What is GameFi?

Richard Gray, COO @ Agora

October 12, 2022

If you’ve been wondering ‘what is GameFi?’, you’ve come to the right place. Learn all about how GameFi is redefining the virtual gaming landscape, what the play-to-earn model is, how cryptocurrency is linked to GameFi and how you can get started on your own GameFi adventure in this complete GameFi guide.

A Brief Intro: What is GameFi?

Merging the three worlds of finance, gaming and blockchain technology, GameFi is rapidly revolutionizing the video gaming industry. But you may be wondering, what actually is GameFi? These blockchain games allow players to earn rewards, such as cryptocurrency and NFTs, which they can transfer out of the game’s virtual landscape.

Before GameFi, video games were all built on centralized technology, with the rights and ownership of the in-game assets belonging to the game developers and publishers. In contrast, games built in the GameFi space allow players to own these in-game assets, such as weapons, avatars and virtual lands, either by purchasing them or earning them by participating in gameplay. The introduction of GameFi’s play-to-earn model enables gamers to earn tokens by taking certain actions and reaching levels in the game, which translates into economic rewards outside of the gamespace.

GameFi brings value to gaming assets by enabling the ownership and trading of these assets via the use of NFTs, marketplaces, and exchanges, which can be centralized, or decentralized. One of the core products of the Agora ecosystem is a GameFi-focused decentralized exchange (DEX). 

The Exponential Growth of GameFi

GameFi Daily Active User (DAU) Growth 

The amount of daily blockchain gamers has also shown impressive growth. According to Footprint Analytics, during the period of 1st March 2021 to 1st February 2022, the daily active users on blockchain games rose from 63,000 to over 1 million. This represents an increase of over 2100% in just under one year. 

The Rise of Axie Infinity

Since 2020, the GameFi sector has experienced phenomenal growth. Top blockchain game and the first play-to-earn game to take off, Axie Infinity, saw its token AXS rise from a market cap of $7.75 million on 4th November 2020 to almost $10.5 billion on 8th November 2021. That is an increase of over 135,000% in just one year. Since November 2020, the crypto market has taken quite a hit, entering a bear market. As of 23rd September 2022, the market cap of Axie Infinity was $1.85 billion, which is still an increase of 13,900% since the 4th November 2020 figure. This shows that the GameFi market has the promise for exponential growth, although projects builst in it need to find ways of ensuring that the growth can be more sustainable.

To read more about the growth of GameFi in the last few years, check out this report by

Evolution of Gaming Business Models

Pay-To-Play (P2P)

Remember the classic coin slot arcade games that required actual cash to play? These retro games from the 70s were actually the forerunners of the pay-to-play (P2P) business model, in which players have to pay individually for each gameplay.

The introduction of home consoles, such as the much-loved Super Nintendo and Playstation, brought the single payment model, which enables gamers to invest once at the start, before playing the game as much as they want without any recurring payments.

By the late 90s, subscription models were introduced that enabled players to maintain access to the game by paying a recurring fee. This model was particularly popular with massive multiplayer online role-playing games (MMPORGS), such as World of Warcraft. Expansion packs and downloadable content then enabled additional sales for ‘skins’, weapons and other premium in-game features.

Free-To-Play (F2P)

With the F2P business model, players can access core standard features of the game for free. They are then encouraged to purchase in-game upgrades, including avatars, digital currency or the removal of ads.

This model became popular with the introduction of in-app purchases by Apple. Games like Angry Birds switched from their old premium P2P model to the ‘freemium’ model, allowing more users to access to their games and hooking them with premium features.

Play-To-Earn (P2E)

With the P2P and F2P models, the only way that players are able to monetize their gameplay is by entering tournaments or streaming their gameplay online, which means that the monetization of traditional gaming is only for developers, publishers and a select few professional gamers or gaming influencers. 

The P2E model, however, created an opportunity for any gamer to monetize their time spent playing games, which democratizes the monetization of gaming. With P2E games, gamers can earn fungible and non-fungible tokens (NFTs) by participating in gameplay. Those tokens can then be traded for other tokens or fiat money on exchanges and NFT marketplaces. 

