What is GameFi? An introduction to play-to-earn and blockchain games

GameFi represents a revolutionary convergence of gaming and finance, transforming how players interact with video games through blockchain technology. With a market capitalization continuing to grow substantially, this emerging sector is positioned to disrupt the $175 billion global video games market. The success of titles like Axie Infinity, which has generated significant value in total in-game asset sales, has captured the attention of traditional gaming industry giants such as Ubisoft and Square Enix, signaling a significant shift in the gaming landscape.

What is GameFi?

GameFi refers to the financialization of video gaming, combining the words "game" and "finance" in a manner similar to the popular crypto term DeFi (decentralized finance). This broad term encompasses various blockchain-based games that integrate financial elements in different ways. Some GameFi titles reward players for completing in-game tasks, while others enable players to generate income through the sale of owned digital assets. It's crucial to distinguish GameFi from gambling, as these games require players to employ skill and strategy rather than relying primarily on chance. While luck may play a role, it is not the dominant factor in determining success or financial rewards.

The term GameFi originated in November 2019 at the Wuzhen World Blockchain Conference in China, where MixMarvel founders discussed how blockchain technology could revolutionize gaming. The term gained wider recognition in the West through discussions by Andre Cronje, founder of Yearn. Despite the recent popularity of the term, GameFi's history extends nearly as far back as Bitcoin itself, with early examples including Minecraft servers with BTC integrations and projects like Huntercoin. The launch of Ethereum in 2015 opened new possibilities for developers through sophisticated programming capabilities, enabling the creation of blockchain games like CryptoKitties, which leveraged NFT technology to represent in-game assets.

How do GameFi games work?

GameFi operates through various mechanisms that allow players to generate value through gameplay. The most popular blockchain games today typically combine several key features to monetize player activity. Play-to-earn mechanics reward players with financial incentives for completing gameplay objectives, with funds typically distributed from a reserve of native tokens held within smart contracts. For instance, Axie Infinity rewards players with AXS tokens for winning battles, maintaining land plots, marketplace trading, and breeding Axies.

Asset ownership represents another fundamental pillar of GameFi, leveraging blockchain technology to establish true digital scarcity through NFTs. These tokens can represent diverse in-game items, creating economic opportunities previously impossible in traditional gaming. Players can breed creatures, sell assets, or lease them to other gamers, sharing generated profits. Virtual worlds or metaverses like Decentraland, The Sandbox, and Cryptovoxels enable inhabitants to monetize their time through land ownership, with owners able to develop attractions, lease property, or sell land outright. These virtual spaces are witnessing the emergence of functional economies, with businesses hiring real people for virtual positions.

Additionally, some GameFi projects incorporate DeFi features such as yield farming, liquidity mining, and staking, providing passive income opportunities for gamers. Titles like Axie Infinity, Aavegotchi, and Nine Chronicles exemplify this integration of DeFi mechanics into gaming ecosystems.

Top GameFi protocols

While early GameFi titles utilized the Bitcoin blockchain, most modern blockchain games operate on smart-contract-enabled networks. Ethereum remains a popular choice for developers and gamers, despite being optimized for decentralization and security over performance. However, Ethereum's limited block space and resulting high transaction fees during periods of high demand have prompted many developers to migrate to faster, higher-capacity networks. Popular alternative protocols include various Layer 1 and Layer 2 solutions, Polygon Network, Solana, Wax, Polkadot, and specialized gaming chains like Ronin. These platforms offer improved performance characteristics that make blockchain gaming more accessible and affordable for mainstream audiences.

How to get started playing blockchain games

Entering the world of GameFi requires several essential steps, though specific requirements vary by game. First, players must create a Web3 wallet compatible with the game's underlying blockchain network. Unlike traditional gaming accounts, blockchain games use Web3 wallets for user identification, with various wallet options available depending on the specific GameFi platform and its underlying blockchain.

Second, players typically need to acquire specific in-game assets before playing. Many GameFi titles, such as Axie Infinity, require ownership of certain NFTs or digital currencies, which can be purchased through cryptocurrency exchanges or directly through the game. Finally, players log in through their Web3 wallet by visiting the game's website and connecting their wallet, which serves as both their account and item inventory. The wallet saves all progress and houses any assets used in gameplay, enabling a seamless gaming experience across compatible titles.

