GameFi, which has become popular in the post-epidemic era: How far is the trillion-level market from us in the future?

Since the beginning of 2020, the global epidemic has caused widespread economic problems. Except for China, almost all major economies in the world experienced negative growth throughout 2020.

Since entering 2021, the impact of the new crown on the economy has not only not weakened, but has become increasingly stronger, so much so that a new term has emerged: the post-epidemic era.

And with this era as the background, the concept of metaverse and the concept of blockchain metaverse emerged: GameFi.

01The gaming industry in the post-epidemic era

In the post-epidemic era, measures such as "maintaining social distance", "reducing gatherings and activities in public places", "reducing international flights", and "regional or individual isolation" have almost brought consumption and business activities to a standstill, and the global real economy has recovered slowly.

At the same time, the demand for the gaming industry that can provide online social interaction and entertainment has skyrocketed. Amid different epidemic prevention policies around the world, games provide people with a way of social interaction that is different from traditional entertainment.

With the changes of the times, the negative connotations that previously attached to gaming as an entertainment activity have gradually faded, and this epidemic has undoubtedly accelerated this process.

Today, as the global economy and social life are gradually recovering from the epidemic, we are beginning to truly feel the role played by the gaming industry. When people are confined indoors due to the epidemic, the significance of games has far exceeded the role of a single form of entertainment itself.

According to relevant statistics, since 2020, under the epidemic situation, players' participation and spending in games have surged. Compared with 2019, it soared from US$144.4 billion to US$177.8 billion, an increase of 23.13%.

However, under the epidemic, remote work and supply chain disruptions will continue to bring challenges to the gaming industry. The release of many games has been postponed. Especially for the console game and PC game markets, the negative impact of the second-order effect has become more prominent in 2021 and will affect the overall market revenue.

After March 2021, the concept of the metaverse began to become popular. Based on the general framework of the metaverse concept, the phenomenal GameFi game based on blockchain technology was born, as well as the popularity and application of DeFi and NFT. GameFi's highly potential performance continues to break through the traditional game industry gameplay and has become the focus of the market.

The application of the P2E model allows GameFi to not only realize the social and entertainment aspects of the game, but also provides users with a scenario where they can earn rewards through blockchain games.

However, GameFi's market projects are generally of mixed quality, and some blockchain games were hastily launched without being fully developed, which has given participants a negative view of the entire industry.

Therefore, the current development level of the GameFi market in the blockchain metaverse and the future development prospects of GameFi have become topics of common concern in the industry.

02 GameFi under the framework of the Metaverse Economy

It is undeniable that the Metaverse is the key point for GameFi to become popular and generate sustained popularity. The integration of the Metaverse economy and the digital economy is the basis for GameFi to realize the P2E economic model.

The digital economy is an economic activity that uses data as the main production factor, including the production, circulation, and consumption of physical products, as well as the creation, exchange, and consumption of digital products. The Metaverse Economy strictly limits the creation, exchange, and consumption of digital products to be completed in the digital world.

As a special form of digital economy, the particularity of the metaverse economy is mainly reflected in the collapse of the "economic man" assumption, the value is determined by identity rather than labor, the marginal cost is reduced, the marginal benefit is increased, and the transaction costs are approaching zero.

The generality is reflected in the compliance with the basic principles of economics: the larger the market size, the more prosperous the economy will be.

The main features of the Metaverse economy include digital creation, digital assets, digital markets, digital currencies, and digital consumption. Its characteristics are significantly different from the traditional economy, manifested in the unity of planning and market, production and consumption, supervision and freedom, and behavior and credit.

Therefore, the metaverse economy will become the only option for many industries in the future.

Under the metaverse economy, GameFi naturally possesses all the characteristics of digital creation, digital assets, digital markets, digital currencies, and digital consumption.

Blockchain games have deviated from the basic scope of games, and the way of playing has become the rules of visual finance. People seem to be "playing games" under these rules, but in fact they are participating in a certain financial system.

The game itself uses the distributed structure of blockchain to confirm the ownership of all game assets and props, and players can freely trade the assets of the chain game.

03GameFi’s development history and current status

Based on the fact that the traditional game Free-To-Play model can no longer meet the higher-level pursuits of players, the Play-To-Earn game model of blockchain GameFi has opened up a new model for the gaming industry. Players have gone from spending money to buy gaming experience to playing games to participate in game construction and profiting from it, which has become an important way to achieve more in line with the metaverse economy.

GameFi's "play and earn" model has extremely rapid user fission and has been widely regarded as a new field in the blockchain with the lowest threshold and the easiest to implement.

GameFi's integration of DeFi, NFT, and games has made blockchain no longer limited to mainstream digital assets. According to DappRadar statistics, the transaction volume of the blockchain game sector in the first half of 2021 has reached 480.7 billion US dollars. As of mid-November 2021, the number of blockchain game players worldwide has exceeded 3 million.

GameFi's decentralized operations, data credibility, consensus algorithm, anonymity and cross-platform, virtual asset rights confirmation, and breakthroughs in the isolated economic effect have become the most promising areas in the blockchain world.