With some blockchain games, like Axie infinity, gamers need to first purchase NFTs in order to access the game. This can be quite restrictive, considering that the price of two Axie NFTs was $300 at one point. Gaming guilds, such as Yield Guild Games, work to provide fair access by enabling gamers to borrow NFTs via scholarships, which gives them access to P2E games. The yield generated via the gameplay is then divided between the player, the guild and the treasury of the guild, which is governed by the guild’s community.

Use of NFTs in GameFi

Now we’ve explored all about play-to-earn games, you may be wondering ‘what is a GameFi token?’ Let’s explore all about what tokens are and different types of tokens you’re likely to come across in GameFi.

What is a GameFi Token?

Non-fungible tokens (NFTs) are blockchain records associated with a particular asset. Examples of fungible tokens or assets include the US dollar or Bitcoin tokens. There are many of them and they are all identical. NFTs on the other hand are unique and non-divisible. They can be seen more like a contract or deed that represents ownership of something. The main difference between fungible tokens and NFTs is that fungible tokens store units of value, whereas NFTs store data that contains information regarding what ownership the NFT represents. They are useful for representing ownership of intangible digital items, such as digital art or in-game assets, although they are also likely to be used to represent ownership of physical assets in the future. 

How are NFTs used in GameFi?

The main use case for NFTs in GameFi up until recently has been representation of in-game assets. This can include things like ‘skins’, avatars, and digital land. Some games require gamers to own an NFT gaming asset in order to access the game, and some enable gamers to earn NFTs based on their performance in the game. GameFi projects such as Decentraland and the Sandbox enable users to purchase digital land in the Metaverse. This enables the land investors to host digital content, such as assets and games.

There are also special types of NFT, known as Non-transferable Social Tokens (NTSTs), also referred to as Soulbound tokens, conceptualized by the popular game World of Warcraft. It is not possible to transfer this type of NFT to another wallet once it has been received. Soulbound tokens are being used in GameFi to assign achievements and behaviors on-chain. 

Why NFTs?

Permanence and Security

Because NFTs are stored on a blockchain, they last forever in a completely secure way. Meaning that when you own an NFT, no one can delete it or take it from you without your explicit permission.


Interoperability is the ability of systems (or blockchains in this case) to communicate with each other, by exchanging information or assets. Because NFTs are secured on the blockchain, it is possible to transfer them between games on the same blockchain. This enables gamers to use their assets in multiple environments and display them outside of the game or platform where they were earned or purchased. 

It is also now possible to transfer assets across blockchains via cross-chain bridges, as well as other solutions, such as Inter-Blockchain Communication, with platforms like Cosmos.


DeFi applications, such as exchanges and NFT marketplaces, enable gamers to sell their NFTs, meaning that gamers can monetize their gameplay.

Identity Visibility

Gamers have the ability to curate and display achievements or status externally to the games they play on, such as on a marketplace or other platform that enables them to connect their wallet.

Collectability & Investment

NFT gaming assets have the potential to grow in value over time, due to their rarity and the demand for them on marketplaces and exchanges. This makes it possible to collect gaming assets and use them as investment vehicles for generating wealth.

Additional Income Streams 

Anyone can create their own NFT collection and some projects, such as The Sandbox, enable creators to create their own characters, which can be sold on a marketplace.

GameFi Tokenomics

What is Tokenomics?

The topic of tokenomics encompasses how blockchain projects integrate economic incentives into their ecosystem via their native token and the use of NFTs. It covers how the token is created, how it is distributed, and how the supply and demand of the token is controlled to maintain and increase value. This can include things like incentive mechanisms and burn schedules, whereby tokens are burned in order to decrease the circulating supply, which increases the value of individual tokens that interested parties hold.

Token Distribution

There are a number of possible recipients of token distributions. Some include:

  • Stakers - A portion of tokens can be assigned to those who stake the native token in order to encourage holders to lock their tokens for the long term. If the project includes a blockchain network, this will support validation of the network.
  • Community rewards - To encourage gamers to adopt and use a game, projects usually allocate a portion of tokens to reward users for participating in the game economy. This was first introduced with the adoption of the play-to-earn model.
  • Team & Advisors - The team and advisors usually receive a token allocation to motivate them to deliver on the success of the project.
  • Liquidity -The treasury may set aside some tokens to ensure liquidity on exchanges, making sure that it is always possible to trade the token, regulate the price and prevent price manipulation.
  • Private investment rounds - Many projects raise early stage funding by selling a portion of their tokens to investors.
  • Public sales - This involves offering tokens to the public and raising further funding to develop the products.