Decentralizing GameFi with DAOs

GameFi projects are pioneering new governance models through decentralized autonomous organizations (DAOs), extending decision-making power from centralized studios to players themselves. In a DAO structure, token holders can propose and vote on project updates that directly impact game features and monetary mechanics. Participation requires ownership of the project's governance token, with voting power typically proportional to token holdings.

Examples of GameFi DAOs include title-specific organizations like Alien Worlds, which features six DAOs representing different planets in its MMORPG universe. Cross-game DAOs like Yield Guild Games harness value from multiple play-to-earn titles, pooling in-game assets through the main DAO and title-specific sub-DAOs to enable collective income generation for members. This democratization of game development represents a significant departure from traditional centralized studio control.

The state of GameFi today

GameFi has demonstrated remarkable resilience and continued evolution as a sector. Developers continue refining their projects and showcasing innovative gameplay mechanics through attractive trailers, drawing interest from players seeking asset ownership, crypto earnings, and participation in decentralized communities. The GameFi ecosystem continues to expand with new titles promising to drive further interest and increase unique active wallet numbers upon their public release. The sector's momentum suggests continued expansion as more polished projects enter the market and established game developers embrace blockchain integration.

GameFi obstacles and roadblocks

Despite promising developments, GameFi faces significant challenges in achieving mainstream adoption. The primary obstacle concerns gameplay quality, as many GameFi titles prioritize earning mechanisms over engaging gameplay experiences. Compared to polished Web2 games like Hearthstone, blockchain alternatives such as Gods Unchained often lack the strategic depth and production quality needed to compete with established titles. Without compelling gameplay, GameFi projects struggle to maintain active player bases and justify continued development investment.

Additionally, GameFi must overcome negative perceptions surrounding NFTs, particularly following controversies that have affected player trust. This stigma has influenced mainstream audiences' perception of NFT value and GameFi economics. To succeed, new titles must create transparent and fair NFT ecosystems that move beyond unsustainable models, potentially through redemption systems establishing intrinsic value or clear utility definitions for purchased NFTs.

The future of GameFi

Despite historical roots tracing to cryptocurrency's origins, GameFi continues to evolve toward mainstream appeal. The sector's growth potential is exemplified by successful titles that have achieved significant milestones in token sales and active player engagement. The technology and understanding supporting blockchain games have matured to the point where new titles are finding substantial fan bases, with many industry commentators viewing gaming as the most likely pathway to widespread blockchain adoption.

The global gaming audience of over 3 billion players already understands concepts like digital scarcity, tokenization, and in-game currencies, making them ideal candidates for blockchain gaming adoption. Organizations like the Blockchain Game Alliance, featuring members including Ubisoft and AMD, are working to raise awareness and legitimacy for the sector. Major publishers' focus on GameFi signals growing mainstream industry interest.

Given the success of established GameFi projects and the numerous blockchain games currently in development across various protocols, GameFi clearly has a promising future. While features like play-to-earn mechanics and asset ownership will remain prominent, the rapid evolution of blockchain technology ensures continuous innovation. These breakthroughs will introduce new monetization methods and gaming experiences, potentially capturing increasingly larger portions of the $175 billion global video games market.

Conclusion

GameFi represents a transformative force in the gaming industry, merging financial incentives with interactive entertainment through blockchain technology. From its origins in early Bitcoin integrations to today's sophisticated play-to-earn ecosystems and virtual metaverses, the sector has evolved dramatically. While challenges remain—particularly regarding gameplay quality and NFT perception—the fundamentals supporting GameFi's growth are strong. With major industry players entering the space, innovative DAO governance models emerging, and technological capabilities continuously improving, GameFi is positioned to reshape how billions of players worldwide engage with video games. Success will ultimately depend on developers' ability to prioritize fun, engaging gameplay while maintaining the transparent, fair economic systems that make blockchain gaming unique. As the technology matures and mainstream adoption increases, GameFi's potential to revolutionize the gaming industry becomes increasingly tangible.

FAQ

What does GameFi mean?

GameFi combines gaming and finance, allowing players to earn real money through gameplay. It uses blockchain technology to create a new gaming model where in-game assets have real-world value.

Can you make money from GameFi?

Yes, GameFi offers multiple ways to earn. Players can make money by playing games, staking tokens, and trading in-game assets. Successful projects can provide substantial rewards.

Which is the no. 1 game to earn money?

As of 2025, Axie Infinity remains the top play-to-earn game, offering significant earning potential through its NFT-based ecosystem and cryptocurrency rewards.