Spurred on by Axie Infinity, whose play-to-earn model exploded in popularity in 2021, many investors believe that gaming is a winning use case for blockchain and Web3.

a16z is launching a $600 million gaming fund, and blockchains like Polygon are setting aside $100 million to their gaming fund, aimed at combining blockchain technology with gaming.

We spoke with a few GameFi enthusiasts, and the word on the ground is that it's not so simple.

Here’s what we chatted about!

Han Wei from Ollie Verse, @Ollieginal

Game Finance, better known as GameFi, refers to play-to-earn (P2E) blockchain games that offer economic incentives to players. Players can earn cryptocurrency and NFT rewards by completing tasks, battling other players, and progressing through different game levels.

Traditional Web2 Gaming might have their own coin reward system or even a marketplace. But the key difference is that unlike traditional gaming, most blockchain games let players transfer the gaming items out of the game’s virtual world.

Traditional Web2 ecosystem doesn’t allow players to do that – whatever they earned is pretty much stuck in the game ecosystem.

Essentially, GameFi combines entertainment with financial incentives – allowing players to convert what they’ve gained to cash, or even to trade their items on NFT marketplaces and their crypto earnings on crypto exchanges.

For example, Hearthstone, is a free-to-play online digital collectible card game where players can earn gold in the game. However, you cannot trade or sell it for cash. Ironically, as a trading card game, none of the cards in Hearthstone are tradable.

Comparably, Ollie Verse is a blockchain trading card game that allows players to create and customise their own trading cards as NFTs. These trading cards are playable and tradable.

The possibilities lie in “cross-chain” – where multiple games can implement a shared smart contract protocol and governance token, and digital assets that players earn (such as in-game currencies and NFTs) could be portable across the ecosystem.

The games driving the most use could then earn the greatest percentage of the governance tokens distributed by the system’s DAO, leading game creators to in turn fund additional development of their games.

ReeFi DAO

We think that GameFi gives an opportunity to create real world value out of in-game actions.

We think that traditional conservation is not working. It’s not engaging – individuals cannot see where the value they’ve contributed to goes towards.

With GameFi, we have the opportunity to gamify those experiences, to make sure that individuals who participate in conservation can have some transparency over where their dollars and input goes – and also to have fun and get something tangible in return.

For example, what we’re doing is take photo-imagery of real world coral reefs, and creating virtual environments out of that, which can be explored.

Part of the value that players can have is to explore and learn more about our world and the different biology within that environment, and also to fund regenerative actions on the reef, so they might earn 2 tokens – one goes into their account, and another towards a community account that they can assign to a specific project.

Leonard Tye, PlanetQuest

My dream as a twenty decade gamer it’s not to make a game where people would play as a day job to substitute for their living wage, but to play the game for fun. If you can earn money at the same time, that’s great. But my goal is more about making the game enjoyable.

And to take advantage of blockchain technology where you can truly own what you buy within the game, since it is interoperable – you can transport your avatars from one world to another.

Play-to-Earn (aka P2E) started with Axie Infinity, where 1.5 billion wallets out of 2~ billion of P2E wallets belong to people in Vietnam playing Axie Infinity.

The whole P2E concept was popularised because in some countries, when you play-to-earn, you actually earn more than your living wage.

That’s why many players from these countries participated because it is more profitable to play the game instead of working. It’s a dream come true for players in these countries, but less so if you live in a country with a higher cost of living.

Traditional games don’t extract value from the game economy, since they don’t give players money. In play-to-earn, you have an earning mechanism to give players money.

However, it’s not a sustainable model.

To give money, you need money in the first place. This tends to come from retail & institutional investors.

So if you don’t generate enough profit, if your invested money is going out to players rather than coming in, then your token price will tank since investors may just dump the tokens. Your earnings will then tank as well. Eventually, it’ll go below what you expect to earn. And the project dies after a while, which is a pretty ugly way to die.

