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How GameFi & Play-to-Earn Games Are Transforming the $200 Billion Gaming Industry

Learn all about GameFi and why it’s taking the video game industry by storm, as well as some of the most popular games.

Nearly a half million players signed into Axie Infinity over the past 30 days, while the game’s native token (AXS) is worth upwards of $800 million. When you add tokens across the crypto gaming industry, “GameFi” tokens have a market capitalization of about $7 billion, making it a sizable chunk of the broader video game industry.

Let’s look at GameFi and why it’s taking the video gaming industry by storm, as well as some of the most popular projects.

What is GameFi?

GameFi – a combination of the words “game” and (decentralized) “finance” – combines video games with blockchain-based financialization to create a unique and compelling experience.

For example, Axie Infinity lets players use their pets (Axies) to earn tokens (SLP) by completing daily quests and battling other players. Players can sell these tokens or use them for breeding more Axies. In addition, some players lend their Axies to other players, enabling them to earn money without actually playing the game (e.g., scholarships).

Axie Infinity is a GameFi pioneer but crashed in mid-2022 following a devastating hack. Source: Niko Partners

In essence, GameFi’s incorporation of blockchain technology helps create open digital economies. Players can earn and sell crypto tokens or collect unique non-fungible tokens (NFTs) by completing quests, collecting items, or battling others. As a result, they have a more transparent and cross-platform alternative to proprietary game ecosystems (e.g., World of Warcraft [WoW]).

How GameFi Works

The GameFi ecosystem leverages blockchain technologies to power unique in-game economies, but each game takes a different approach.

Axie Infinity players start by purchasing three Axies, non-fungible tokens (NFTs) held in a Ronin crypto wallet. Each Axie has unique genes and attributes that ultimately determine its value. Then, players can download the game and connect their wallet and Axies to battle other players to complete quests to earn SLP or AXS tokens.

The Sandbox is an example of a non-traditional GameFi project, offering a metaverse experience. Source: The Sandbox

Other GameFi games focus on building rather than battling. For example, the Sandbox is a world where players can build, own, and monetize their assets and virtual experiences on the Ethereum blockchain. In some ways, it’s a mix between The Sims and Minecraft, where players can simply hang out or build and share their creations.

Business Models

Traditional games are often sold as a one-time purchase or ongoing subscription in the case of massive multiplayer online games (MMORPGs). Game studios may also sell expansion packs to add new maps or quests to an existing game. However, few games charge money for in-game items or require any ongoing investment to play beyond a subscription fee.

On the other hand, play-to-earn game developers typically sell NFTs that players need to play the game. They also make money from transaction fees every time NFTs trade hands and create value with native cryptocurrencies. And finally, they may display ads to players to generate revenue and fund cryptocurrency hand-outs to players.

Asset Ownership

Play-to-earn games also handle the ownership of in-game assets a little differently. Traditional games involve studio-controlled in-game assets, such as weapons on World of Warcraft, making it challenging for players to buy and sell items. After all, the game studio owns the servers and ultimately owns all of the items in the game.

On the other hand, play-to-earn games have NFT-based assets that exist on blockchains. Players can take ownership of these items in their crypto wallets, enabling them to easily buy, sell, or trade the items outside of the game, creating a more vibrant economy for players. In fact, many P2E economies have become worth millions of dollars.

What Are the Most Popular Games?

The GameFi ecosystem continues to evolve with the launch of new games every quarter, pushing the boundaries of what’s possible.

The most popular games, ranked by unique active wallets, include:

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The most popular games by wallet balance include:

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* Data from as of January 2023.

The Future of GameFi

The GameFi ecosystem has been dominated by projects focusing on crypto natives, but those dynamics will likely change soon.

The GameFi ecosystem is starting to attract mainstream game developers interested in capitalizing on compelling economics. For example, the Japanese gaming giant Konami began recruiting a wide range of Web3 talent in October 2022 with plans to launch an NFT trading platform where players can trade their in-game items.

That said, Ubisoft’s Quartz platform had a harsh reception from gamers last year after partnering up with to launch its own NFT platform. Players felt the move was a money grab by the company. And ultimately, the company’s CEO scaled back rhetoric surrounding the project, saying it was in “research mode” all along.

GameFi’s move towards free-to-play models could help alleviate some of these stigmas. For example, rather than letting whales hoard in-game assets (e.g., characters) and generate passive income, free-to-play games enable players to pay for in-game advantages (e.g., items). These models could help attract a broader, mainstream player base.

The Bottom Line

The GameFi ecosystem is already worth upwards of $7 billion, making it a significant and growing chunk of the gaming market. While crypto games have seen their fair share of problems (like many crypto industry segments), players continue to embrace a growing variety of games, ranging from trading card games to metaverses.

If you’re involved with GameFi, ZenLedger can help you keep everything organized for tax season. Our platform makes it easy to aggregate transactions across wallets and exchanges and compute your overall capital gain or loss for the year. You can also pre-fill the tax forms you need to file or automatically send them in TurboTax.

Get started with ZenLedger for free!

Justin Kuepper