Disclaimer: I own some of the tokens mentioned. This is not investment advice, just sharing some research on what seems to be one of the next big trends in crypto. If you find this article useful, feel free to follow me on Twitter @AkadoSang and use my reflink to signup at FTX: ftx.com/#a=1311776
First, why write about GameFi? In short, it looks like it has more upside than any of the other crypto sectors right now. “Traditional DeFi” like lending and farming is saturated: same players, institutions, tokens out in the market already inflated with huge marketcaps, etc. New entrants have a higher chance of being farmed than extracting value from it so it’s time to move on to greener pastures where more opportunities lie ahead of us
What is GameFi?
As the words suggests, a combination of Gaming and Finance. To put it simply, DeFi concepts applied and integrated with Gaming. This allows us to create a new economic system around games with financial incentives to participants that play, earn, trade, compete and build.
A game similar to Travian or Ogame where users collect resources to build stuff. Let’s assume, wood and iron. With those, they could create a pickaxe. This pickaxe allows them to mine gold. Gold can be traded for other items in-game.
If we integrate DeFi concepts, Wood and Iron would be two tokens put into farming pool. Pickaxe would be the LP token. Gold would be the farming rewards.
A game where users can travel to a new city or to a new dimension through a portal to complete new missions. That could be the equivalent of the user moving from one chain to another with new incentives.
Why is GameFi such a big deal?
The Gaming industry keeps growing
In a report, Accenture estimates the Gaming industry has surpassed $300billion, thus, surpassing the movie and music industry combined.
And the market agrees, as Esports prize pools have also kept growing from $115 million in 2017 to an estimated $400 million in 2021
Play2Earn is a concept in which a game provides incentives and rewards to gamers for playing and growing the game economy. Participants can play the game and earn something that can be exchanged for money.
Example: Completing all daily missions for a weak, earns game tokens that can be exchanged for other crypto and/or dollars.
DeFi Kingdoms picture
While “normies” might not be familiar with DeFi concepts like farming and immediately dismiss them as they sound too complex or “nerdy”, they’re familiar with gaming. Everyone has played some type of game before. Only now, players can get paid to do so and can make the most out of it, according to time spent playing and their skill. Why would they go through the hassle of trading, farming, hedging, keeping up with vesting schedules, APYs, loans, collaterization and a higher chance of getting hacked when they can simply do what they have always done: have fun playing a simple game.
Also from conversations I had with friends, the idea of starting with nothing and working your way up makes it seem fair and much more appealing from their perspective. They can start right now where everyone is kinda evenly fielded instead of competing with “rich crypto VCs”.
A use case for NFTs
NFTs have been trending but many have criticized them over not having any utility. “Ok, I buy this JPEG and now what? I can’t do anything with it”. GameFi brings a new use case and utility to NFTs, both complement each other. Again, “normies” might not care about owning a Punk, but they’re likely enjoy flexing a CS skin that could be easily traded and sold. See Star Atlas as an example.
Star Atlas Marketplace
GameFi as the next “Greener Pasture”
As mentioned at the top, DeFi looks saturated. Same players, same VCs, more institutions coming for your yield. Note that this isn’t a “DeFi is dead” claim. It isn’t. It’s extremely useful and will keep growing, however I see GameFi having much more upside than DeFi, specially to new entrants.
Tokens start with much lower marketcap and have remained strong despite the whole market tanking the last couple months. This is signalling strength and imo, a narrative shift.
Why would you buy some VC bags at 20x or 50x what they paid for when you can buy fresh stuff as a smallcap? Here’s some GameFi charts:
ILV, JEWEL, PYR and SAND price charts from Coingecko
While those already pumped, meaning we’re not at the exact beginning of the narrative, there’s plenty of projects coming out, some with very reasonable valuations and with plenty of upside. It’s something normies have been into since Axies exploded in popularity.
From what I see, most of cryptotwitter is still in DeFi. On the other hand we have new money coming in into this untapped market. New stuff, less investors dominating pre-sales, new money and people dismissing it with the argument of “graphics suck” look like the perfect cocktail for a decent performance.
The “cons” of GameFi have mostly been claims of “bad graphics” and “UX”. However these are not permanent. Games will evolve. We could easily see a rapid advance on game quality as soon as trend picks up. Why?
Crypto has a lot of money being throw around. Plenty of VCs want to invest, people that became millionaires and even billionaires are always looking for opportunities.
On the other hand, we have great indie games failing due to lack of funding. Meaning VCs could simply acquire those quality indie games, integrate crypto to develop an economic system around it and there you have it: GameFi explodes in quality in a very short period of time. There’s no need to reinvent the wheel. Meanwhile, it’s up to us to pick the best opportunities before GameFi ends up saturated like DeFi.
To finish, same way DeFi pumped because everyone could finally put their assets to work, GameFi will allow gamers to put their items to work. It won’t be just a “sword” or a “spaceship”, those could be lent in exchange for fees. If games were already addictive because they were fun, we’re about to discover a whole new level of addiction with utility and a chance to make a living out of it!
On to greener pastures!
A random and unrelated example of greener pastures
Ok so this is what most people like. The tokens. Here’s a list of interesting stuff that hasn’t pumped yet, meaning has plenty of upside.
$FNC — Fancy Games
Small cap with $30M marketcap but with decent liquidity ($200k for 2% slippage on Sushiswap). Developing a game similar to FlappyBird (will develop more games). Solid tokenomics. Farming rewards vested for 1 year so no sell pressure. Stakers get 100% of in-game revenue. Investors like Kain Warwick from Synthetix, Stani Kulechov from Aave, Tyler Ward from Barnbridge, angel investor Santiago Santos (ex-ParaFi Capital) and 0xmaki from Sushi. Wouldn’t be surprised if they helped design the tokenomics.
$MC — Merit Circle
$280M marketcap. Definitely not as small but could grow way bigger than FNC. It’s like a DAO for GameFi, making early investments in the sector, meaning it could act like an Index or a benchmark to GameFi in the future. Can currently be farmed and dumped on Binance launchpad (will last for 1 more month and a half) but chart looks like it’s setting a reversal. Recently listed on Gemini. Likely to become one of the biggest GameFi tokens. Read more about it on this blog post by Godel.
$JEWEL — Defi Kingdoms
Known to almost everyone who came in contact with GameFi. Not exactly an example of a token that is yet to pump but trend seems strong.
One of the most anticipated blockchain games and powered by Solana. Their Medium has pleeeenty of posts for you to read. Here’s one on their economics which is what most are interested in right now. Partnership with FTX, Sino Global, Yield Guild Games and a few more. Likely to become one of the biggest games in Crypto. Chart not on uptrend but at the bottom very close to support. Could possibly be a decent entry. $200M marketcap.
You can find a list of Gaming Tokens to start your own research here. Would also suggest researching for anything related to Metaverse and NFTs as they’re often intertwined. Plenty of GameFi stuff is yet to be relase so I’m confident you’ll be able to find some cheap gems out there :)
Honourable mention to;
@_41l4 for constantly spamming me with NFT and gaming stuff.
Go give them a follow and hope you enjoyed,