Right now, we see projects in the market in development launching without any MVP, with a roadmap stretching out 2-3 years later. They’re just pulling off hype and launching an IDO to generate token price action.

There’s no revenue model in place, they’re not earning any money from the players, but from investors.

So now people are moving to a more sustainable revenue model such as with ads and brand partnerships.

And instead of Play-to-Earn, where it’s more like a job – it’s not fun – players do something and get rewards in return. GameFi is shifting into Play-AND-Earn, where players get what they want while also providing earnings and ownership.

The idea behind generating a sustainable income is to design a fun game that players want to play and invest in. That’s also why VCs, publishers and Web2 companies are also trying to get into eSports, where the audience is really big and the games have some sort of longevity to them.

Han Wei from Ollie Verse

What I noticed in many games using P2E models, it feels like a trading platform rather than a game, because many people are talking about how much money they can make, how much tokens they can earn, and what’s the value, price market, etc.

It seems like a complex version of OpenSea where instead of buying and selling, you get quests and challenges.

So when we built our game, we believe it cannot be only about trading, it cannot be just about trying to make money from the game.

First and foremost, it has to be fun to play, where players want to keep coming back to your game. Only then, we can monetise in various ways. For instance using P2E models, rewarding crypto or even receiving funding from investors.

So any game developer or creator shouldn’t prioritise earning, but to first build a better product, before scaling and reaching out to more users or customers.

Jeffrey Tief from Solar Network

Solar recently launched a Minecraft-like metaverse where players can purchase NFT land parcels and build their own services and products. We’re inspired by Minecraft because we think that the game design is sticky and familiar for many users.

Essentially, gaming is a lot about putting the carrot in front of the user – getting the player to enjoy the experience so much, that they keep coming back and sharing with their friends. That’s what we’re trying to do now.

Leonard Tye, PlanetQuest

You need a sprawling community that is very enthusiastic about your project – especially if you have a long roadmap.

To build such a community, the secret is to have a very solid product, with a solid gameplay loop and game design documents.

And to build a solid product – building upon what Han Wei mentioned – is to focus on developing your product MVP, and then to scale the model based on a sustainable revenue model.

Since game development typically have very long roadmaps, it’s important that the team knows what it takes to build a solid game, so that the community is invested in its development.

I notice a lot of heavyweight Web2 teams coming into Web3. For example, there’s this sci-fi game called Earth From Another Sun which is already in alpha and they have a Steam page going up. And new Web3 game studios like Digital Insight Games, founded by Hall-of-Fame game designer Jon Van Caneghem, and Tencent’s Jack Sheng.

In PlanetQuest, we have over 250K people in our Discord, and our roadmap stretches into next year. One of the biggest challenge is to maintain interest during that time.

And the way we do that is to have a storyline going out. We share art, giveaways, publish development blogs on social media.

Once you have that great game product in place, there will be ambassadors who love playing your game so much, they willingly share content about your game. And these ambassadors are your game’s users/players, not investors teaching you how to earn money from playing it.

Also, I think partnerships is important to Web3 gaming. For example, if players have to use tokens to enter a tournament, then cash out winnings from a tournament, how will it be integrated? These are blockchain integrations that need to be thought through when it comes to the game/product.

Essentially, it’s about first building your game; your product, then building the community, followed by partnerships or blockchain integrations.

Han Wei from Ollie Verse

I agree about building a community to grow interest in your game. I think it’s important to focus on the community that keeps coming back. It could be the people in your game, or even in your Discord group or in your socials such as Twitter.

People in Web3 tend to favour brands that evoke certain emotions or qualities that they desire. If the community is invested in your game’s branding, I think game creators can even tap on this intellectual property (IP).

Some NFT projects are capitalising on their branding to sell their own products. For example, the team behind the famous BAYC NFT project is building apps, launching their own restaurants, building their own metaverse games, so on and so forth.

