What is GameFi? An Overview of Play-to-Earn Games in the Blockchain Era

Have you ever imagined being able to enjoy gaming while generating real income? What many considered a fantasy has become reality thanks to the development of blockchain technology. GameFi—the combination of gaming and digital finance—has ushered in a new era in the global gaming industry, where players not only leave their mark but also earn tangible value from their activities.

According to DappRadar, Web3 and metaverse gaming projects attracted up to $2.9 billion in investments in 2023, affirming GameFi’s position as the most dominant sector within the decentralized application (dApp) ecosystem. This explosion is not accidental but the result of technological advancements and changing perceptions among the global gaming community.

Defining GameFi: The Fusion of Gaming and Digital Finance

GameFi is an abbreviation of “Game” and “Finance,” representing a type of blockchain-based game where players can earn money by participating and completing tasks. Unlike traditional video games that focus solely on entertainment, GameFi integrates elements of decentralized finance (DeFi), cryptocurrency tokens, digital assets (NFTs), and blockchain technology.

The GameFi ecosystem creates a unique virtual environment where players have full ownership of their assets—from virtual land, avatars, and outfits to customized weapons. The key difference is that these assets are not only valuable within the game but can also be traded on cryptocurrency exchanges and NFT marketplaces, providing real monetary value.

Since blockchain functions as an immutable public ledger, ownership rights are indisputable. Even if the game platform encounters issues or is attacked, your assets remain securely protected on the distributed blockchain network.

The Development Journey of GameFi: From Bitcoin to Modern Blockchains

The concept of earning money through gaming began when early developers experimented with Bitcoin-related websites to earn this digital currency through gameplay. This initial effort continued with hopes of deploying GameFi on the Bitcoin blockchain but faced serious technical challenges: limited block space, slow processing speeds, and high transaction fees made the idea impractical.

A shift to Ethereum opened new possibilities. Known as a platform supporting smart contracts and decentralized applications, Ethereum provided an ideal ecosystem for GameFi development. However, in 2017, the emergence of CryptoKitties—an Ethereum-based blockchain game—caused unprecedented network congestion. Each new player joining slowed down the network, and gas fees skyrocketed, creating significant barriers for developers.

This situation prompted the migration of GameFi to other blockchains with better scalability. Platforms like Solana, Polygon, BNB Chain, Avalanche, Harmony, Polkadot, WAX, and SKALE gradually became preferred choices. Each platform offers unique features: Polygon stands out with a robust gaming ecosystem and investment funds like Inevitable Games Fund; Ronin and Solana continue to demonstrate resilience with ongoing technical upgrades.

By the first quarter of 2024, the Web3 industry reached a milestone with 7.7 million daily active wallets (UAW), a 77% increase over the previous quarter. Blockchain games account for 30% of all active wallets, with 2.1 million UAW, up 59%, indicating the growing appeal of this sector.

How GameFi Games Work

Although GameFi projects share core principles, each applies its own economic models and design to create a unique experience. Players can earn assets such as virtual land, avatars, outfits, or other NFTs. However, to trade these assets on open markets, they must be converted into NFT format first.

Compared to traditional video games like Call of Duty, Fortnite, or Minecraft, GameFi offers a clear distinction. Traditional games operate on a “play-to-win” model, providing engaging experiences but primarily enriching the developers. In contrast, GameFi offers opportunities for players to benefit from their time and effort.

In traditional games, players compete to win and often need to purchase in-game assets with real money to gain advantages. Conversely, GameFi is designed so players can earn money as they progress, with rewards of real-world value, often without initial investment or with minimal upfront costs.

Key Features of GameFi Compared to Traditional Gaming

Integration of Decentralized Finance (DeFi)

GameFi combines blockchain with DeFi components, allowing players not only to earn from gameplay but also from financial activities like staking. By locking NFTs via smart contracts, many blockchain games enable players to generate annual yields. Organizations like Yield Guild Games allow players to stake cryptocurrencies and NFTs to earn interest or even lend in-game assets, creating additional income streams for both lenders and borrowers.