Token Utilities

It’s important when designing tokenomics to build the use of the token into the products and ecosystem. This makes tokens as integrated as possible. Two of the most prominent blockchain games, Axie Infinity and The Sandbox, have token utilities that include:

  • Staking - This helps to validate the network and reduce token sell offs (more on this below).
  • Incentives - This is important to build a strong community from the beginning of the project.
  • Governance - Enabling the community to vote on proposals that influence the direction of the project is important for decentralized projects.
  • Buying NFT assets - Including the use of the native token as a currency for buying game assets promotes trading activity and can create token buy pressure.

DeFi Applications in GameFi


What is Staking?

Staking is enabled by blockchains that leverage a consensus mechanism known as Proof of Stake (POS). The consensus mechanism is the mechanism that enables the network of nodes (or computers) involved in a blockchain to validate individual transactions that occur in the network. It enables all transactions to be verified and secured by the network in an automated way, with no third party or intermediary.

Staking works by validators locking up a certain amount of the native token of a platform (a stake) in order to get the chance to validate a block of transactions and earn a reward in the native token of the platform. Individual holders of tokens can delegate their tokens to a validator pool and receive a reward for locking their tokens with the validator.

Why Stake GameFi Tokens?

Games that are built as  dApps (decentralized applications) on a blockchain that leverages POS can create their own native token and enable holders of the token to stake their tokens, via smart contracts. Stakers can receive staking rewards, which can come in the form of inflation (the project generates a certain amount of new tokens each year). Some DeFi platforms, such as DEXs, also give additional token rewards to stakers that are generated from fees that the platform accrues, based on use of the services they provide.

When you stake the tokens you hold, it means that you can counteract the effects of inflation on the overall value of the tokens you hold. When a token has built in inflation, it increases the amount of tokens in circulation and therefore reduces the value of each token in circulation. If there is not enough buy pressure for a particular token to increase the demand and price of that token, then inflation can cause significant reductions in value. When inflation is very high, that reduction in value can have a big impact on the overall value of your portfolio. 

Although, if your tokens are being staked, you can sometimes have a positive yield on your tokens, depending on how many other token holders are staking and the tokenomics of the project you are invested in. When you stake your tokens, you also provide the necessary requirements for a network to be secured, which supports the network of the project you have invested in. Based on the duration you stake your tokens, some projects enable you to earn higher rewards or have certain rights, such as participating in governance of the project via a Decentralized Autonomous Organization (DAO). This means that you can have an influence on the future of the project, together with the rest of the DAO community. 


Lending of digital assets in GameFi has started to take a few forms. As previously mentioned, due to the high cost of entry to certain games that require NFT ownership to access the game, Guilds such as Yield Guild Games (YGG) are enabling gamers to borrow NFT gaming assets that they purchase with their treasury funds. Lending platforms like ReNFT enable peer-to-peer lending of NFTs to be done in a secure way using smart contracts.

Loans provided by protocols such as Metalend are another use case of lending in GameFi. They enable owners of digital land from Metaverses like The Sandbox and Decentraland to secure loans, using their digital land NFTs as collateral. This enables digital landowners to put their NFTs to better use and borrow digital assets, such as Ethereum, against their gaming NFTs. It is possible to continue the use of digital assets on P2E games while they are in the Metalend protocol. 

Liquidity Mining

Another way of generating income on your GameFi tokens is liquidity mining. For DEXs to operate and enable the trading of tokens, they require liquidity providers to deposit their tokens into liquidity pools. 

When you deposit your token into a liquidity pool on an exchange, you receive tokens that represent ownership of the pool and rights to receive rewards in the form of fees that are generated from trading activity on the token pairs that you have provided to the pool, also known as LP tokens (liquidity provider tokens). You can also earn additional rewards in the native token of the DEX.