Of course, the development of GameFi did not happen overnight. The current GameFi field has gone through at least the following three stages of development: the 1.0 era represented by DAPP games and gambling games, the 2.0 era with Play-To-Earn as the core of the new economic model, and the GameFi era with blockchain + DeFi + NFT + metaverse.

1. GameFi 1.0 era: DAPP chain games

Around 2017, blockchain games with blockchain + games + art as the core were born and were considered to have long-term development potential. At that time, blockchain games actually already had some of the characteristics of NFT. Every game character and prop had its data on the chain, and at the same time, they were unique and scarce.

GameFi 1.0 allowed people to see the possibility of combining blockchain and games for the first time. At the same time, Chain Game 1.0, which was born by combining the characteristics of blockchain such as "transaction attributes" and "unique private assets" with the gameplay, also triggered the market's first attention and trial of DeFi.

However, since GameFi 1.0 is presented in the form of DAPP, its game graphics and running speed have significant problems.

First of all, the game screens are mostly presented with low-precision characters. Although they are unique, for most people's aesthetic tastes, they do not trigger people's desire to collect them.

Secondly, since DAPP was built directly on the public chain, the sharding technology, on-chain and off-chain separation computing, and parallel chain technology were still not perfect at the time, resulting in most chain games in the GameFi 1.0 period being criticized for being relatively congested.

2. GameFi 2.0: Play-To-Earn

In the second half of 2020, the Play-To-Earn business model was applied in the blockchain game field. In fact, the so-called P2E model was not first used by blockchain games. In the early games such as "Legend", "World of Warcraft", and "Westward Journey", players could make profits by selling equipment and game coins offline.

GameFi 2.0 simply extends this model. Although some people can make money through game gold farming and selling game props in traditional P2E games, they cannot trade directly in the game and must move offline.

GameFi 2.0 transfers this economic model into the game, while eliminating the gaming fees for players. Players no longer obtain gaming experience from game developers, but instead "work" for the game. The more people play the game, the faster the game will speed up and develop, and players can also benefit from the game's development dividends.

The biggest feature of GameFi 2.0 is to earn real money through NFT games based on encrypted digital assets.

Therefore, GameFi 2.0 has obvious advantages over NFT and DEFI. First of all, GameFi 2.0 solves the traffic problem in the early stage of a blockchain project.

In other areas of the blockchain industry, if ordinary people want to participate in it, they must master certain blockchain knowledge, and even have certain research on wallets, chains, and computers before they can play in this field. The income that can be obtained is not necessarily stable.

GameFi 2.0 has lowered the entry threshold, and the intuitive benefits have attracted a large number of players who are not interested in blockchain to join. Some players do not understand blockchain technology, but this does not prevent them from making money in GameFi.

Secondly, GameFi 2.0 is not a pure game. The integration of the NFT concept prevents the game from having excessive liquidity and depreciating game assets due to an increase in value. The mapping of the financial system is the core of GameFi.

Finally, GameFi 2.0 has a very high player retention rate. Players can dominate the development of the game through DAO governance. Players’ destiny is in their own hands, which also makes players feel more at home in GameFi 2.0’s chain game.

3. The current situation of GameFi: the era of the metaverse

GameFi has gone through the 2.0 era in a very short period of time, and has now entered the era of chain game metaverse, which is integrated with the concept of metaverse and combines NFT, DEFI and the real financial system.

The Metaverse blockchain gaming era provides an open finance that fits the free sharing characteristics of games, and can provide financial services including transactions, lending, and insurance to help reduce the creation costs and monetization costs of game players.

However, the current metaverse era is still not mature enough. Some of the GameFi chain games are old chain games. The dividends of GameFi 2.0 have allowed these chain games with long development time and stable returns to occupy a larger market share.

Another part of the blockchain games are hyped for the purpose of rapid launch and catching up with the "metaverse" craze. Therefore, the current metaverse era needs to settle down, and higher-quality blockchain games are needed to set an example for other blockchain game projects.

04 The future of the trillion-level GameFi market

In 2020, amid the COVID-19 pandemic, players' gaming participation and spending surged, soaring from US$144.4 billion to US$177.8 billion in 2019, an increase of 23.13%.

The world's top 100 listed game companies generated a total revenue of US$166.3 billion, a staggering year-on-year increase of 23%, accounting for 94% of the total game market revenue in 2020. It is estimated that around 2024, the total global game market will exceed US$300 billion (about RMB 1.8 trillion).

As GameFi's impact on traditional games becomes more and more obvious, with GameFi's rapid growth trend, it is not far away to reach a trillion-dollar scale globally. From the industry's perspective, GameFi's real growth opportunity should last about 5 years.

The future GameFi market will be more segmented. Earning small profits through blockchain games and advertising through blockchain games will be the real future of games.

05 Summary

The blockchain metaverse is certainly not limited to GameFi, but at present, GameFi is the best expression of the blockchain metaverse. In GameFi, all blockchain social, entertainment, financial, and even economic systems can be integrated with chain games.

Just as we look forward to the Internet metaverse, the dividend effect of the blockchain metaverse is even more worth looking forward to.