Immutable Asset Ownership

While trading in-game assets isn’t new—games like Fortnite and Call of Duty have long allowed this—GameFi introduces a fundamental change: assigning real monetary value to virtual assets. Blockchain removes centralized control by creating transparent, immutable ledgers that record ownership of all assets players build or purchase. Importantly, players retain the value of their assets even if the platform encounters issues.

Play-to-Earn (P2E) Model

Blockchain games feature an attractive economic model for both developers and players. Players earn by completing levels, battling others, and buying or trading assets like avatars, outfits, virtual land, or weapons—all as NFTs. These assets can be traded or sold for real money. Axie Infinity exemplifies this, where players breed, care for, and battle creatures called Axies, earning Smooth Love Potion (SLP), a utility token usable within the game or tradable on crypto exchanges.

Move-to-Earn (M2E) and Other Models

The Move-to-Earn (M2E) model rewards users based on physical activity. StepN is a prominent example, where players earn GMT tokens by walking or running while wearing NFT shoes. These tokens can be used within the ecosystem or traded on open markets, providing financial incentives for maintaining a healthy lifestyle.

Tap-to-Earn (T2E) is an emerging model where players earn tokens through simple actions like tapping the screen. Notcoin is a prime example—a highly accessible game allowing anyone with a smartphone to participate. Rewards from T2E games can be used within the ecosystem or converted into other cryptocurrencies.

How to Get Started with GameFi: Basic Steps

Anyone from anywhere (excluding regions with restrictions) can participate in GameFi and earn money. The process is similar across most projects, with some minor differences. To begin your journey:

Set Up a Digital Wallet

First, you need to create a digital wallet to store NFTs and cryptocurrencies, and to perform in-game transactions. The type of wallet depends on the blockchain the GameFi project runs on. For Ethereum-based games, MetaMask is a popular choice. It’s advisable to create a separate wallet for each project to protect your funds from potential risks like scams or hacking.

Prepare Initial Capital

While many GameFi projects can be started for free, some require purchasing starter items such as weapons, gear, avatars, or NFTs to begin earning. Carefully research the initial financial requirements before committing.

Explore Passive Income Models

Beyond playing directly, combining DeFi components allows you to stake cryptocurrencies and NFTs to earn additional income or lock in profits for interest over time. This approach helps build passive income streams even when you’re not actively gaming.

Why GameFi Is Increasingly Attractive to Players

Earning Money from Passion

There’s no better way to earn than from your own passion. GameFi enables you to make money simply by playing blockchain and NFT-based games. These games can become a source of active or passive income, offering players the chance to become millionaires through their hobbies.

Ownership of Digital Assets

GameFi allows players to earn and retain digital game assets. They own not only cryptocurrencies but also virtual weapons, outfits, and unique characters they create. These assets have real-world value and provide unique benefits to each owner. Blockchain ensures ownership rights through transparent, immutable ledgers, so no one can dispute your ownership. GameFi also offers a secure marketplace for trading or exchanging assets.

User Governance

Unlike traditional games, blockchain games often focus on player rights. Communities control voting and governance rights, ensuring decisions are made in the best interests of the community.

Low Barriers to Entry

GameFi can be free or require only minimal fees to participate, significantly lowering entry barriers worldwide. This contrasts sharply with traditional video games, which often involve high costs associated with valuable assets.

Future Outlook of GameFi

GameFi has demonstrated strong growth potential, with significant technological advancements including Layer-2 solutions to improve scalability and reduce transaction costs. The integration of artificial intelligence also opens new possibilities for enhancing gameplay and creating personalized experiences.

However, the industry still faces major challenges. The most critical need is to incorporate genuinely high-quality gameplay, avoiding over-reliance on blockchain gimmicks that neglect the core gaming experience. Developers must also build sustainable economic models (tokenomics) driven by community input to ensure long-term viability.

Interoperability between different blockchains will also be crucial for expanding the user base. With ongoing technological progress, widespread adoption of cryptocurrencies, and new GameFi projects emerging continuously, it’s highly predictable that blockchain gaming will continue to grow its share in the industry.

GameFi is not just a passing trend but a fundamental evolution of the gaming industry, where players are no longer mere consumers but owners, investors, and creators of real value.