brands are taking seriously, too, as they continue to launch their own digital collections:

1. Corsair – Partnered with Elemon on the BNB Chain, integrating their gaming hardware into the Elemon Metaverse.
2. Epic Games – Unlike Steam, Epic Games supports blockchain gaming, hosting Blankos Block Party and showing interest in Gala Games’ project, Grit.
3. ESports Teams – Teams like Fnatic, Navi, and Team Liquid have partnered with the Web3 game Guild of Guardians.
4. Tier One – This Asian eSports and talent management agency is influencing traffic to Web3 projects.
5. Bandai Namco – Investing $130 million to build its own metaverse.
6. Square Enix – Released and sold out NFT trading cards in Japan.
7. Ubisoft and Electronic Arts – Both are exploring blockchain technology.
8. Disney: Disney invested in Epic Games for metaverse collaboration

If you want to explore other trends that are expected to perform well during the bull run, feel free to check out our article on the Top Crypto Trends for the Upcoming Bull Market.

Analyzing GameFi’s Growth

Early Beginnings with CryptoKitties

In late 2017, “CryptoKitties” launched as one of the first blockchain-based games on the Ethereum network. An idea from Axiom Zen, this game allowed players to buy, sell, and breed digital cats. Each CryptoKitty was unique, represented by a non-fungible token (NFT) on the Ethereum blockchain. The game’s success and viral popularity quickly showcased the potential for blockchain technology in the gaming industry. It gave us the first idea of what it would be like if we coupled blockchain and gaming. The key aspects it introduced include:

Digital Ownership: Before “CryptoKitties,” we stored gaming digital assets on controlled servers overseen by game developers. With blockchain, players could prove ownership of their CryptoKittys. This meant players truly owned their digital assets, which could not be replicated or taken away by developers – as Buterin experienced with his WOW character.

Provable Scarcity: The game used smart contracts to ensure each CryptoKitty was unique and certain traits were rare. This concept of provable scarcity created a new level of value for digital assets, similar to rare physical collectibles.

Monetization and Economy: The success of “CryptoKitties” showed that players were willing to spend real money on digital collectibles. The game saw some CryptoKitties being sold for significant sums, with Someone paying $170,000 for one Cryptokitty!

The Evolution of Play-to-Earn

Traditional gaming models, such as pay-to-play and free-to-play, require players to either purchase the game upfront or access it for free with in-game purchases as a revenue model. A well-known example of free-to-play is Fortnite – which generated over $5b in revenue in 2023. 

In GameFi Play-to-Earn games, however, players can earn tangible results through in-game activities. This model allows gamers to earn cryptocurrency or NFTs by completing quests, winning battles, or trading in-game assets. P2E not only provides entertainment but also offers financial incentives, making it highly attractive to a broader audience. Games like Axie Infinity have popularized this model, enabling players to generate income by playing the game, thus blurring the line between gaming and real-world economics.

During the COVID-19 pandemic, Axie Infinity helped people in the Philippines put food on the table and pay their bills. This is an extraordinary demonstration of the potential for GameFi, as it’s a space that has the potential for monetizing gameplay for players as a reward for the time they invest in GameFi communities – the incentives speak for themselves.

The mini-documentary “Play-to-Earn” showcases how this game has become a vital source of income for many Filipinos facing economic challenges, with nearly 60,000 active players involved. While the Philippines has dropped from second to sixth place in Chainalysis’s 2023 Crypto Adoption Report, it still ranks among the top 10 countries for cryptocurrency adoption in Central and Southern Asia and Oceania, with continued strong usage of digital assets on gaming and gambling platforms.

Check out our picks for the Top Play to Earn Games in 2024

Emerging Models: Click-to-Earn and Move-to-Play

As GameFi continues to evolve, new models have emerged, expanding the ways players can interact with games and earn rewards. 

Two notable models that have gained traction are Click-to-Earn and Move-to-Play.

