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What Is GameFi? A Guide to Web3 Gaming


Rob Behnke

May 18th, 2023

In recent years, blockchain technology has transcended its original role in cryptocurrencies and has started expanding into numerous industries including gaming. The fusion of gaming and finance (more specifically, decentralized finance or DeFi) has been called GameFi. GameFi combines the interactive and immersive aspects of gaming with the financial opportunities and incentives offered by blockchain technology.

GameFi represents a new gaming industry trend that leverages blockchain technology's power to create decentralized games and virtual economies. In GameFi, players can truly own in-game assets, participate in transparent and immutable game mechanics, and even earn real-world value from playing games.

In this article, we will delve into the world of GameFi and explore how it is revolutionizing gaming as we know it. From understanding the basic workings of GameFi to discussing trends, challenges, and real-world examples, we will provide a comprehensive overview of this innovative phenomenon at the intersection of gaming and blockchain technology. Let’s get started.

What Does GameFi Mean?

The term GameFi is short for "Game Finance" and refers to the integration of blockchain technology into the gaming industry. It represents a new paradigm where games are developed on decentralized blockchain networks, and players have true ownership and control over their in-game assets. GameFi games are designed with unique features that differentiate them from traditional games, offering players novel experiences and opportunities.

At its core, GameFi utilizes blockchain technology to create decentralized games that are transparent, immutable, and player-centric. This means that the in-game transactions are recorded on a distributed and decentralized blockchain, ensuring transparency and fairness. 

GameFi games often leverage non-fungible tokens (NFTs), which are unique digital assets that can be bought, sold, and traded to represent in-game items, characters, or land ownership. NFTs provide players with true ownership of in-game assets, allowing them to transfer or trade their assets without intermediaries.

One of the defining features of GameFi is the concept of play-to-earn. In traditional games, players invest time and effort into playing, but the value they generate stays within the game and is not transferable outside. However, in GameFi, players can earn real-world value through various mechanisms such as token rewards, staking, or participating in decentralized finance (DeFi) protocols associated with the games. This introduces a new dimension to gaming, where players can potentially earn income by playing and engaging with GameFi games.

How Does GameFi Work?

GameFi projects have two parts to their architecture: on-chain and off-chain. Let's explore the components and identify what part they fit into.

GameFi Games

The game can be built to be a web browser game (using HTML5, for example), a 2D game (using PyGame, for example), or a 3D game (using Unity engine, for example).

The game, after being built, uses a mechanism to interact with a REST API. Using this mechanism, we can communicate with a database. The database will be written to allow the storage of all important data in the game, including:

  • the players’ data

  • which wallet is owned by which player

  • the players’ in-game wallet balance in the game’s native token

  • the players’ in-game assets

The state of these data is updated in the database via the REST API directly from the game.

On the blockchain, a smart contract is built to represent and manipulate gaming assets on the blockchain. To represent these assets, different kinds of smart contracts are required:

  • the assets smart contract using ERC-20, ERC-721, or ERC-1155

  • the assets factory smart contract that interacts with the assets smart contract and creates new assets

  • the vault smart contract acts like a bank for the assets, allowing players to deposit and withdraw the assets using fees and tax of the native token

Bots on the blockchain will listen to the events emitted by the smart contracts, queue them, and check every item on the queue for their validity. It will then interact with the game’s APIs to update the data in the smart contracts when needed. Illustratively, if a player buys in-game assets with the native token, the payment is locked in the vault contract, and the assets are sent from the assets contract to the game’s frontend via relevant APIs.

Some GameFi projects include advanced features like:

  • token staking & farming

  • NFT marketplace with auctioning functionality

  • NFT breeding

  • NFT lending and borrowing

In the next section, we will learn about these advanced features and how they apply to GameFi projects.

GameFi Tokenomics

The video game industry generated over $159 billion in revenue in 2020, which is more than in the movie and music industries combined. It is estimated to reach $321B by the year 2026. To this end, there have been partnerships on promising projects (like between Binance and MoU) to build more P2E ecosystems. In a P2E game, both owners and players earn based on the tokenomics of the game platform.

The tokenomics of GameFi projects are fundamental to the projects as they describe the supply and demand of the game. 

A GameFi project’s tokenomics include:

  • the in-game assets (GNFTs)

  • the native/governance token of the game

  • the supply and mechanics of tokens

  • the mechanism for encouragement

Given the explosive growth and the financial prospects of GameFi projects, they are fast becoming targets for bad actors. You can learn more about the security challenges in GameFi projects in our forthcoming article.

