Online gaming is revolutionizing how people interact with one another, being able to connect individuals on a global scale in a matter of seconds. Especially for younger generations, playing online games is now the go-to activity for friends to spend time together. Its rapid growth and digital presence has led to current projections of online gaming audiences surpassing 1.3 billion by 2025. Yet, despite its growth, gaming has traditionally been viewed as just a hobby with no productive value for individuals. GameFi seeks to answer this issue by introducing financial incentives in online games. In particular, GameFi involves implementing play-to-earn designs in games that reward players with tokenized assets for completing in-game tasks.

With the immense growth of online gaming, GameFi seeks to revolutionize this already established industry by answering the common issues associated with the space. Introducing economic incentives not only provides a productive incentive to play games but also seeks to return financial ownership of game development to players. GameFi has gradually become a major aspect of the DeFi space, and understanding its functionality, history, growth, and future is necessary to be involved in Web3.


At its core, GameFi differentiates itself from traditional online gaming by introducing a play-to-earn (P2E) model in its games. In contrast, most of today’s online games incorporate a pay-to-play (P2P) model that requires players to purchase a game or specific game item to access that feature. However, purchasing these game items does not represent any real-world value. For example, many current games have in-game currencies that can be used to purchase specific in-game items. These in-game currencies can be purchased in set quantities with real-world money. However, while this in-game currency can buy items in-game, this in-game currency cannot be reconverted to any real-world value.

In contrast, GameFi’s implementation of a P2E model means that in-game items are tokenized, which allows players to have digital ownership of these assets. GameFi games incorporate P2E using different techniques based on the game’s design. These assets include buying virtual land, cosmetic avatars, special weapons, and other in-game features. In these cases, the in-game items are NFTs that have been minted to a specific blockchain. Since these assets are now tokenized on a specific chain, they can be traded on an NFT marketplace. Other games may also have in-game items that are not converted to NFTs until the item is bought or sold on a different marketplace. There are even games that offer opportunities for generating passive income through the lending of these assets or yield farming practices.

The P2P model of traditional online games means that the player does not actually own in-game items. These items are owned by video game development companies, including the items that players purchase with real-world currency. GameFi addresses this issue by introducing digital asset ownership, giving players the financial freedom to monetize their items in different ways. The implementation of tokenized assets also introduces aspects of decentralization to online gaming. Specifically, ownership of certain governance assets allows players to vote on game development decisions. This is similar to how decentralized autonomous organizations (DAOs) vote on protocols for their specific operations. Decentralized voting systems return ownership to players for games they are already paying money to own.

Start of GameFi:

GameFi’s origin is often attributed to the launch of Crypto-Kitties on the Ethereum mainnet in 2017. Crypto-Kitties is a trading game focused on users breeding and trading “crypto-cats” that are tokenized and have market value. The game’s popularity at its launch was immense, as its computational work initially composed 20% of all power on the network. The monumental growth of Crypto-Kitties would result in many blockchain developers shifting focus on the GameFi sector, with games like Ether Cartel and Ether Shrimp Farm launching soon after. However, it is necessary to distinguish that these early forays into GameFi more resembled yield farming with gaming elements as opposed to a P2E model game. Regardless, the popularity of these games resulted in a 20% increase in gas prices across Ethereum to handle their computational work.

However, GameFi would start to resemble its current landscape as larger tech companies began to venture into the space with existing IPs. For example, in 2019, AMD joined the Blockchain Game Alliance, announcing partnerships with online GameFi platforms like Robot Cache and ULTRA. Samsung would also become part of the industry by adding a Tron blockchain game to its Galaxy 10 crypto wallet. By 2021, the launch of games like Axie Infinity and its AXS token has established the GameFi space as a multi-million dollar industry that was exponentially growing. Axie Infinity alone garnered more than $800 million in revenue within just 30 days, becoming the leader across all DeFi protocols.


The GameFi industry’s rise can be measured from a financial and player base perspective. Rapid growth in both areas is crucial for any video game to establish a recurring revenue system and separate itself from competing games. Assessing current growth trends for GameFi can not only inform its meteoric rise but also project its continued expansion for the future.