Click-to-earn: This model simplifies the earning process by allowing players to earn rewards through simple, often repetitive actions like clicking. Click-to-earn games are generally more accessible and require less time investment than traditional P2E games. They cater to casual gamers who may not have the time or desire to engage in more complex gaming activities but still want to earn rewards.
Move-to-Play: This innovative model integrates physical activity with gaming, encouraging players to earn rewards by moving in the real world. Move-to-play games use technologies like GPS and fitness trackers to monitor players’ movements, rewarding them for activities such as walking, running, or cycling. This model not only promotes a healthier lifestyle but also gamifies exercise, making it more engaging and rewarding. An example of this model is the game “Stepn,” where players earn tokens by walking or running with their virtual sneakers, which are NFTs. 

Factors Driving GameFi Profitability

Did you know the gaming industry is twice as big as the film and music industries combined? That may sound unbelievable, but it’s true. The global gaming market in 2022 was worth $184.40 billion and is expected to generate $249.6 billion this year, compared to the film and music industries, valued in 2022 at $93.4 billion and $31.2 billion, respectively. Thus, the gaming industry is worth nearly twice as much as both combined.

The profitability of the gaming industry is in part thanks to its multiple revenue streams, such as the sales of games, specialist hardware (consoles, PCs), e-sports, microtransactions, downloadable content, and merchandising. In addition, the development and distribution of mobile phones have improved accessibility for huge numbers of people across the world than ever to gaming. Mobile gaming, now valued at $89.25 billion, further contributes to the industry’s value. In Q2 2024, NVIDIA earned revenue of $13.51 billion, up 88% from Q1 and up 101% from the same period in 2023.

The video game space is an extremely profitable and multi-faceted industry, something GameFi developers will be hoping they are tapping into. By bringing blockchain and smart contracts to gaming, along with the P2E model, they can use monetary incentives to attract players and build sustainable communities. In 2021, the global GameFi market was valued at $9 billion and is projected to reach $90.91 billion by 2031, with a CAGR of 27.13% from 2021 to 2031.

GameFi Market Breakdown

Layer 1 (L1) blockchains like BNB, Ethereum, Polygon, and Wax are the most popular GameFi platforms. However, due to the limitations of L1 networks in balancing scalability, security, and decentralization, Ethereum has been leading the way in scalability solutions through its Layer 2 (L2) and Layer 3 (L3) chains. 

Immutable X, an L2 solution developed by Immutable Platform and Immutable Games, stands out as the first Ethereum-based protocol for NFT transactions, offering a more cost-effective and eco-friendly alternative while maintaining Ethereum’s scalability and security. Despite having fewer daily active players compared to Wax, Immutable X is considered a top choice for large-scale, high-quality games. While L1 networks and EVM sidechains remain dominant, there is growing interest in L2/L3 solutions and application chains in the Web3 gaming space.

GameFi Types

Blockchain games can be categorized based on how they use on-chain assets and how much of the game’s content and mechanics are managed directly on the blockchain. Here’s a look at the different models:

Game Model	Definition	Characteristics	Examples
On-Chain Assets	Specific assets within the game (characters, items, currency) are represented as NFTs or tokens on the blockchain. Game logic and state are managed off-chain.	Ownership: Verifiable ownership of in-game assets, tradable outside the game. Interoperability: Assets can be used across different games or platforms supporting the same blockchain standards.	CryptoKitties, Axie Infinity
Hybrid On-Chain Games	Combine on-chain and off-chain elements. Assets and transactions are recorded on the blockchain, while game mechanics and interactions may be handled off-chain.	Flexibility: Leverages blockchain for assets and transactions but uses traditional servers for other functions. Efficiency: Balances decentralization with traditional infrastructure efficiency.	The Sandbox, Decentraland
Fully On-Chain Games	Operate entirely on the blockchain. All game mechanics, logic, and assets are managed through smart contracts.	Decentralization: The entire infrastructure is decentralized. Immutability: Game rules and states are immutable. Scalability Challenges: May face issues with transaction speed and cost.	Chainlink VRF-based games, Ethereal Enigma

