NFT Labs: Application Scenarios of NFT (GameFi)

Application Scenarios of NFT（GameFi）

Based on fungible tokens, non-fungible tokens continue to develop. Due to their indivisible, unique, and verifiable characteristics, NFTs are increasingly entering people's vision. Since 2017, many projects have emerged in NFTs. According to The Block Research, at least 73 NFT platforms use NFTs in various fields today. Next, this serial will take you through the top fourteen practical cases of NFTs.

GameFi

What is GameFi

Thanks to the rise of blockchain technology, the financial aspect has never been more intertwined with the gaming industry. Blockchain games are decentralized games, namely GameFi - Game + DeFi (decentralized finance).

In addition to DeFi, NFT is also the core component of chain games. The appeal of NFT, with its uniqueness, scarcity, provability of ownership, and transferability, undoubtedly has tremendous significance for enhancing the value of in-game items. It is worth mentioning that NFTs also embed metadata that can be used to prove the authenticity of assets. In fact, the first application of NFT is also a game.

Blockchain, digital art, and NFT are gradually permeating all aspects of our lives, and the entertainment industry is one of them. NFT games based on blockchain technology are rapidly revolutionizing the traditional gaming experience, attracting more and more gamers.

GameFi development history

In November 2017, a blockchain-based pet development game, CryptoKitties, the originator of chain games, attracted users' attention.

Soon after the NFTs went live, the mass appeal and engagement with breeding caused CryptoKitties to congest the Ethereum network to prevent other Ethereum-based platforms from operating efficiently and driving gas fees to dizzying heights.

At the peak of its popularity, a CryptoKitties could be sold for one million-dollar price, but it fell to the bottom when the bubble burst. In 2018 and 2019, blockchain games entered an era of growth. Gamblers entered the game regardless of cost, and inferior projects scam the money with exaggerated gimmicks. The excessive bubble of “blockchain games” finally entered a cooling-off period in Q2 of 2019 - such an unhealthy development model cannot last for a long time. After all, under the mood of “getting rich,” who still has the heart to play or develop games？

I had always used the term “blockchain game” before because GameFi was initially defined as GameFinance, which was proposed by the Chief Strategy Officer of MixMarver at the Wuzhen Conference at the end of 2019, that is, games with financial attributes. Later, when DeFi appeared, YFI founder AC said that after DeFi's future features are more inclined to gamification, GameFi is widely known as Game + Defi (decentralized finance).

So far, the concept of Game+DeFi+NFT has been recognized by users. But it doesn't seem to be a particularly healthy model to change hands, and the “Play to Earn” economic model pioneered by Axie Infinity solves this very well. The “Play to Earn” model is considered one of the cores of GameFi, and is still emulated by the entire GameFi field to this day.

After the DeFi upsurge has passed, there is an urgent need for new gameplay, and here GameFi comes, which ignited a new round of hot spots in the industry in July 2021, and reached its peak in the second half of 21.

While the uptrend has subsided in recent months, popular games like Axie Infinity, DeFi Kingdoms, Pegaxy, MOBOX, and Bomb Crypto continue to see millions of daily transactions.

How GameFI empowers traditional games

The most significant pain point of traditional games is that players are in a weak position and have no dominance. The equipment and armed characters that players have worked so hard to build may be discarded after a version update; developers can increase the number of props at any time, and the support in players' hands can become worthless. In addition, players can only be consumers, and they can only be consumers all the time - even if you use a third-party platform to sell items to make a profit, it is not stable. Even as powerful as V God, he deleted the game angrily after protesting against Blizzard's unsuccessful version update.

The NFT, based on blockchain technology, can record the player's status and achievements in the game and save the list of items obtained in the game. NFTs, ensure immutable and transfer of records, guaranteeing ownership verification and authenticity of game items. At the same time, game items can be designed to be used across games or have a particular exchange value. The problem with traditional games is that these items are not allowed to be transferred, and few games allow the trade or sale of collected objects, let alone use across games. NFTs provide a solution to this problem. Allows in-game assets to be transferred to other games.

And the P2E model pioneered by Axie changed the situation in traditional games where players can only be consumers. In the P2E mode, chain game players can not only play games but also bypass third parties to earn real profits and seek returns from the market - all of which are entirely determined by the market rather than by centralized game companies. Traditional games are just games, and the identities of players and investors are separated, while P2E makes the essence of chain game players change, which can be players, participants, and investors.

The Core of the GameFi Project - Take Axie Infinity and Wolf Game as Examples

Axie Infinity - An excellent economic model is a key to the continuity of the project

Axie Infinity (referred to as Axie) is a blockchain game launched in 2018. The game type is somewhat similar to Pokémon battle.

Axie is a Vietnamese team. The original intention is to hope this game can help some backward areas with the poor economic ability to improve their quality of life. Axie first became popular in the Philippines at the end of 2020, with unemployment as high as 25%+. After a 22-year-old Axie player publicly announced that he bought two houses in the Philippines with the profits made by Axie, Axie ultimately became popular. Domestic, European, and American players also began to participate, and more and more users began to learn “Play to Earn,” and the popularity of Axie also reached a peak.

Axie has two types of tokens: SLP and AXS. The economy under the blessing of dual tokens is also more stable. Its utility is as follows:

If players want to acquire Axie NFTs, they need to consume AXS and SLP; so the demand for Axie NFTs ultimately drives the demand for AXS and SLPs. Conversely, by playing against players in the game, the winner can get AXS and SLP. Therefore, if players' order for Axie NFT is created, it is the key to the excellent development of the Token economy. Moreover, both AXS and SLP tokens can be traded directly through the trading platform, which is easy to cash out and has inspired many players' enthusiasm.