For the game industry, the daily active user (DAU) metric is an important measure to demonstrate an online game’s success. For any online game to generate revenue and expand across the space, a high DAU is needed to maintain an active player base and extend the game’s lifespan. Reports from DappRadar and Footprint Analytics show that the DAU of the GameFi space is growing rapidly. From March 2021 to February 2022, DAU rose from 63,000 players to 1.04 million players. This represents a compound monthly growth rate of 29% or a 20x annual increase. Furthermore, FootPrint and DappRadar both estimate that there are approximately 1.06 million daily GameFi players as of February 2022. Of the blockchains that host GameFi applications, Hive and WAX both account for the most players at 332k and 329k players, respectively. This is likely due to Hive and WAX both not charging gas fees for minting in-game items.

Regarding its financial growth, GameFi has also grown rapidly, especially spurred by increased gaming engagement from the COVID-19 pandemic. A primary example of GameFi’s surge in value is seen in Axie Infinity and its governance token. The AXS token saw its market capitalization exponentially rise from $7.75 million in November 2020 to a peak of $10.49 billion in November 2021. Other high market capitalization GameFi tokens dominating the DeFi space include The Sandbox’s SAND token and Enjin Coin’s ENJ token. From an industry-wide perspective, the total GameFi market cap has grown from $0.48 billion in January 2018 to a peak at $40.99 billion in November 2021. Even in a crypto-wide down market, crypto research from, CoinGecko, and CoinMarketCap still project GameFi market capitalization at an average of $35.3 billion.

Key GameFi Players:


Crypto-Kitties is widely considered one of the first applications of GameFi in the DeFi space. Players collect and breed cats with unique genomes that define their appearance and traits. Breeding different cats with one another create new cats with combined genomes, giving players the chance to unlock rare attributes. Each unique cat is an ERC #721 token built on the Ethereum blockchain.

Crypto-Kitties had an explosive growth stage, as after its release, its operations alone accounted for 20% of all computational power on the Ethereum network. However, Crypto-Kitties rapidly declined just months after launch. The current atmosphere of the game is that a few dominating players widely control cats and other resources, making the game unplayable for new users. Being one of the first GameFi applications, Crypto-Kitties was also the victim of hype and significant public attention from media outlets. As a result, developers were unprepared for the mass influx of players, resulting in early technical issues that caused players to eventually drop the game.

Axie Infinity:

Axie Infinity is likely the most widely-known game in the GameFi sphere, having been covered by media outlets for its significant growth during the COVID-19 pandemic. Axie Infinity takes inspiration from the popular Pokemon series, as players capture, train, and battle creatures called Axies. Each Axie is a unique creature with its particular stats that give specific advantages in battle. Axies can also be bred with one another, transferring stats from prior Axies and creating new combinations of creatures. However, what differentiates Axie Infinity from other GameFi applications is the growth of its governance token AXS. AXS can be staked to generate further rewards or used as a governance token to vote in Axie Infinity development decisions. Its market capitalization reached a peak of $10.49 billion in 2021 and has been key in the decentralization of gaming development in GameFi.

However, while Axie Infinity has dominated the GameFi industry in the last couple of years, it has shown a decline in player base throughout 2022. While Axie Infinity saw 2.7 million players at the peak of the COVID-19 pandemic, recent numbers indicate only 111,000 active players are currently on the game. One of the main factors contributing to this drop-off has been security, as Axie Infinity was the target of a $600 million attack in early 2022. This decline in player base has been demonstrated in the decreasing value of AXS. The token peaked in November 2021 at $160 but is now valued at just $12.83 as of September 2022. With plans to release on Android and iOS, Axie Infinity hopes to regain its meteoric numbers from 2021 in the near future.

Farmer’s World:

Farmer’s World is a farming simulator game that allows players to harvest resources, buy land, and acquire new tools to unlock more game features. Other game features include owning and selling NFT land plots, raising NFT animals, and cultivating more resources. Harvesting resources and selling in-game items allows players to engage with Farmers World’s growing marketplace. As players harvest more resources, they can invest those resources into upgrading tools to generate more resources in the future.

Farmer’s World is a more passive game compared to others like Axie Infinity, yet it currently has one of the highest player bases and most active economies in the space. One of the reasons for its popularity is that the game currently runs on the Worldwide Asset Exchange (WAX) public chain, which has no gas fees to complete transactions. No gas fees and a more passive playstyle have attracted players seeking a more casual, less skill-intensive experience in the GameFi space.


