The Historical Development and Future Prospects of GameFi

DeFi and NFT Lay the Foundation for GameFi

Since the launch of the Ethereum mainnet in 2015, the DeFi and NFT markets have flourished, providing a fertile ground for GameFi. The total market value of DeFi has grown from $0.5 billion in 2015 to $100 billion in 2023, and the market value of NFTs has also increased from a few million dollars in 2018 to $8 billion in 2023.

DeFi has brought a continuous flow of funds to the cryptocurrency market, while NFTs have shifted the focus of blockchain towards entertainment and gaming. The combination of the two has provided fertile ground for the development of blockchain gaming. Based on this, the concept of GameFi, which integrates DeFi and blockchain gaming, is beginning to emerge.

The Proposal and Initial Development of the GameFi Concept

In the second half of 2019, Mary Ma, the Chief Strategy Officer of MixMarvel, first proposed the concept of GameFi - "gamified finance" and "new gamified business." This concept combines elements of gaming and finance, aiming to introduce new business models and economic systems to the gaming industry through blockchain technology.

In September 2020, Yearn.finance founder Andre Cronje elaborated on his understanding and outlook of GameFi, marking the concept of GameFi beginning to truly enter the public eye. Andre Cronje believes that the DeFi industry is in the "TradeFi" stage, and GameFi will serve as the future development direction of DeFi, where user funds can not only be used for financial transactions but also have real application value in the virtual gaming world.

GameFi Reshapes the Gaming Track

GameFi is a technology that combines DeFi, NFT, and blockchain gaming, integrating game assets with some logic running on smart contracts on the blockchain, managed by a DAO organization responsible for the development of the gaming ecosystem. GameFi focuses on building a complete financial system, supporting activities such as item trading using native game tokens. Users can earn token rewards through gaming and share the benefits of game development.

GameFi can solve problems such as limited item trading and monopolization by game companies in traditional games. Through DAO governance, players can share the governance power of the game, avoiding development in a direction unfavorable to users.

From the perspective of the development history of games, GameFi perfectly aligns with two of the three key elements of the enhancement of computer technology, hardware upgrades, and innovation in game concepts, in accordance with the historical progression of games.

GameFi 1.0 Era: The Rise of Ponzi Games

The GameFi 1.0 era is represented by CryptoKitties and Fomo3D, which are mostly Ponzi scheme games. These games suck money from new users and distribute rewards to old users, and the fragile balance under high returns is very easy to collapse. Essentially, blockchain games during this period do not have a complete financial system and cannot be called true GameFi.

GameFi 2.0 Era: The Rise of Play-to-Earn Model

The GameFi 2.0 era, represented by Axie Infinity and The Sandbox, began to combine the "play-to-earn" concept with complex financial mechanisms, creating an attractive NFT creature world and virtual sandbox world.

Axie Infinity practices the concept of GameFi through the "play-to-earn" model, successfully attracting true fans of the game through PVE and PVP modes. The Sandbox, on the other hand, provides an example of the integration of traditional IP and blockchain technology, demonstrating the powerful wealth accumulation effect that high-quality GameFi possesses.

GameFi 3.0 Era: On-Chain Games and Cross-Industry Integration

The development trend of GameFi 3.0 era includes:

1. On-chain games: All game logic, data, and assets run and are stored on the blockchain, achieving complete decentralization and transparency.

2. GameFi+: Combining with emerging technologies such as AI and the Internet of Things, projects like Palio, Ultiverse, etc.

3. Introduction of Traditional IP: Traditional game companies such as Atari, Square Enix, and Capcom plan to bring classic game IPs to the blockchain.

4. High Playability: Create games with high playability that include a complete financial system, such as MOBA-type GameFi.

Future Outlook

1. The GameFi market is still a blue ocean, and with breakthroughs in the underlying fields, there is an opportunity for a second explosion.

2. "Fully On-chain Games" and "GameFi+" are the future development trends.

3. Investment in GameFi needs to focus on aspects such as its IP, playability, and technicality. Only GameFi that can truly attract players has the potential for long-term development.

4. The introduction of traditional game IPs may become a key breakthrough for the development of GameFi.

GameFi, as a unified application of blockchain technology and a new stage in the development of games, has tremendous potential for future development. With continuous technological advancements and innovations in game design, GameFi is expected to reshape the gaming industry landscape in the future, creating new value for players and investors.