Can GameFi Players really benefit from this game genre?

What is GameFi？

About the 'blockchain games' I want to talk about today, the more familiar concept related to it is "GameFi" - gamification of finance, which presents financial products in the form of games, combining NFT, DeFi, and Games, and brings the ownership of digital assets of games to players. Common promotional discourses often mention these key meanings: "GameFi solves the problem of mutual trust between game makers and players, for participants enjoy the fun brought by the game while gaining real benefits from it, and the assets acquired by players in the game can be transformed into real money in the decentralized trading market".

The difference between blockchain games and traditional games

1. decentralized virtual asset system, no company unified operation

Traditional games are centralized, so if the game system is destroyed by hackers, all of the player's assets will be lost. In blockchain games, the player's assets are not associated with the game itself, and even if the game system crashes, the assets will remain intact, reducing the risk of being hacked and stolen as well as the risk of the firms changing their minds.

2. the new Play-to-earn mode

Traditional games follow the concepts of play-to-win, pay-to-play, free-to-play, etc. Players spend money to buy items and pay for gameplay, and the cash mainly flows to game developers and publishers. However, the items in chain games have actual value in real life and belong to the players themselves mostly, and game developers mainly get part of the service fee from in-game transactions.

3. Other differences: avoiding inflation (uniqueness of NFT), worlds in games are connected with each other, it's possible for players to participate in game modification and optimization, etc

In short, in traditional games, game developers/project teams control the game content and players have the "right to use". In the concept of blockchain games, users become the investors of the game and also act as the sharers of the game and players have the "ownership". However, many blockchain games on the actual market are not completely free from centralized management, but only borrowed and used some blockchain technology.

What is the "play-to-earn" advertised by Blockchain games?

Let's take Axie as an example and look briefly at how players "make money" in this game.

3.  Earn revenue by earning and pledging AXS, which is the virtual coins in the game.

Figure: Officially announced economic cycle

Does it seem to be no different from traditional games? If you've played MMORPGs, you must know item & pet trading, but now the settlement currency has changed from in-game tokens to virtual currencies that are separate from the game developers or publishers, or add a financial function to the in-game currency - such as pledge.

Another system that has brought Axie to the forefront is called Scholarship, which can also be interpreted as a form of "proxy play/rental". As mentioned earlier, if you want to enter Axie, you have to buy 3 initial Axie ranging probably from 300~600 USD, and not all players are willing to spend such an initial investment. So the firm advocates its Scholarship system, so that players are willing to spend time to help players with funds to play the game, and the output of the SLP can be shared by both. This system allows Scholar to enter the game to gain revenue at no cost, and investors do not need to operate to generate revenue from a large number of assets in the game, which ultimately provides a large number of new players (both small and large investors) and increases the popularity of the game.

Initially, this is how Filipino players during the Covid situation gained more than the average income in their home country

After the above introduction, do you feel it is "very appealing"? And this is the tricky point, how can "everyone make money" in a market? Asking a few simple questions could reveal the clues.

①The output of SLPs is unlimited and can be generated as long as there are in-game behaviors, but the consumption is limited. After a large number of players participate in, the total output of SLPs in the game has greatly exceeded the amount needed in the market, who will pay for these extra items? Will the cost of time spent still outweigh this revenue?

②Axie is not a complete blockchain game, it just uses decentralized technology, but in fact, it still has a centralized official firm controlling the game, and the firm has not completely assigned the power of community management to players. Looking at the previous price changes of SLP, behind the change is related to the official news released, such as sanctioning accounts with MMR less than 800, changing SLP consumption value, allowing land trading, etc.; is it possible for firms to gain extra benefits by raising the value of NFT through such speculative news and unseen operation?

③High investment + long payback period makes it necessary for each player to stay in the game for a period of time, which is usually 3 months and more, and anything can happen during this time; does the investment of the players who enter later become the earnings of the players who enter earlier?

Who is "playing" blockchain games

In blockchain games, there are often the following groups of players: large investors who benefit most, and their voices can be heard (or known as scientists), the studio, KOL, retail investors and real players (scarce), etc.

●Blockchain game studios

There are a lot of blockchain game studios, most of whose main business is based on the commission by operating on behalf of the investors (similar to a sizeable scholar).

When analyzing the composition of an agency company, we will find that they often have a group of employees who play games and have a richer source of information, compared to the retailer investors they can grasp the way of making profits in blockchain games much faster. The existence of such studios also constantly improves the output of in-game items, making them devaluate during a period of time.

●KOL：

There are often some KOLs who can maintain a certain level of interaction with blockchain game developers, and they take on the function of promoting blockchain industry & blockchain games to the public. For such KOLs, the revenue of blockchain games itself is not as fast and high return as other investments, and their revenue may mainly come from their fans, advertisements, and their fame, etc. They spend more time on other marketing work, and if playing the blockchain game themselves, they value the experience of the game itself more.

We have interviewed a KOL who is a freelance writer for blockchain topics and the leader of the local private blockchain game community, and he also clearly mentioned that many of the chain games are now of lower quality and there exist financial scams. As a member of the industry, he is aware of the huge risks involved, so he mainly holds the mentality of "purely playing" to experience the game, and puts his money into other investments.

●Retail investors

In a "Blockchain Game Player Research Report", the portrait of the core players of blockchain games as depicted by the researcher is as follows.

"Mainly male, those who were born in the 80s and 90s, live in first-tier cities, working as freelancers or self-employed, with flexible time, concerned about the information of bitcoin mining and making money, etc."

"They prefer strategy games, RPGs, and are motivated by defeating others, exploring the unknown, making money and gaining profit, and play games almost every day".

As for the other potential players, "these players are younger, diverse in gender, and located in cities scattered around the first-tier cities. They pursue the fun of the game itself, such as brainstorming and team interacting, etc., and their gaming is not as frequent as the core players"

Most blockchain game players are willing to share their games for two motivations: "playing and making money together" and "spreading risks", sharing their successful experience of making money with their friends to gain profits together, or inviting friends with gaming experience/investing experience to participate to reduce their own trial-and-error cost.

So what will be the shape of the future of blockchain games? Will it go from a hotspot issue to an outdated topic left behind by the trend, or will it evolve, and really produce formalized and high-quality blockchain games with technologies? Let's wait and see.