DeFi Kingdoms is a fantasy MMORPG type game built on DeFi protocols with numerous capabilities. It currently has platforms on two blockchains, Klaytn and the DFK Chain. Its main token is JEWEL, which can be used as an in-game currency to purchase NFTs and mint new NFTs. Furthermore, JEWEL acts as a governance token for game development decisions. CRYSTAL is the equivalent of JEWEL for DeFi Kingdoms’ DFK Chain. Whereas JEWEL runs solely on the Klaytn chain, Crystal is used for any transaction on DFK. With these tokens, players can engage in multiple DeFi operations, including trading, liquidity mining, and purchasing DeFi Kingdom NFTs with in-game utility.

DeFi Kingdom is currently viewed as more of a general DeFi protocol with a game aesthetic applied to its user experience. However, developer roadmaps indicate DeFi Kingdoms will expand its gameplay features to resemble more of an MMORPG in the future. Developers have made efforts towards this goal by moving its main game, DeFi Kingdom: Serendale, to Klaytn blockchain. By moving to Klaytn from Harmony, DeFi Kingdoms hopes to improve its scalability and continue to grow its presence in the GameFi industry.


Illuvium is a creature collector, auto-battler game currently in its beta stages of development. It is an open-world RPG-styled experience where players are tasked with mining, harvesting, and capturing creatures called Illuvials. Engaging in the game allows players to earn Illuvium’s token ILV. ILV will act as the governance token for Illuvium development and can be staked in liquidity mining features of the game. Currently, Illuvium differentiates itself from similar creature collectors like Axle Infinity in terms of its graphical fidelity. The game features the P2E model of GameFi games with the graphical and gameplay quality of a AAA game studio.

Future of GameFi

The recent crypto slump has slowed GameFi’s meteoric rise; however, the industry is still projected to expand as innovations in the space become more established. Specifically, there are numerous growth opportunities for applications in the GameFi to continue its rapid growth even during this down period. Understanding these key drivers will help those in the DeFi space recognize opportunities to become involved in this rapidly expanding field.

Traditional Game Companies have GameFi Plans

Massive AAA game development studios are making forays into GameFi, implementing their existing franchises into the GameFi opportunity. Ubisoft is one of the world’s largest game developers behind popular franchises like Assassin’s Creed, Rainbow Six, Far Cry, etc. Ubisoft recently became a founding member of the Blockchain Gaming Alliance and has partnered with GameFi companies like Tezos and to develop games in the space. Square Enix is another game developer behind the globally famous Final Fantasy series. Square Enix has announced that in 2022, implementing GameFi in their game offerings will be a major strategic goal. Ultimately, as more game developers implement their existing franchises with large fan bases in GameFi applications, the player base of GameFi will also expand.

Financial Institutions are Funding GameFi

DappRadar has recently reported that GameFi received over $1 billion in funding in January 2022 alone. In comparison, GameFi only saw $4 billion in total funding throughout the entirety of 2021. This increase in funding accessibility enables developers to invest more heavily in the development resources of their games. These resources include game developers, artists, designers, music composers, etc. From this funding, the quality of games released in the GameFi ecosystem will be vastly improved, generating a greater player base who find the game enjoyable. Illuvium is one of these next-generation GameFi games that will implement the quality of a AAA studio in a GameFi P2E model.

Game Development Timelines

The GameFi industry began to expand in early 2018, shortly after the launch of Crypto-Kitties. With the typical game development timeline of AAA studios aligning in the 3 to 5-year range, the first wave of high-quality GameFi games will begin to launch within the next year. With GameFi already extremely popular and growing, the arrival of high-quality, large-budget games will only drive DAU metrics to new records. Games of this quality will not only improve GameFi’s player experience, but also improve player retention and keep them involved in the game’s ecosystem for longer periods.


In a recently published article on Medium, Axie Infinity player Lindsey Tam is quoted saying that playing Axie Infinity is “starting to feel like a chore”. This sentiment has been echoed across players of Axie Infinity and similar GameFi games dominating the space. In combination with the current crypto slump, a lack of fun elements is why GameFi has decreased in its growth since its peaks during the pandemic. The future of GameFi seeks to address this issue, as video games are inherently supposed to be about fun. Many of the current GameFi applications are entirely focused on the financial incentive portion instead of offering a genuinely entertaining gaming experience. Upcoming GameFi applications have realized this current issue, as more funding, increased development time, and more experienced developers are entering the space with the goal of creating fun games. While GameFi has slowed in the past year, the development of AAA quality games by established developers will ensure that this space will continue to expand rapidly.



Thoughtfully Apeing in DeFi @pennblockchain

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