Some of the Most Promising GameFi Crypto Picks Of 2024

Here is a snapshot of some of our favorite GameFi crypto projects. But for an in-depth review of their GameFi tokens, be sure to visit our comprehensive best gaming crypto article, where we break down the games in more detail:

• The Meme Games: The Meme Games project combines the excitement of meme coins with the spirit of the 2024 Olympics, allowing participants to support their favorite meme characters and potentially increase their holdings. The $MGMES token is central to this experience, offering entertainment, gaming community, and significant rewards within the crypto space.
• Play Doge: PlayDoge is a new P2E mobile game inspired by Tamagotchi, where players care for virtual pets, engage in nostalgic 8-bit mini-games, and earn $PLAY tokens. This project combines pet care with blockchain technology, offering cryptocurrency rewards and a modern twist on a classic virtual pet experience.
• Mega Dice: Mega Dice is an online cryptocurrency casino and sportsbook, launched in 2023, that operates with a Curacao eGaming license and is accessible via the Telegram app. It offers a wide range of casino games and sports betting options, supports multiple cryptocurrencies, and ensures secure, instant payouts on the blockchain.
• Axie Infinity: It launched in 2018 and became hugely popular in 2021 as an OG play-to-earn game despite setbacks from the crypto winter. It maintains a loyal gaming community and continues to develop, with new updates like Axie Infinity Homeland and its upcoming release on Google Play. The game’s success lies in its addictive gameplay and robust play-to-earn system, making it one of the top blockchain games with over 90k monthly users.
• Farcana: Farcana is a free-to-play 3rd-person PC arena shooter using Unreal Engine 5 and blockchain, where players compete in 4v4 combat to earn Bitcoin. Set on Mars with lore centered around the hunt for Infilium, the game is developed by Farcana Studio and backed by notable ambassadors Albert Duraev and Khamzat Chimaev.
• Gala: It is an ecosystem of P2E gaming where users earn, own, and trade in-game assets, with token holders voting on game development.
• Immutable: Immutable offers a comprehensive gaming ecosystem for web3, combining products and infrastructure to support gamers and developers. Key products include Passport (a universal wallet), Mint (NFT creation tools), Marketplace (for trading in-game assets), Trade (ensuring liquidity), Checkout (a payment solution), and Developer tools (blockchain data and APIs).
• Beam: Beam (BEAM), a gaming blockchain project by Merit Circle DAO on the Avalanche network, aims to enhance blockchain gaming by solving key challenges. It simplifies game development by integrating blockchain functionalities, reduces high transaction fees and latency, and addresses scalability issues. Beam ensures true ownership of in-game assets, enhances interoperability between blockchain networks, and improves user experience for mainstream adoption.
• Pixels: Pixels is a Web3 farming game where players can cultivate resources, prepare food, trade goods, and develop individual plots of FarmLand. It features a unique Guild system and Reputation Score based on in-game actions, offering enhanced benefits for higher scores. Supported by blockchain technology and using its native token BERRY, Pixels integrates digital collectibles and provides a captivating, accessible gaming experience.
• Shrapnel: Award-winning veterans at Neon Machine developed Shrapnel, an AAA (gaming classification for high budget and high profile games) extraction shooter game. It will launch on PC in 2025, but early access started in February 2024. The game features high-stakes, skill-based play, creative modding tools, and a gaming community marketplace. Players can engage in solo or team gameplay and create and mint game items as NFTs on its Avalanche-based blockchain network.
• Star Atlas: Star Atlas is a space-themed Massively-Multiplayer-Online (MMO) Game focused on exploration, territory control, and political dominance, aiming to create a metaverse experience without geographical constraints. The game, set in 2620 with three competing factions, held its first token event in August 2021 and plans to use Unreal Engine 5 for hyper-realistic visuals. While it aspires to a self-sustaining digital economy via DeFi, playable content is still a long way off.
• Bloktopia: Bloktopia is a metaverse skyscraper with 21 levels, representing 21 million Bitcoin. Users, called Bloktopians, create avatars and enter at level 1, which features crypto information, a helpdesk, and prime retail space. They can earn revenue through real estate (REBLOK), advertising (ADBLOK), gaming in the top-floor penthouse, and attending events. The game also includes an auditorium for crypto-related presentations and a marketplace for buying real estate via NFTs.