Benefits of GameFi

Benefits for Players

Earn for Playing

As mentioned, GameFi has taken gaming from a place where only game developers, publishers and a select few gamers are able to make money from gaming. GameFi has enabled all players to benefit financially from the monetization of gaming.

Asset Ownership

Vitalik Buterin has previously said that he was driven to build Ethereum after his World of Warcraft in-game asset was removed. GameFi clearly enables gamers to take full control of their gaming assets and even own and profit from digital lands in the games.

More Control for Players

As well as taking control over the gaming assets players accumulate, via NFTs, blockchain games enable players to take control of the development and future of the games they play, via the use of tokens that allow for governance participation. This has moved gaming from centralized decision-making to democratized governance.

Benefits for investors

Exponential Growth Opportunity

GameFi has grown rapidly over the last two years and it is still in the early stages, with many predicting continued exponential growth. This presents a huge opportunity for investors to get involved. According to The Block Research, investment deals for NFTs and gaming went from one of the smallest sectors at the beginning of 2021 to the largest by the end of the year.

Multiple Investment Assets

GameFi presents many investment opportunities, including investing in fungible tokens, as well as gaming assets and digital land in the form of NFTs.

Warren Buffet was famously quoted as saying that cryptocurrency is “not a productive asset”. On the contrary, ownership of gaming NFTs presents many productive investments, such as yield from lending in-game assets and digital land, as well as much higher value growth potential than traditional investment assets. 

There are many ways of earning on gaming tokens, such as staking, lending and liquidity mining, which investors can profit from by getting involved in early GameFi projects. This can involve participating in token public sales, NFT launches, and even creating and joining communities to invest in private sales of new games.

Top Blockchain Games

The Sandbox

As one of the first movers in the Metaverse space, The Sandbox provides an interconnected digital world of game experiences. It consists of thousands of land plots of varying sizes. People are able to purchase these land plots and build their own creations on them, including games, social hubs, or whatever they decide to use their land for. 

Axie Infinity

Axie Infinity is one of the most prominent and successful play-to-earn games. Players can collect and breed Pokemon-like creatures, known as Axies. It is an Ethereum-based game that enables players to own and trade their in-game assets and earn cryptocurrency in the form of the native tokens AXS and SLP. Players are required to own Axies and hold them in their wallet in the form of NFTs in order to get access to the game.

Gods Unchained

Gods Unchained is an Ethereum-based free-to-play trading card game, where players compete in duels, using fantasy cards, which players can own via the use of NFTs. Players are able to earn staking rewards in the native token GODS. The game has over 450,000 registered players and enables gas-free NFT minting and trading, via its integration with Immutable X. 


Operating on the Hive blockchain, Splinterlands is an NFT card-based game that has different factions, known as ‘Splinters’. Players are able to play, trade and earn in-game rewards on mobile and desktop. There are a variety of in-game activities that enable players to earn rewards daily, including quests and tournaments.


Pegaxy is a player versus player (PVP) play-to-earn mythical horse racing game. Players can participate in PVP horse races and earn the native token VIS. Pegaxy offers users multiple ways to earn in the game. This includes: breeding Pegas, profit sharing via renting game assets and the ability to buy and sell the game’s NFTs on the Pegaxy marketplace.

Rankings have been taken from Play To Earn, which ranks games based on the following criteria:

  • Quality
  • Fun
  • User base
  • Potential earnings
  • Play-to-earn mechanics

Top GameFi Blockchains 

Some blockchain games are launched with their own blockchain, but most are built as  dApps and require a solid blockchain ecosystem in order to develop the smart contracts that power their application. The following is a breakdown of the top five blockchains for GameFi, based on the user count of games deployed on the network, as of 18th January 2022:


With 315,762 users and 356 protocols built on its platform, Hive first launched in March 2020. Hive was created as a fork of the centralized Steem blockchain, and has now been developed into a decentralized blockchain.

Binance Smart Chain (BSC)

Binance Smart Chain was launched by the centralized exchange, Binance, in September 2020. With 213,739 users and 81 protocols, BSC was built using a Proof of Stake consensus mechanism, known as Tendermint, which is the consensus mechanism of the Cosmos multi-chain ecosystem.


