What is GameFi: A new way to make money with blockchain games

In the digital entertainment space, a revolutionary idea has emerged—combining gaming fun with real-world earnings. This once seemingly impossible concept has become a reality thanks to blockchain technology. The application of blockchain continues to expand across various economic sectors, especially in the gaming industry, where GameFi has become one of the most dynamic market segments. According to DappRadar, Web3 games and metaverse projects attracted $2.9 billion in investments in 2023. This article will explore this innovative ecosystem that merges gaming and finance.

Core Concepts of GameFi

Blockchain technology has brought about a fundamental transformation to the gaming industry. The term “GameFi” combines “gaming” and “finance,” referring to blockchain games that allow players to earn real economic benefits through participation.

Unlike traditional online games, GameFi builds a virtual economic ecosystem that integrates cryptocurrencies, non-fungible tokens (NFTs), decentralized finance (DeFi), and blockchain technology. Players can earn game rewards by completing quests, competing with others, upgrading characters, and more. These rewards exist as digital assets with actual market value.

What makes GameFi unique is that it grants players true ownership of in-game assets. These assets—including virtual land, characters, equipment, and NFTs—can be traded on crypto exchanges and NFT marketplaces, converting into real money. Because blockchain uses distributed ledger technology to store immutable data, players’ ownership rights are fully protected. Even if the game platform encounters issues, assets remain securely stored on the blockchain.

Industry Evolution and Market Status

The development of GameFi has witnessed continuous innovation in blockchain gaming. Early attempts included games on Bitcoin-related websites, but due to slow processing speeds and high transaction fees on the Bitcoin blockchain, most of these early efforts failed.

A turning point came with the advent of Ethereum. Built on smart contract technology, Ethereum broke through the limitations of being merely a payment system, providing a foundation for decentralized applications and financial systems. In 2017, the blockchain game Cryptokitties became a huge hit, allowing players to collect, breed, and trade digital cats. Its success generated massive transaction volume but also exposed Ethereum’s scalability issues—network congestion and soaring gas fees as user numbers increased.

This challenge prompted developers to seek more efficient solutions. Emerging blockchain platforms like Solana, Harmony, Polkadot, WAX, BNB Chain, and Avalanche, with higher throughput and faster transaction speeds, have become the main hosts for GameFi projects.

Industry data from Q1 2024 shows strong growth in GameFi. Daily active wallets (UAW) reached 7.7 million, a 77% increase quarter-over-quarter. Blockchain games account for 30% of active wallets, totaling 2.1 million dUAW, up 59% from the previous quarter. Polygon leads with its robust gaming ecosystem and related funding, while Ronin and Solana continue to innovate. BNB Chain has advanced its technology, and SKALE is rapidly developing through strategic partnerships and funding. This competitive landscape reflects the vibrant and diverse development of the GameFi market.

How GameFi Works: A Detailed Overview

While different blockchain games share core principles, each adopts unique economic models and game designs to create distinctive experiences. Players can profit by acquiring virtual land, character skins, equipment, NFTs, and other customizable assets, which need to be converted into NFTs to be traded on open markets.

Unlike traditional games like Call of Duty, Fortnite, or Minecraft, projects such as Axie Infinity, Cryptoblades, and Splinterlands follow entirely different design philosophies. The former often use a “play-to-win” model, providing entertainment but primarily benefiting the developers. The latter maintain entertainment value while enabling players to earn economic rewards through participation.

Key Features of GameFi

Integration of Decentralized Finance (DeFi)

GameFi games incorporate blockchain and DeFi components, allowing players to profit in multiple ways. DeFi mechanisms enable staking of crypto assets and NFTs to earn periodic yields. Some games allow players to lock NFTs via smart contracts to generate annual returns. Gaming guilds like Yield Guild Games provide asset leasing services for players unable to afford initial costs, earning commissions and creating a complete ecosystem.

True Ownership of Assets

Although trading in-game assets isn’t new, GameFi leverages blockchain and DeFi to assign real monetary value to these assets. Blockchain eliminates the limitations of traditional centralized games by creating an immutable public ledger that records ownership of each in-game item. This mechanism ensures the long-term value of assets and protects players’ ownership rights, regardless of platform changes.