To sustain excitement in your project, I think it’s about consistently creating content. Perhaps, creating a story that you can post on a weekly or even daily basis across your engagement channels. This will help propel the games, branding, as well as IP.

Leonard Tye, PlanetQuest

Yes, with regards to IP, the added value for GameFi is its interoperability.

What you earn in a game can be spent across different chains, not just within the game itself. So, game players can even spend on your novels, novels, merchandise, movies etc.

For example, one of the hottest games is Diablo. They have a lot of models being sold for thousands of dollars.

That’s why it’s also important for games to secure their IP rights.

Leonard Tye, PlanetQuest

A lot of Web2 MMOs are languishing, because every game is always the same.

You log in, do your dailies, raid. If the social community dies, no one will play the game anymore.

I do think there needs to be a revitalisation – unique ideas of what gaming entails nowadays.

For example, many gamers are going into workforce. There’s not much time for them to be playing games anymore. They can only hop on raids with friends after work.

So, for these group of gamers, being able to progress without spending too much time is important.

A Web3 game project that’s getting popular but currently in stealth, is a browser-based game where you play and progress the character and earn rewards simply by “clicking” when you browse the web.

They’re also know as idle games, because you collect your rewards in an idle way.

You can set up your server, but during the day, the game runs by itself in the background, and you don’t even need have the app on. At the end of the day, you collect your rewards and progress your character in a very idle manner.

So, yes being innovative when it comes to game design for Web2 and Web3 is important.

Han Wei, Ollie Verse

Yes, games have to be innovative and refreshing – not just an imitation of another game.

If you look at early trends of successful games and NFT projects, their design is pretty unusual from the traditional ones.

For example, the apes in BAYC look bored. In traditional designs, they evoke good, positive emotions.

Another one worthy of mention is CryptoPunks. Prior to them, there were hardly any pixellated NFT designs – except, of course, with older console games like Gameboy.

Basically, you want to pique people’s interest by creating something new that they can explore what it offers.

Han Wei from Ollie Verse

If you’re hoping to do this as a full-time job to earn income, make sure to do your due diligence, and understand how the overall ecosystem works.

Don’t just jump in because of FOMO, the fear of missing out. You’re investing your time and money, so make sure you know what the game and project is all about.

Leonard Tye, PlanetQuest

There are a lot of shady projects that makes it easy to profit in the short term. When there’s a lot of hype, the price goes up. Some creators dump at this point, and do a rug pull.

If you put your name on 1 of such projects, it’s probably an accident. If your name is on 3 of such projects, you’ll likely be seen as a scam. The industry isn’t very big, and word spreads around. Your reputation will be affected.

So, to join a good project, start by looking at their white paper, whether they have a sound tokenomics model, or if there is a proper game design document, a proper trailer coming out. a credible team.

If the team is made up of only investment or business professionals and there are no game designers and developers, how is the team going to make the game? You need at least 1 person who is savvy with game development and game design.

Han Wei from Ollie Verse

You need to at least have a good idea that you’re passionate about. If you don’t believe in it, it’ll be tough to spend countless hours building it, or even to persuade others to play your game.

Of course, ideas aren’t everything. Ideas are everywhere, but execution is key. How you implement, build and launch your game is crucial.

A good place to start is the Unity game engine, if you have some C# programming language experience.

If you want to add in Web3 features, you can look at Chainsafe SDK, which allows developers to easily enable players to log in with their digital wallets like Metamask.

If you want to collaborate or get product ideas, join communities on Twitter Spaces or Discord.

Leonard from PlanetQuest

Most of the time, game developers are not game designers, they’re focused on programming.

If you’re a Web2 gamer going into Web3 games, you can bring in feedback and suggestions to improve a GameFi project.

However, it’s important to be humble and learn, especially if you’re not Web3 native.

Show interest in the field by researching what blockchain is all about. Join communities on Discord and Telegram. Or, better, join a DAO. Get down and dirty by getting a wallet and transacting, or even buy an NFT or two!