However, if players overproduce Axie NFT regardless of cost, and there are not enough new players to offset the output of Token, it may cause the price of Token to drop. Therefore, the official has also made various attempts to increase the reproduction cost of Axie NFT to maintain the balance of supply and demand and game stability. Of course, the game also involves elements such as land, and the gameplay and details are varied. I won't explain it here, but you can check it yourself.

In a word, there are three keys to the success of Axie Infinity: one is the initial selection of the right market and target users; the second is due to the P2E model and high-quality token economic model it has created; the third is the traffic of the YGG game guild pushed and some other factors.

By the way, GameFi game guild refers to users (or communities) participating in GameFi for profit in a group way, managed mainly by DAO. The union is also a better “intermediary” between GameFi and players. It can mine high-quality GameFi and guide players to make profits. It greatly influences the GameFi market and is called a “pusher.”

Wolf Game - Exaggerated Fomo mood is the key to the project becoming phenomenal

Wolf Game once became the market's focus on November 21, reaching a trading volume of 3000w+ US dollars.

The initial sale price of Wolf Game's NFT is about 0.069 ETH, with a 10% chance of getting a wolf and a 90% chance of getting a sheep. A sheep can produce 10,000 Wools (the Token of Wolf Game) a day, but the Wool produced by the sheep needs to pay 20% of the “protection fee” to the wolf, and the Wool can be sold directly or used to breed new NFTs - but Newly bore NFTs have a 10% chance of being snatched by wolves.

In addition, sheep and wolves can also stake, which makes the gameplay even more exciting. The sheep can release the Stake after accumulating 20,000 WOOL tokens, and when the Stake is removed, there is a 50% probability that 100% of the Wool will be earned, but there is also a 50% probability that the wolf will take it all away.

The gameplay is straightforward, but how the player chooses is a complex problem. Sell the Wool or breed a new NFT？ ——Although there is a probability of being robbed, to obtain 80% of the income steadily or to pursue higher income？ - although the risk becomes more significant.

With high returns and fresh gameplay, everyone can be a gambler. Under the crazy Fomo mood, Wolf Game's popularity also peaked - the floor price of OpenSea reached nearly 5 ETH. Later, new elements, such as land and farmers, were added to expand the gameplay.

The reason for the popularity of Wolf Game is simple, the “wealth effect.” The first batch of players made a lot of money when they entered the market and then spread it frantically to the surrounding users. Many players have already invested in the market before figuring out what it is - because the payback period and possible benefits are too attractive. While many users are still worried about taking over the market and waiting, the players who entered the market the day before yesterday may have already paid back their capital or even got colossal profit.

Of course, the reason for the final collapse of Wolf Game is also straightforward. With the increase of newcomers, entry is challenging for newcomers, and once it cannot attract enough new users, the old users will leave and collapse.

Wolf Game can be described as the climax of GameFi Fomo's popularity. It comes and goes quickly.

Challenges and Problems

Game Fi has indeed received more and more attention. Still, it also faces problems: lack of game innovation, poor user experience, low playability, weak storytelling, single application, and high participation threshold. Without a good solution, these problems are likely to affect the way to the mainstream market of games is unable to form a healthy ecosystem.

We all know that the blockchain has an impossible triangle: perfect decentralization, extremely high processing efficiency, and excellent security, and it is impossible to achieve both.

Similarly, GameFi currently has an impossible triangle - playability, difficulty, profitability,

which is:

1. Games with high playability and low difficulty, poor profitability;

2. Low difficulty and highly profitable games have poor playability;

3. Games with solid profitability and high playability are not easy to get started;

The blockchain has begun to try to solve the pain points by relying on technologies such as Layer2, but GameFi still lacks the optimal solution.

On the other hand, GameFi projects rely more on exaggerated Fomo emotions to boost the first wave of popularity. Still, there will always be a time when the popularity will decline, and only a few can rely on the project party's operation or other reasons to survive. There are very few - only a few projects, such as Star Shark. How to design it into a sustainable game is something that many current project parties have to consider. It is also a necessary factor for the healthy development of the GameFi industry.

Future

The development of GameFi is inseparable from NFT, but even NFT is currently in an early stage - such as the Token circle in 2013 and 2014. GameFi is more like the game field in the 1980s when the computer game industry experienced its first significant growth pain. Publishers who did business honestly appeared on the market together with profiteers who were founded today and will run away tomorrow. Certain games can be copied from existing arcade machines, and the relatively cheap distribution of PC games has encouraged the release of many inferior games. And GameFi with financial attributes is even more brutal than it was at the time.

In the future, more users will participate in GameFi and have more stable profit and loss rules and economic structure. The gameplay will improve, and there may even be a 3A masterpiece in the open world within a few years. Moreover, the game guild will also increase and lead to more participation for players. In addition, there will likely be a “Steam + Metaverse” platform in the game industry, which integrates various chain games. The NFT in the player's game can be circulated between different games.

Crypto users believe that GameFi will drive the development of Web3 since the DeFi functions of games are already a prelude to Web3. In the long run, the lifestyles of people in Web3 will change significantly, and so will games; in the short term, what new gameplay will GameFi have？ More financial？ Gameplay？ Or open a window of Metaverse？ We will wait to see it.