“Play-to-Earn” (P2E) Model

The P2E economic model offers players genuine financial incentives. By progressing in the game, defeating opponents, and collecting or trading NFTs—such as characters, gear, and virtual land—players can generate income. This model is most famously validated by Axie Infinity, where players breed, raise, and battle creatures called Axies. The game’s economy allows players to earn tokens like Smooth Love Potion (SLP), currently priced at $0.00 with a 2.15% increase over 24 hours, which can be used within the game or exchanged on various crypto exchanges.

“Move-to-Earn” (M2E) Model

M2E incentivizes healthy lifestyles by rewarding physical activity. Stepn exemplifies this model—this mobile app lets players earn GMT tokens by walking, jogging, or running outdoors with NFT sneakers. GMT is currently valued at $0.01, up 4.07% in 24 hours, and can be used within the ecosystem or traded on open markets.

“Tap-to-Earn” (T2E) Model

T2E represents the latest participation mode in GameFi, where players earn tokens simply by tapping on their screens. Notcoin is a representative example—designed for maximum accessibility, it allows users to mine virtual coins by tapping the screen. Its simplicity enables anyone with a smartphone to participate, with rewards circulating within the game or exchanged for other cryptocurrencies.

Guide to Participating in GameFi

Players worldwide (excluding regions with policy restrictions) can participate and profit. By dedicating time and effort to complete quests, create unique assets, and rent or sell them, players can earn in-game currency from various GameFi projects. To generate passive income, DeFi mechanisms enable staking of crypto assets and NFTs for additional yields or locking in returns over time.

Although different projects have their own specifics, the basic onboarding process is similar. Here are the steps to get started:

Step 1: Set Up a Digital Wallet

A digital crypto wallet is essential for participating in blockchain games. It stores NFTs and cryptocurrencies and facilitates transactions both inside and outside the game. The specific wallet depends on the blockchain the game runs on. For Ethereum-based games, wallets like MetaMask are recommended. It’s advisable to create a separate wallet for each new game to protect funds and prevent fraud from fake platforms.

Step 2: Prepare Wallet Funds

Some blockchain platforms use proprietary in-game cryptocurrencies, requiring specific assets to be funded into the wallet. While many GameFi games support free entry, to truly play and earn, players often need to purchase initial items—such as weapons, armor, characters, or NFTs—to start their journey.

The Appeal and Future of GameFi

Beyond the economic value it offers investors and participants, several factors drive the growing popularity of GameFi:

Monetization of Labor Value

Is there a better way to earn income than doing what you love? Thanks to blockchain and NFTs, players can make money within games. Blockchain-based games provide both active and passive income opportunities. If gaming is your hobby, participating in GameFi could help you accumulate significant wealth.

True Ownership of Digital Assets

GameFi projects give users full control over their assets. Players not only hold digital currencies but also own the weapons, gear, and unique characters they create in-game. These items have real value and are unique to each user. Thanks to blockchain’s immutable public ledger, no one can claim ownership of assets they don’t possess. The platform offers a secure environment for trading and selling assets.

Player-Centric Design Philosophy

Unlike traditional centralized games, blockchain games often focus on the user. Community-driven governance ensures that platform decisions serve players’ interests.

Low Barriers to Entry

GameFi requires little to no initial investment. This significantly lowers the entry barrier for players worldwide, allowing anyone to participate in blockchain gaming—standing in stark contrast to traditional video games that often require large upfront purchases of high-level gear.

Market Outlook and Trends

GameFi is in a rapid expansion phase. Market forecasts indicate that its share of the global gaming market will increase significantly, rising from around 3% in 2023. This growth is fueled by ongoing blockchain advancements, including Layer 2 scaling solutions to improve scalability and reduce costs, as well as the integration of AI to enhance gameplay experiences.

Despite these technological advances, challenges remain—particularly the need for more high-quality game content rather than overreliance on blockchain features. Active user numbers are expected to reach 50 million, driven by multi-device accessibility and cross-chain compatibility. Community-focused development and complex tokenomics will play key roles in creating sustainable and engaging GameFi environments.

As blockchain technology continues to evolve, cryptocurrencies gain wider acceptance, and new GameFi projects emerge, blockchain gaming is poised to attract increasing attention and further expand its share in the global gaming industry.