In the wake of titles like Axie Infinity and its more than $1 billion in-game asset purchases, the gaming industry is excited about GameFi.
What is GameFi?
GameFi combines the words game and decentralized finance. Also known as play-to-earn blockchain games. Here players are allowed to own their in-game assets. Players earn cryptocurrency and NFTs as rewards for completing in-game tasks, battling each other, and progressing through the levels.
They then can transfer the gaming items out of the game’s virtual world and trade their items on NFT marketplaces and their crypto earnings on crypto exchanges. If you’re a rookie about to enter this hot market, this article below takes a look at the common industry terms to get more interesting knowledge.
Asset: A digital collectible with value in the game’s economy, such as characters, weapons, and skins. Players gain these objects through purchase or by completing set objectives in the game. Players can trade in-game collectibles for other digital assets or fiat money.
Asset Ownership: The ownership rights given to players over their in-game digital assets. Players are provided full intellectual property rights over any assets they buy; they can trade, swap or use them in their projects.
Avatar: A digital representation of your identity and attributes within a virtual environment. For example, in a game or a social network. It allows players to socialize, collaborate, and interact with their counterparts within the game environment.
Axie Infinity: Axie Infinity is a non-fungible token-based online video game developed and known for its in-game economy built on the Ethereum blockchain.
Players of Axie Infinity collect and mint NFTs known as Axies which can be bred and battled against each other in the game. Winners are rewarded with AXS or SLP tokens, which they can trade for fiat money on crypto exchanges.
Build and Build Chain (BNB): A Binance-based chain utilized by many GameFi projects. Compared to its counterpart Ethereum, BNB is preferred due to its affordable transaction costs. BNB was previously known as Binance Smart Chain (BSC).
DAO: Decentralized Autonomous Organizations (DAOs) are collectively-owned, blockchain-governed organizations created to decentralize the blockchain by allowing the token holders to participate in molding the project’s future via voting. Think of them as communities with a common purpose and a bank account. DAOs leverage token and smart contract technologies for their governance.
DeFi: Decentralized Finance refers to various blockchain protocols that provide essential financial services such as lending, borrowing, staking, etc. Blockchain games like DeFi Kingdoms utilize liquidity staking and decentralized exchanges (DEXs), first pioneered by DeFi protocols.
Decentralized Apps (Dapps): These are open-sourced digital applications that exist and run on a blockchain. They operate autonomously, typically through the use of smart contracts.
Decentraland: A 3D digital environment supported by the Ethereum blockchain. Players on this platform can buy and sell land or plots that can be monetized or developed for other purposes. For example, landowners can charge for tours, host events, or rent their land.
Ethereum: An open-source blockchain with smart contract capabilities. It’s the second-largest blockchain network by market capitalization. Arguably, the entire decentralized finance space is built on Ethereum. Since a popular game could receive millions of interactions daily, Ethereum is not an excellent platform for building blockchain games. The network gets congested by that traffic, which further increases the gas fees for the user. Thus, pushing blockchain developers to opt for platforms like Solana.
Extended Reality (XR): XR is a catch-all that refers to virtual experiences generated through an amalgamation of Augmented Reality and Virtual Reality.
Guilds: Organizations that recruit, train, and promote video game players.
Initial Game Offering (IGO): A fundraising method where game developers auction a portion of a game’s native tokens.
In-game tokens: The native currency of a game’s economy. Players can either use it to buy in-game assets or trade it for real money on a cryptocurrency exchange. For example, the AXS tokens in Axie Infinity.
Liquidity pools: A reserve of funds locked in a smart contract. It facilitates the trading of crypto assets on a decentralized platform.
Liquidity: An asset’s reserves in the market that can be converted into fiat cash without affecting its market value.
Metaverse: An immersive virtual environment that mimics the aspects of the physical world using technologies like virtual reality, augmented reality, artificial intelligence, social media, and cryptocurrency.
Marketplace: A platform where users can buy, sell, and trade digital assets.
NFTs: Unique tokens that can be used to prove the ownership rights of a digital asset. They are non-fungible; thus, no one token is the same as another in the same collection.
Play-to-Earn (P2E): First popularized by Axie Infinity, P2E allows players to earn assets for investing their time and efforts in a game’s economy.
Play-and-Earn (P&E): While P2E turns a game into a job, P&E games allow players to monetize their gaming experience without sacrificing narrative and gameplay.
PvP (Player vs. Player): Players in the game battle each other.
PvE (Player vs. Environment): Players follow a narrative through the game while playing alone or with simulated companions.
Public Sale: During a public token sale round, players can buy game tokens in this round.
Private Sale: A secret token sale only for backers or those directly supporting the project.
Quests/ Missions: A player must complete these tasks in the game to receive a reward, usually items or tokens.
Royalties: The automatic commissions (royalties) earned by NFT creators upon the resale of their digital art.
Reward Pool: Most Play-to-Earn games maintain a reward pool of native tokens that pays players for their efforts.
Roadmap: The overall development plan that guides customers and investors on the goals of a GameFi project.
Skins: In-game objects used to aesthetically augment the appearance of a character.
Staking: A way of earning a reward for locking an asset for a time.
Sandbox: An Ethereum-based metaverse platform that allows players to buy a virtual plot and customize it to their liking. Brands can purchase plots to host custom immersive virtual experiences for their customers and community.
Tokenization: Tokenization refers to placing game assets on a blockchain. It unlocks ways of interacting with in-game assets such as trading, lending, etc.
VR (Virtual Reality): A simulated digital environment that can be experienced through specialized equipment like VR headsets.
Wallet: Wallets store the private keys of a user. Private keys are like passwords that users need to access their crypto assets.
Yield Guild Games (YGG): A Web3 gaming guild that coordinates players to earn crypto-based rewards in play 2 earn games. The organization has created a huge community of Web3 players spread across the globe. Due to the rising prices of NFTs, YGG also offers a scholarship program. This revenue-sharing program lends NFT assets to its community members in exchange for a small percentage of the player’s gaming income.
Zero Knowledge Proofs (ZKP): Blockchains enable all parties to observe all transactions. On the other hand, Zero Knowledge Proofs allow for proving the legitimacy of these transactions without revealing personal information. ZKPs offer privacy and anonymity.
And that’s a wrap. We hope this GameFi glossary helped you learn about the metaverse game world. We will routinely update it to include any new terms that pop up in this ever-growing industry.
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