An Intro to GameFi: Gaming Meets Decentralized Finance

The GameFi concept (derived from ‘DeFi’ (decentralized finances) and ‘game’) was introduced in September 2020 by Andre Cronje, Yearn.Finance core contributors and ‘Father of DeFi’.

But is GameFi the next big thing?

TL;DR

GameFi concept is too native so its definition hasn’t ossified yet. It’s GameFi when DeFi protocols are empowered with gamification instruments. Also, it’s GameFi when in-game assets from blockchain-based games are utilized in DeFi-like solutions.

What is GameFi?

Due to the nascent stage of this concept adoption, blockchain analysts and enthusiasts lack a consensus about which protocols and solutions should be classified as GameFi.

Without a doubt, it is the intersection between decentralized financial instruments or DeFis (‘yield farming’ tools, lending/borrowing environments, algorithmic stablecoins, token minting instruments, and so on) and blockchain-based gaming.

On the one hand, GameFi solutions include the software programs that implement gamification instruments in DeFis. In this case, the gaming is a shell while the underlying DeFi protocol is a core element of the project business model.

The second type of GameFi solution includes bringing DeFi-specific concepts into the turbulent sphere of decentralized gaming. Typically, such systems list digital collectibles or non-fungible tokens (NFTs).

GameFi as DeFi with Gamification (DeFi = back-end, Game = UX)

In this case, gamification acts as one more way to make DeFi speak human language. GameFi lowers the entry barrier: bulky interfaces stop many crypto newbies from starting experimenting with DeFis.

The understanding of GameFi as ‘gamified DeFi’ can be best illustrated by MOBOX ‘play-to-earn’ platform. Like other modern DeFi ecosystems, MOBOX includes modules for a plethora of uses: staking schemes, liquidity pools, yield farming tools, NFT environments, and so on.

While MOBOX users stake their ‘liquidity providers’ (LP) tokens through in-game “crates,” they are rewarded with native assets (‘keys’) according to their weight in the pool.

The TradeAction module of MOBOX GameFi application acts as a gamified decentralized spot and derivatives exchange. ‘Bull vs Bear’ and ‘LeverageMania’ games therefore should be referred to as gamified front-ends for spot and CFDs trading.

GameFi as New-Gen Blockchain-Based Gaming

Also, there are a number of applications when the tokenized in-game assets (that, by default, have zero intrinsic value) can be pledged as collateral or used for yield farming. Participating in such protocols takes slightly more advanced skills in crypto than in previous cases.

Non-fungible tokens (NFTs) can be collateralized in various top-league DeFi protocols, such as Aavegotchi, Meme, etc. While collateralizing their in-game objects (axes, panzers, and so on) minted as Ethereum-based NFTs (ERC-777 tokens), users can obtain a loan in USDT, DAI, Bitcoin (BTC), and Ethereum (ETH).

Some mainstream blockchain-based economic games can also be included in this category. For instance, the most popular EOS-based game UpLand allows its users to buy and sell virtual property. Property rights (another type of digital in-game objects) in UpLand are represented by EOS transactions.

In a nutshell, merging the benefits of NFT, DeFi and decentralized gaming will give an origin to plenty of interesting financial and entertainment designs.