Why GameFi Is Crypto’s Hot New Thing (and What Is It?)

One of the hottest things in the cryptocurrency world right now is GameFi. Its name reflects the combination of the old-fashioned thrill of winning prizes with new crypto developments in what’s known as DeFi. GameFi players can trade, lend or rent out their winnings or even borrow against them. You can’t do that with the stuffed kitty you scored at the county fair. As its popularity soars, there’s a debate over whether GameFi will remake gaming or just separate the credulous from their money. Reports of people borrowing to play raise the prospect of GameFi democratizing crypto opportunities -- or becoming a form of digital sharecropping.

DeFi stands for decentralized finance, a field in which token-based transactions like lending and borrowing take place on blockchains, decentralized digital ledgers similar to that first used with Bitcoin. In its most common usage, GameFi refers to decentralized applications (“dapps”) with economic incentives. Those generally involve tokens granted as rewards for performing game-related tasks such as winning battles, mining precious resources or growing digital crops. It’s an approach also known as play-to-earn. In many GameFi apps, such as Alien Worlds, users can also earn money passively by letting others mine their virtual lands. They can also earn interest by using techniques developed by DeFi platforms to lend assets like digital characters or deposit them in what’s known as staking.