Investing in GameFi: Opportunities and Risks

GameFi comes with its opportunities and pitfalls. It offers financial rewards through cryptocurrency earnings, asset ownership for trading and selling digital assets, investment diversification across gaming and crypto markets, early adoption benefits with potentially high returns, and a drive for innovation and creativity in gaming experiences.

Conversely, GameFi faces market volatility with fluctuating asset values, regulatory uncertainty that could impact legality and value, security concerns with potential for hacks, project viability issues where many may fail, and high entry costs that can limit participation.

In short, many of the risks are the same as investing in a cryptocurrency. For a crypto project to succeed, it needs an engaged community and healthy levels of liquidity. The same is true of GameFi and, indeed, games in general. It doesn’t matter how good a game is; if no one is playing, it can’t make money.

Conclusion

GameFi, although still very nascent, is a space with a great deal of potential. As new projects come to market and the gaming industry continues to grow, we will be watching closely to see how the space develops. It will be interesting to see if the inbuilt incentives of earning crypto in exchange for players’ time will be a determining factor in the growth of the GameFi space.

Take a look at our 10 best crypto gaming projects article to get a closer look at the projects that have caught our eye.

Frequently Asked Questions

What is GameFi?

GameFi refers to video games that are integrated with DeFi technology. This allows digital assets to be used to reward players and power in-game economies.

What is Play-to-Earn (P2E)?

Play-to-earn allows players to be paid in crypto tokens as a reward for playing a game. Players can then keep these tokens or exchange them for popular cryptocurrencies such as Bitcoin or Ethereum.

What is Axie Infinity?

Axie Infinity is a Pokemon-like game that uses a P2E model. The game saw a surge in popularity during the Covid-19 pandemic and has been a minstay in the P2E space ever since.

What is the best GameFi project?

Finding the best GameFi project requires research and due diligence. In general, a thriving community with a steady number of active users, as well as decent transaction inflows and outflows, are good indicators of a solid project. To see our picks, read our top GameFi coins guide.

What Makes Crypto Gaming Different from Traditional Online Games?

Traditional games, including board and video games, are centralized with all data controlled by developers. These popular games started in the mid-20th century with early digital games like Spacewar. The industry saw significant growth from the 1970s arcade era to the 1980s home consoles, which were marked by iconic releases like Super Mario Bros. and advancements from 2D to 3D graphics. GameFi gives the players custody and power through blockchain technology. It utilizes Play-to-Earn (P2E), NFTs, and other technology innovations (like trading items) that may come in the future.

Can Crypto Gaming Truly Revolutionize the Gaming Industry?

Yes, GameFi will be big. It will achieve this by providing financial rewards and true ownership of in-game assets; GameFi crypto has the potential to alter the gaming landscape significantly.

Why Could Blockchain Gaming Become the Biggest Crypto Sector?

crypto gaming’s combination of gaming and finance attracts a wide audience, and its growth potential outpaces many other crypto sectors, making it a strong contender for the biggest crypto sector in the future.

References: Vitalik Buterin says he created Ethereum after his beloved World of Warcraft character was hobbled by the developers’—Business Insider

Blockchain In Gaming Market Size, Share & Trends Analysis Report By Game Type—Grand View Research