2.3 What is GameFi?

As the name implies, GameFi is an all-encompassing term for all things related to blockchain gaming combined with financial infrastructures that is prevalent in the growing decentralized finance (DeFi) ecosystem. With the explosive growth of blockchain in recent years, it seems inevitable that the technology would be applied to the gaming industry.

Indeed, the characteristics of scarcity and decentralization in blockchain can be perfectly applied to games. It is now possible to grant immutable ownership of in-game items to gamers, which solves the issue of item theft due to hacking, or the sale of fake in-game items. Blockchain can also allow the transfer of assets between games, since these items no longer exist only within a single game. This allows gamers to derive greater utility from their in-game assets, since they can be used throughout multiple games, and can also be resold in the secondary market if needed.

A GameFi ecosystem may include, but is not limited to, mechanisms such as liquidity pools, yield farming, and NFTs. Another innovative aspect about GameFi is the new Play-to-Earn mechanics, which would reward gamers for their time and effort spent in-game. An example would be Axie Infinity, a game where players can earn Smooth Love Potion (SLP) tokens, which can then be sold for real cash on a cryptocurrency exchange.