GameFi: Bubble or a New Gaming Paradigm?


There's no denying that GameFi (Game Finance) played a pivotal role in the previous boom in the cryptocurrency market. With its innovative concepts and gameplay, GameFi attracted a large user base and opened new doors for Web 3.0. However, as with any period of prosperity, there comes a downturn. Since its peak in late 2021 to early 2022, GameFi has been on a downward trajectory. Currently, the entire GameFi market has declined by over 95%.


In the current market climate, various sectors, including public blockchains and NFTs, have the potential to revive as the market rebounds. However, for GameFi projects, the opportunities for resurgence appear limited, as it seems their vitality has been eroded by the frenzy of speculation.

What Is the GameFi Track?

GameFi, a fusion of Game and DeFi (Decentralized Finance), has significantly altered the operational model of the gaming industry, driven by the NFT (Non-Fungible Token) sector and blockchain technology.

The industry is undergoing a revolution, with the "Play to Earn" model in blockchain gaming gradually replacing the traditional "pay-to-play" model. With the remarkable success of blockchain game Axie Infinity, a new way of earning a living through gaming is rapidly emerging. This "Play to Earn" model has experienced rapid growth and decline but has now become an integral part of Web 3.0.

The advantages of GameFi are clear. On one hand, it introduces the concept of decentralized wallets to a wide user base through gaming. On the other hand, the "Play to Earn" model showcases solutions for asset ownership. In traditional games, these rights are typically concentrated in the hands of corporations. For example, in Web 2.0 games, players often spend countless hours chasing virtual rewards, which usually have no real-world value.


The Shortcomings of GameFi

Firstly, the "Play to Earn" model sets false expectations for players. When the sole driving force behind playing a game is to make money, the essence of "play" is lost.

Secondly, the participants in a game can be broadly categorized into project creators and users. Project creators seek profits, while users playing the game also aim to profit. This logic clearly presents a problem: who is profiting from whom? Unless the project can grow rapidly and attract a vast user base, allowing old users to benefit from new ones, this setup is challenging to sustain.

Thirdly, GameFi, in essence, is still DeFi, with a gaming layer added. Many player-designed games lack variety and creativity, leading to boredom, especially for Web 2.0 players. Therefore, many Web 3.0 players focus solely on maximizing their earnings, often by buying tokens to gain more tokens. This approach is detrimental to the long-term development of the gaming economy.

Lastly, at present, no GameFi project's profit model seems sustainable. Players typically need to purchase tokens to acquire more tokens, and this design merely delays the inevitable collapse of a Ponzi scheme. Once major investors exit, it can trigger a sell-off and market crash, plunging the game into chaos.

Leading Projects

Despite the brief rise and fall of GameFi, it cannot be denied that it became one of the hottest emerging sectors in the blockchain space at the time, attracting developers and players alike. GameFi produced several leading projects, which achieved impressive results in a short time, providing users and the market with stability and returns.

Axie Infinity

Axie Infinity was introduced in 2018 but didn't initially gain much attention and had a mediocre start. However, after more than two years of quiet development, it made a remarkable comeback and became the biggest winner in the blockchain gaming industry. During the second quarter of this year, it even briefly held the top spot among NFT games. Apart from the game's inherent strengths, Axie Infinity's success was propelled by the strong support of the Southeast Asian gaming guild YGG, which specializes in earning virtual currency within games.


Axie Infinity features "pet-like creatures" as a central element, creating a digital pet universe. Players can breed, raise, and trade these creatures, called "Axies," and earn in-game currency through battles and completing tasks. Notably, the game's initial phase required minimal investment. However, as the AXS token gained popularity, the barrier to entry increased, requiring currency to purchase three Axies. These Axies are essential tools and a basic condition for battles, from which players can earn SLP tokens. Axie Infinity accounts can be broadly categorized as "low-cost" and "high-cost," with the former requiring lower initial investment and the latter offering higher potential returns.

The Sandbox

The non-blockchain version of Sandbox had already made significant achievements in 2021, with over 40 million downloads and more than one million active users.


Now, based on blockchain technology, The Sandbox has evolved into a gaming platform that has built a metaverse on the 以太坊 blockchain. In this metaverse, players can freely create their virtual worlds, using their creativity and imagination to craft game environments that suit their desires. Popular sandbox games like Minecraft and Terraria have already found immense success in this field.

The Sandbox comprises several core elements:

  1. Land: These are ERC-721 tokens minted on the Ethereum blockchain, representing digital real estate within the Sandbox metaverse.
  2. Assets: ERC-1155 tokens created by users, which can be used to populate their LAND.
  3. Catalyst: ERC-20 tokens that are destroyed upon use, defining the level and rarity of a player's ASSETS. Players use Catalysts to add empty slots to NFTs, which can be filled with gems.
  4. Gems: Also ERC-20 tokens destroyed upon use, which players can use to customize their ASSETS.


Decentraland is a blockchain-based virtual reality platform that allows users to buy, manage, and own virtual assets using the MANA token. Users can build, play, socialize, and trade within the Decentraland world. Additionally, Decentraland supports the issuance and trading of NFTs, enabling users to earn MANA tokens through their artistic creations and digital assets.


The Future of GameFi: Where to Go from Here?

Once upon a time, people had high hopes for GameFi, believing it had the potential to surpass the traditional gaming industry. However, reality has proven to be harsh. As of 2023, the value of the traditional gaming industry has exceeded $250 billion, with expectations of doubling by 2030. In contrast, in July 2023, the market capitalization of blockchain games was less than $10 billion.

This data is not difficult to interpret. After all, 2021 to 2022 was the peak period for blockchain gaming, mainly driven by Axie Infinity's hype. Once the hype receded, the blockchain gaming market's bubble naturally dissipated.

However, this does not mean that GameFi has no future development opportunities. Today, metaverse projects have tremendous potential. With the continuous advancement of virtual reality technology and lightweight solutions, metaverse projects are likely to create new opportunities for entertainment, virtual commerce, and social activities. GameFi may once again have the chance to usher in a new era of gaming.



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