Blockchain games or financial games? The current state, issues, and breakthroughs of GameFi

Where is GameFi really hot? Where is it cold in reality?

Since Axie Infinity caused a stir, the entire crypto community has been discussing one question: What is GameFi, and why does it attract so many players? The more painful question is—why has the once-booming trend now fallen silent?

Simply put, GameFi combines “playing games” and “earning money.” It sounds enticing, but the truth behind it might be more complicated than you think.

First, let’s clarify: What exactly is GameFi?

A blend of gaming + finance

The term GameFi is a portmanteau of Game and Finance—it refers to a gaming ecosystem based on blockchain technology that offers economic returns to players.

In this ecosystem, players are not just passing time. They complete quests, defeat opponents, and clear levels to earn cryptocurrency and NFT rewards. Most importantly, these rewards are valuable not only within the game but can also be traded outside the game—this is the fundamental difference from traditional games.

Playability vs. Financialization: An eternal contradiction

When discussing the current state of GameFi, we must face an awkward fact: Most so-called “games” are actually DeFi applications disguised as games.

Taking the most popular projects—Axie Infinity, DeFi Kingdoms, Wolf Game—these “stars” that received huge funding during the last bull market are essentially financial products, not real games. Anyone who has played truly good games like Stardew Valley would laugh when hearing that DeFi Kingdoms is “the future of gaming.”

P2E Model: Sounds great, but in reality, it’s tough

P2E (Play-to-Earn) is the core selling point of GameFi—playing while earning.

How do traditional games work? You pay to buy them (like Call of Duty), and then all your in-game assets are controlled by the publisher, so you can’t earn a penny. P2E games promise: you own your assets, and you can make money.

Take Axie Infinity as an example: players use NFT pets “Axie” to complete daily tasks and PvP battles to earn SLP tokens. If they reach a certain level, they can also earn governance tokens AXS. These tokens can be used to breed new Axies or traded for cash directly.

Sounds good? But the problem is—entry barriers are high. You need to buy at least 3 Axies, which could cost hundreds or even thousands of dollars initially. When will you break even? Maybe in several months. And all of this depends on the token price; if the price drops, your dreams collapse along with it.

This has also led to the “scholarship” model: NFT owners lend game assets to players, sharing profits. It seems mutually beneficial, but in reality, it increases players’ risk perception asymmetrically.

Does the gaming industry really need Web3? An honest answer

This is a question asked countless times, but few dare to speak frankly.

The traditional gaming industry doesn’t lack Web3

The fact is: In 2022, the global gaming market size was $222 billion, and it is expected to grow nearly 50% in the next four years—these growths do not rely on blockchain at all.

Unreal Engine 5, AR/VR hardware, cloud gaming… gaming innovation is rapidly iterating. But current Web3 infrastructure is far from meeting the computational demands of AAA titles. This isn’t to say blockchain will always lag behind, but the reality is clear: the gaming industry does not currently need blockchain technology.

But gamers might be attracted

The logical turn here is crucial. The argument supporting Web3 games is not from an infrastructure perspective but from the player rights angle:

Real ownership of assets, financial opportunities, creative interaction with developers… these are genuinely attractive to players. There are countless examples of players being exploited in gaming history, and the sovereignty principle of Web3 theoretically can change all that.

But the problem is—the most outspoken critics of Web3 games are actually gamers themselves. They are not opposed to blockchain concepts; they oppose being forced into garbage games.

Why is GameFi cooling down? The core issue lies here

Fatal mistake: Putting finance before gaming

This was the biggest mistake made during the last bull run. Almost all Web3 games violated the basic rule of game development—do not over-financialize the gaming experience.

Remember Diablo III in 2012? Blizzard introduced an in-game auction house, taking a cut from each transaction. Players’ reaction? Collective resistance. After a game update, the auction house was removed.

The lesson is simple: Players dislike designs that prioritize profit over playability.

But during the last bull market, almost all Web3 games did exactly that. Developers focused on token economic models and liquidity mining mechanisms, not on whether the game was fun. Players quickly realized they were being fooled—this is not a game, but a financial product.

The only exception was NFT card games, because traditional card games inherently have financial attributes (card trading, rarity pricing), so Web3 versions appeared more naturally.

Infrastructure bottlenecks

Current blockchain TPS (transactions per second) and costs are still unsuitable for large-scale games. Ethereum’s transaction fees often run into tens of dollars per transaction, which is fatal for daily gameplay.

Although Axie Infinity reduced costs via the Ronin sidechain, this introduces centralized risks, contradicting the original intent of blockchain.

What does GameFi need to survive?

Step one: Return to the essence of gaming

Playability must come first. Without good games, even the best economic models are meaningless.

Developers need to learn: Web3 technology should support the gaming experience quietly in the background, not be something to flaunt with blockchain, NFTs, or tokens. Players want immersion and fun, not financial forms.

Step two: Lower the entry barriers

Many current GameFi projects require high initial investments. To truly attract the masses, players should be able to experience with zero or low cost.

Free trials and gradual paid upgrades are proven models in traditional gaming. P2E games should learn from this, not go against it.

Step three: Wait for infrastructure to mature

Layer2 solutions, cross-chain technology, more efficient consensus mechanisms… these foundational innovations are ongoing but still need time. Once infrastructure catches up and costs decrease, the imagination space for Web3 gaming can truly open up.

Market size vs. reality

As of March 2022, DappRadar has recorded over 1,400 blockchain games. They are spread across major chains like Ethereum, BNB Chain, Polygon, Solana, and others.

Sounds prosperous? But only a handful can truly be called “games.” Most are just “finance + game skins” combinations, abandoned after less than a week of play.

Practical insights and future expectations

The past 18 months of crypto bear markets have taught the industry a lesson: You can’t lure players in with financial incentives and then hope they stay for the game.

The future of Web3 gaming still exists, but the premise must be a complete strategic shift:

1. Priorities rebalanced: game > finance > technology, not the other way around
2. Narrative reshaped: from “play to earn” to “truly fun,” with earning as an added bonus
3. Long-term investment: like traditional game companies, invest in content development instead of rushing to market
4. Player-first approach: regularly gather feedback, iterate and improve, rather than sticking to the same formula

As Web3 infrastructure advances, blockchain-based games will eventually return to the market. But this time, they must learn from lessons: Without engaging gameplay, even the most dazzling blockchain tech is futile.

Players want something simple—good games. We want to escape reality and immerse ourselves in virtual worlds, not be overwhelmed by endless financial concepts. For Web3 games to succeed, they must be fun first. It sounds easy, but based on the past few years’ attempts, the crypto industry still has a long way to go.