The Rise of GameFi

Today, GameFi has become an independent sector in the encryption market. They do not follow the changes of the mainstream market, and they often go out of the independent market. If we look closely, the market movement of each GameFi is also different. This is often related to the economic model and Token Economics that correspond to GameFi's construction. At the same time, the independent trend also means that GameFi has achieved success in a certain sense.

It is difficult for us to perfectly restore the reasons behind the success of a thing, but we can always find out some key factors. These factors will help us see and understand the development rhythm of GameFi more clearly, and will not miss the opportunities of the future encryption industry and GameFi track.

post epidemic era

In the past ten years, the new crown epidemic has become the largest black swan event in the global market. Its impact is far-reaching, changing the life and destiny of every resident in the world.

The most intuitive impact of the new crown epidemic is "maintaining social distance". People's "staying at home for a long time" has given birth to the rapid expansion of industries such as encryption, games, and live broadcasting. Especially now that the new crown epidemic has not yet been resolved, people's desire for real experience is gradually decreasing, and their demand and imagination for the virtual world are gradually increasing, and the virtual world can also bring more novel experiences to ordinary people.

Therefore, the narrative structure developed by the combination of games and encryption has triggered people's thinking about the future world. The narrative logic of the game industry lies in "entertainment" and "social interaction", while the narrative logic of the encryption industry lies in "Web3.0", "decentralization" and "self-control of assets".

The resulting narrative logic of GameFi lies in two points:

First, the main promotion of chain games in the old era is "player's ownership of in-game assets".

The "definition" of game assets by major companies such as Tencent is also strengthening players' desire to own "game assets". The account deletion incident of the previous Tencent game "Tianya Mingyue Knife" is proof. Items that will be released in the next version appeared in the account of a certain player of "Tianya Mingyue Knife". After the incident fermented, many players who spent a lot of money in the game deleted their accounts to protest. However, "Tianya Mingyue Knife" reversed the deleted account and responded that what players have is the "right to use" the game account, not "ownership".

Lianyou hopes to solve this problem, and the GameFi protocol that emerged later has also practiced this.

The second is "Play2Earn".

Due to the impact of the epidemic, the number of jobs in various countries has declined to a large extent, and the increase in the number of unemployed has further contributed to the development of the game industry. The "Play2Earn" model created by Axie Infinity is undoubtedly a revolutionary innovation.

A documentary called "Play-to-Earn" on Youtube really shows us how AxieInfinity has changed people's lives and become something that some ordinary Filipinos depend on. These ordinary people include groups such as single mothers, college graduates who cannot find work, and elderly couples who run small convenience stores.

The Rise of Dajin Studio

In addition to the GameFi agreement mentioned above, the rise of Dajin Studio has maintained the momentum and popularity of GameFi's rise.

According to the September report issued by Yield Guild Games, the most famous GameFi goldsmith union, as of the end of September, YGG had 62,545 community members on Discord, an increase of 16.4% from August 2021. Since its launch at the end of July, 14,161 members of the YGG community have officially become guild members by minting their YGG guild badges.

While the community members are growing rapidly, Yield Guild Games is also participating in the investment of some potential game NFT assets and other NFT assets through its growing financial strength and influence, and at the same time making use of the profits of these assets to achieve the growth of the number of community members and dissemination of community culture.

In addition to Yield Guild Games, some influential Dajin studios include Merit Circle, MetaGame Guild, GuildFi, etc. They all help the community members early, including providing game NFT assets and game teaching, etc., to retain community users, so as to realize the development of the community. As the community grows, so does the GameFi marketplace.

At the same time, the ability of Dajin Studio and the community to make money in the virtual world has driven the Fomo sentiment of many groups, and many people outside the blockchain industry have also begun to learn encryption knowledge and participate in it. This is also one of the reasons why GameFi can achieve an independent market - outsiders only participate in "Play2Earn" GameFi products, and hope to achieve continuous revenue, and have little interest in other cryptocurrencies.

Sustainability of game economic system

While praising "Play2Earn", we also need to think about some problems with "Play2Earn".

The essence of GameFi gold making is to add liquidity to the secondary pool. The rapid development of liquidity will bring rich profit returns to participants, but the withdrawal of liquidity and the decline of Token Price can easily cause stampede events, triggering a series of chains reaction.

This type of incident has already happened once with GameFi protocol Cryptomines.

Relying on the optimism of the market and the sentiment of Fomo, the price of $ETERNAL (Cryptomines Token) has risen rapidly, reaching as high as $800 at one point. But just a few days ago, the panic selling in the market caused $ETERNAL to quickly drop from the highest point to the lowest point of $47.

Although, Cryptomines has already done enough work for the sustainability of the economic system. In addition to providing the Stake $ETERNAL channel, charging a 15% handling fee for market transactions and returning the prize pool, Cryptomines has also added a withdrawal handling fee—players need to pay a 30% handling fee when withdrawing game revenue. If the player wants To fully reap their benefits, they need to wait 15 days - which reduces the selling pressure of $ETERNAL to a certain extent. But they still can't stop the current decline of $ETERNAL.

And this is related to the unsustainability of "Play2Earn". Investment institution IOSG Ventures pointed out in the research report :

The gameplay of RadioCaca's Metamon Island, endorsed by the richest man Musk's mother, is also a problem-the game content is just a few simple clicks of the mouse and upgrading Metamon. Not to mention traditional games, the gameplay of these GameFi is not even comparable to mobile games.

This confirms to a certain extent the lack of high-quality games and the lack of high-quality game talents in the market.

Rich gameplay is critical if GameFi is to survive in the long run. If only relying on the "Fomo emotions" brought about by concepts such as "Play2Earn" and the Metaverse, GameFi cannot achieve longer-term development. How a sustainable economic system should be realized is currently unknown to us.

However, we can also imagine what GameFi will look like in the future:

High playability, driven by gameplay;

Player stickiness is high, and players are willing to spend time playing games;

With paying players, players are willing to pay for some content in the game, such as accessories and skins;

There is room for profit;