GameFi Models

GameFi models dictate the way in which players benefit from the games. There are three main models in GameFi, and they include:

  • Play-to-Earn: players play games and earn cryptocurrencies from them

  • Play-and-Earn: players are encouraged to play continually and sustain the game through expressive means

  • Play-to-Own: players get proof of ownership for in-game assets they win/own, and they can be sold in a marketplace

Current Trends in GameFi

Blockchain analysts speculate that GameFi as a technology will be a major factor in promoting crypto adoption. To this end, newer ways of harnessing GameFi are beginning to gain the spotlight. Let’s explore some of them below.

Gaming Metaverses and Hubs

The Gaming Metaverse is a virtual world where players interact, explore, participate, and invest in various activities on gaming ecosystems in the Web3 space. GameFi Metaverses mimic the real world, enabling players to fully own and control their in-game assets and heightening the social and economic experiences of decentralized finance. 

The technologies that enable Gaming Metaverses include:

  • Augmented and Virtual Reality technology

  • Cryptocurrencies and tokens

  • Internet of Things

  • 3D app technology

Undeads Metaverse is an example of a project that uses the Gaming Metaverse feature. The team is building a social Virtual Reality hub with multiple VR games in the Metaverse.

GameFi Protocol

The GameFi protocol is an aggregation protocol that integrates different GameFi ecosystems and DeFi functionalities to promote Free-to-Play-to-Earn (F2P2E) user features. The features under the GameFi protocol include the following: 

GameList: GameList is a curated list of GameFi projects built on different blockchain networks. It provides a comprehensive collection of decentralized games that incorporates features like true ownership of the in-game assets, Free-To-Play-To-Earn mechanics, virtual economies, and DeFi protocols. GameFi project teams receive incentives to launch their games using this feature. It is noteworthy that only GameFi projects that have significantly high playability and good tokenomics are listed on GameList.

GDAO: GDAO is a Decentralized Autonomous Organization (DAO) that controls GameFi Protocol operations on the blockchain. Members of GDAO are the stakeholders of the native token and are capable of:

  • voting for decisions that impact the games

  • launching IGO games using GLaunch

  • selling GNFTs

  • changing GFI tokenomics

  • modifying the rules of the game and network, etc.

Cross-chain interoperability

Cross-chain interoperability has been trending in the blockchain space as a solution to blockchain—and Ethereum in particular—scalability issues. Interoperability between blockchains allows for the seamless exchange of assets and data across different blockchain networks. This trend enables players to transfer, sell, or make use of their in-game assets across multiple games and ecosystems. On the side, it fosters collaboration between multiple GameFi projects, and launching on several chains can be the best way to target larger audiences.

Examples of GameFi projects with cross-chain interoperability include CryptoBlades (BSC, Avalanche, Polygon, Aurora, HECO, and OEC), Splinterlands (Hive, WAX), and Alien Worlds (WAX, BSC).

NFTs and Virtual Asset Marketplaces

NFT marketplaces are virtual platforms where users can buy, sell and trade assets. In GameFi, there are marketplaces that allow players to trade in-game assets with other players—a major feature that makes GameFi a revolutionary technology in gaming.

Virtually all GameFi projects have marketplaces for trading in-game assets.

Integration of DeFi Functionalities

Some GameFi platforms imbue DeFi protocols and features, another GameFi ecosystem trend. This integration includes enabling the users to stake assets in DeFi protocols, earn passive income, and use their assets in various DeFi activities like lending, borrowing, and liquidity provision.

Examples of GameFi projects that allow DeFi functionalities like staking in-game assets include RobotEra, Battle Infinity, and Axie Infinity.


In conclusion, GameFi is an innovative application of blockchain technology that is revolutionizing the gaming industry by enabling the creation of decentralized games and virtual economies where players have true ownership and control over their in-game assets. With transparency and fairness ensured by blockchain technology, players can enjoy novel gaming experiences and earn real-world value from playing games.

GameFi games leverage non-fungible tokens (NFTs) and feature different types of in-game economies like Play-to-Earn, Play-and-Earn, or Play-to-Own. GameFi projects are typically made up of two parts, the game and the tokenomics, both of which have significant roles to play in the project's success. While GameFi is still in its early stages, it has already gained significant traction and is expected to continue growing in popularity in the coming years. With more and more blockchain-based games entering the market, it will be exciting to see how GameFi evolves and how it will shape the future of the gaming industry.

Halborn is a leading blockchain security company that specializes in auditing blockchains, DeFi applications, smart contracts, and games’ logic and mechanics. Get in touch with our Web3 security experts here to find out how we can help secure your GameFi project.