WAX, which stands for Worldwide Asset Exchange, launched in June 2019 as a place to trade virtual items, such as in-game assets and virtual lands in metaverses. With 138,716 users and with 53 protocols, WAX was created by the team, OPSkins, which is a leader in the virtual trading item industry, already serving millions of customers.


With 110,799 users and11 protocols, Ronin is an Ethereum side-chain, built specifically for the game Axie Infinity by games publisher Sky Mavis. Launched in February 2021, Ronin enables users of Axie Infinity to send and receive NFTs and tokens without paying any gas fees, while still benefiting from the security and decentralization of the Ethereum network.


Having 95,607 users and 1 protocol, Polygon launched in May 2021. Polygon is a layer 2 side-chain that runs alongside Ethereum, enabling faster transactions and lower fees, while maintaining the decentralization and security that Ethereum users are used to. The native token is MATIC, which is used to govern and secure the network, as well as to pay for network transaction fees.


How to get started with GameFi

There are now many blockchain games on multiple blockchains, so how to get started depends on what game you are interested in and the chain it operates on. It also depends on how you want to get involved, i.e. if you want to play games and earn cryptocurrency, or if you want to get involved as an investor in tokens and NFTs. Whatever you decide your goals are, there are a few things that are necessary for everyone to get started, including: 

  1. Setting up your wallet

All decentralized applications, including blockchain games, require a crypto wallet in order to manage the tokens you buy, sell and earn. There are different types of wallets, including browser wallets, mobile wallets and hard wallets. You will require a browser plugin-based wallet to play most blockchain games. One of the most well known is Metamask, although there are some networks that have their own wallet and require you to set up the specific wallet that is compatible with their network. This video will help you learn how to get set up with Metamask.

It is strongly recommended to additionally use a hard wallet when managing large amounts of funds. This makes your assets more secure, as it makes it impossible for someone to hack your wallet and get access to your funds, unless you give them the access to your private key. This adds some complexity to your setup, so make sure you will be able to manage setting it up or get someone you trust to help you (without giving them access to your private key!). Be sure to store your private keys in a very safe place on a piece of paper and not on any digital device that can be hacked. One commonly used hard wallet is Ledger.

  1. Connecting your wallet

In order to interact with a blockchain game, you will need to connect your browser wallet to the game. If a game has the possibility of a side-chain with lower transactions, you might want to look into leveraging the side-chain. This can massively reduce the cost and speed of your transactions. This video will give you an example of how to get set up with Metamask using the Ronin side-chain.

  1. Add tokens or NFTs to your wallet

Most blockchain networks will require that you have a certain amount of the native token of that network in order to pay for transactions. For games on the Ethereum network, you will be required to hold some ETH on your wallet to cover the cost of transactions. It is recommended to use decentralized exchanges (DEXs) for purchasing cryptocurrency, so that you can be sure that your funds are secure, as long as you are using a hard wallet.  Here’s an example of how to buy ETH on Uniswap, one of the most prominent and safe DEXs.

Some games, such as Axie Infinity, will require you to hold NFTs on your wallet in order to access the game. Check out this example of how to purchase Axies using the Ronin wallet.

Future of GameFi

Naavik and BITKRAFT estimated the global gaming market size to be over $335.5 billion in 2021, with the number of gamers predicted to rise to over 3.07 billion in 2023 from a figure of 2.69 billion in 2020, according to Newzoo. According to, based on historical growth data, GameFi daily active users will grow at a compound annual growth rate (CAGR) of 1000%, increasing from just over 1.06 million in Q1 2022 to 12 million by Q1 2023. Gabby Dixon, Co-Founder at Yield Guild Games, has predicted that there will be 10 million wallets interacting with blockchain games by the end of 2022.

All of these insights are based on historical data of which there is limited information, due to the early stage of the GameFi sector. What could be the most interesting precipitator of growth in GameFi will be the adoption of and transition to GameFi for the traditional gaming market, which clearly represents a huge market compared to the number of users interacting with blockchain games presently. 

What is interesting is that there are some traditional gaming giants already exploring GameFi projects such as Ubisoft, Square Enix, Microsoft and Epic Games. Agora is building a digital identity that will make it easy for Web 2 users to transition to GameFi, which will enable this transition from traditional, centralized gaming to GameFi.

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