If you have a bunch of game apps on your phone and play them for hours, you have probably earned coins or gems as a reward. You can use these to upgrade your weapons, strengthen your defense, or buy lifelines. In the real world, they are usually worth nothing.
GameFi, from the words gaming and Decentralized Finance (DeFi), also uses the concept of rewards similar to coins and gems. These are called tokens. GameFi tokens are cryptocurrencies used in NFT-based games — the talk of the town recently. It also serves as a secure mode of payment between players in the game’s ecosystem.
Each game has its native token. It works like fiat money. If you are living in the United States (US), you use US dollars to buy goods. Companies in the US pay their employees also with dollars. Meanwhile, people in South Korea complete their transactions using South Korean won.
Because GameFi was born to provide players with economic incentives, these tokens can be used outside of the game and cashed out for use outside the virtual world.
How are GameFi tokens used?
GameFi tokens are usually earned by completing tasks, battling with other players, or participating in tournaments and other in-game events.
What you do with your tokens after earning them is up to you.
Players use the game’s tokens to buy digital tools and assets. It allows the player to speed up the avatar or the property’s progress in the game.
Most blockchain games encourage the players to stake their earnings to support the ecosystem. Instead of immediately cashing out or storing it in a crypto wallet, players lock in their cryptocurrencies. These tokens will be utilized by the game to support the development of its features.
Staking is beneficial to the players because it allows them to compound their earnings instead of just holding on to the tokens. Players who staked their earnings will then be rewarded with incentives.
Decentralization is the shift of the game’s operation and ownership to the community that plays it.
The game’s decentralization does not happen overnight. Players are rewarded with governance tokens which will give them voting rights to important decisions such as game innovations and improvements.
Some games charge transaction fees such as trading fees or acceleration fees. These tokens are returned to the game’s treasury. It is used for the game’s operations, maintenance, or as payment to the developers.
Some players gather enough tokens and exchange them for another cryptocurrency. Fees are usually involved in exchanges. Once players get a good grasp of cryptocurrency trading, their tokens could earn more.
Popular GameFi tokens
Axie Infinity’s AXS and SLP tokens
The creatures called Axies in these virtual land are collected as pets. Breeding and selling them are some of the many ways you can benefit from this play-to-earn NFT project.
Axie Infinity uses two tokens:
Axie Infinity Shards (AXS) is the currency used in the Axie NFT marketplace. It can also be used for staking and as a governance token.
Smooth Love Potions (SLP) is the gaming token earned by Axie Infinity Players when they battle against other players or complete daily quests. SLP can also be traded with other cryptocurrencies in crypto exchanges.
Plots of lands are being bought, developed, and sold in Decentraland. Users make money from their parcel of land through lease, advertisement, and paid experience.
One of the popular owners of this virtual land is Paris Hilton.
MANA tokens are used both as a governance token and as a currency in buying goods, services, and properties.
My Neighbor Alice’s ALICE
Inspired by Nintendo’s Animal Crossing, players are represented by their avatars. They can interact with each other using these characters that live in their own virtual islands.
Users earn ALICE tokens by participating in the game’s events and competitions. ALICE can also be used to buy digital assets, lands, and cosmetics.
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