GameFi today: greed, cupidity, and money-making opportunity?...
Over the past year, the GameFi market has shown that more and more gamers are looking to play and make money at the same time. The total capitalization of such projects has already exceeded the $15 billion mark. Still, while everyone keeps saying that the trend stands for the future and that we need to invest in new projects, we decided to do our own investigation and find out what's behind this latest trend.
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Just to say that besides examining crypto projects whose coins and tokens are listed on crypto exchanges, we also investigated major gaming companies that have been actively trying to make money from this trend. We chose Axie Infinity to start with, a game that stands as a benchmark for the GameFi sector.
On the surface, everything looks pretty good. Funny graphics, fun music. Your main task in the game is to create your own Axie fairy creatures. You can breed them, mix them up with other creatures and sell them, or upgrade them to fight against NPCs or other players. Thanks to an elaborate system, each Axie has unique properties hard to replicate. Therefore, players focus on raising their own unique army of little monsters.
The project's financial part consists of two tokens, namely, Small Love Potions (SLP) in-game currency. You can earn it through battles with NPCs or real players. It can be spent to create and improve your creatures. It can also be exchanged for a second AXS token, which is used as a cryptocurrency to either inflate or withdraw money.
The game was launched in 2018 but gained great popularity in 2021. Back then, its market capitalization reached a record $10 billion in November 2021.
Everything seems quite good, unless we look closer at this project. In fact, the first question we posed was as follows: Where do the creators get the money to pay out to the players? The answer is simple: to start the game, players must first buy at least three creatures for real money. Then, you can use real money to speed up the evolution of your character. After that, the money received is distributed to the best players, while the company gets its own benefit in the form of a commission for each transaction. Thus, we see a regular gambling game, like the ones that exist in any casino. Everyone invests in a bet (or as in our case, monsters) and only a few of those who invest win.
So, how is it that Axie Infinity has become mega popular and reached such a big capitalization? Our special thanks go to CNBC America, which in May 2021 published a big report on how Indonesians play the game and earn more money than half the population in the country. Since then, other media have picked up on the story and Axie Infinity's capitalization has skyrocketed.
However, such a scheme has one crucial drawback: it requires a constant influx of new players who will bring in more and more money. If not, the new money flow will end. The AXS rate will drop and, as a consequence, players will no longer want to play it, since it is not played for fun, but only for the money. By the way, the dying process is already underway. In 2021, Axie Infinity held the top spot in terms of capitalization, but today it has already slipped down to third place with a total of $3.6bln. If developers succeed in finding a new player market, the capitalization will rise again, but sooner or later the game will reach its end, since there is not an infinite number of gamers in the world.
However, last year's smashing success of this game has sparked a series of other games featuring a similar principle of raising money: you make an initial purchase with real money and then compete against other players for it. Each of these games is driven by the greed of the developers, who don't care much about making an interesting story, a user-friendly interface, or realistic graphics; instead, they promote the idea of making money. Oddly enough, people fall for it. Don't believe us? See how many people play the similar Mir4 game.
While small developers are greedy, big gaming corporations tend towards cupidity. However, they cannot replicate the same stunt of smaller companies, since they must obtain a special license when setting up such schemes, like the licenses obtained by casinos in Las Vegas. They also have to impose restrictions on games for users under 18 or 21 and keep track of that (it is not clear how to do that if gamers live outside the US). Anyway, this way of making money is quite risky for them because of the state regulators who might slap them on the wrist.
However, that does not stop them from trying to develop their own schemes to make money from gamers. Such an example is Ubisoft Quartz, whose beta testing began on December 7, 2021.
The project offers a special platform where you can buy and sell in-game items as NFTs. They are stored on the Tezos blockchain network. The collections will be released in limited editions, the first of which will include items for Tom Clancy's Ghost Recon Breakpoint game. Players can both buy and sell NFTs to other players, thus making money from the most popular items.
At the same time, Ubisoft has assured that the items won't affect the features of the characters but will serve as accessories. In addition, the company is not planning to charge a transaction fee for transactions between players (although we believe that commissions will definitely be introduced in the future, otherwise why bother creating it all? To help players make money for free?).
What we see here is that there is no money-making gambling scheme. Instead, it offers earning on short-term trends regarding certain games and stuff. On the whole, it has a better quality than the previous method, since companies offer high-quality games that also let you make money. So what's the problem? Ubisoft repeats the main mistake of small companies, namely, they focus on providing money-making opportunities for players, rather than on the game itself. The Ubisoft Quartz platform won't attract gamers who are fans of certain games, but ordinary traders involved in buying and reselling items. At the same time, gamers get nothing in return: it is cool to get nice skins, but not for much money.
Another curious version of cupidity comes from the DMarket platform, a marketplace for buying and selling virtual items from various games. In fact, it is a more advanced model of Ubisoft Quartz. But unlike the latter, it offers the sale and exchange of items from different games of various companies. It also runs on blockchain and creates NFTs.
While the companies formally deny such platforms, they implicitly support them since it increases the number of players in their games and consequently brings them money through micro-transactions when buying loot boxes or individual skins, which are then offered for sale on grey market platforms such as DMarket.
A money-making opportunity?
So, are there any opportunities to make money at GameFi? Our answer to that is yes, there are. But only for those who really want to do it in a focused way. All you need to do is track down the most promising projects and start playing them as early as possible, since the first one to start is the one who can make much money.
However, we believe that once the first wave of trends calms down, there will be really interesting GameFi projects coming onto the market. Success awaits those projects that will help players do useful things, such as assisting in scientific research, solving math problems, creating their own content, etc.
For instance, the well-known Eve online game is actively cooperating with scientific institutes. Scientists help them introduce special content into the game, where gamers can assist in solving scientists' problems, like researching DNA or identifying exoplanets. But what stops developers from charging institutions and paying the money to the players who achieve the best results? In this case, instead of gamers, the money would come from the institutions. Moreover, the players will do something useful rather than compete over who has the biggest...
Another example is Fortnite. They can raise money from advertisers to pay their players for creating interesting skins, running tournaments or other events. Either way, some generosity towards gamers would increase activity and the number of players, thus attracting new advertisers.