Why GameFi Needs NFT
AXS+8. 77%
Regardless of how you view the GameFi boom sparked by Axie Infinity in recent months, whether you see it as a groundbreaking innovation of a new era or merely another greater fool's game, one thing is undeniable: this summer, GameFi has become the most prominent concept in the crypto market. In OKX OKX Academy's previous article "A Brief Analysis of the Relationship Between the Metaverse, NFT, and GameFi" , we briefly analyzed the relationship between GameFi and NFT. In this article, we will build on that foundation to further explore the deeper connections between GameFi and NFT.
What Was the Gaming Industry Like Before NFT?
Before formally discussing "Why GameFi Needs NFT," let's take a step back to examine what position the gaming industry occupies in today's economy and society, how it operated before NFT saw widespread adoption, and what areas remain in need of improvement.
In a paper titled "Economic Analysis of China's Online Gaming Industry" published by Shi Hexin from the School of Economics at the Central University of Finance and Economics, there is a passage stating: "The online gaming industry can now be regarded as a national pillar of the economy. The development of online games determines whether a country can advance its modernization process and capitalist economic development. In an era of thriving market economy, national interests are increasingly driven by the substantial profits generated by the online gaming industry. Like a bond, the development of online gaming influences the interests of e-sports platforms, which in turn affects national economic development." Moreover, on the Wanfang Data Knowledge Service Platform, the number of research papers on the gaming industry alone reaches nearly five thousand, with the majority published after 2010. While we won't comment on the viewpoints in Shi Hexin's paper here, the growing academic attention toward the gaming industry in recent years alone speaks to its increasingly important role in today's economy and society.
So, how does the gaming industry perform in the actual realm of production and consumption? According to data compiled by Qianzhan Industry Research Institute, between 2015 and 2020, the global gaming market achieved a compound annual growth rate (CAGR) of 13.4%, with the global gaming market size reaching $164.6 billion in 2020 and expected to reach $196 billion by 2022, poised to break the $200 billion milestone.
Global gaming industry market size from 2015 to 2020, source: Qianzhan Industry Research Institute
Additionally, according to Newzoo's "Global Games Market Report 2021," the global gaming audience has now approached 3 billion people, and due to well-known factors since 2020, the number of gamers continues to grow. Beyond the sustained growth in the gaming population, a notable shift quietly unfolding within the industry is that the ways gamers spend their leisure time are becoming increasingly sophisticated, which objectively raises the bar for producers in the gaming industry. Conversely, this presents GameFi with a prime opportunity to overtake traditional gaming through cornering.
Global gaming audience distribution in 2021, source: Newzoo
Anyone with even a basic understanding of the gaming industry knows that the current market participants exhibit a clear dual structure — upstream producers and end consumers — with an insurmountable divide between them on matters of profit distribution. Specifically, upstream producers primarily include game developers and other IP holders, publishers, distribution channels, and more. Some market participants hold multiple roles within the industry value chain and in certain cases simultaneously engage in development, publishing, and distribution. They dominate the direction of the industry while capturing the vast majority of the profits it generates. Meanwhile, end consumers — the nearly 3 billion gamers — on one hand continuously inject funds into the industry, but on the other hand largely lack true ownership over the accounts, equipment, and items they have invested time and money into acquiring within games. This status quo can hardly be described as fair. This is precisely the primary and most critical issue that GameFi and NFT aim to address.
NFT Empowers GameFi to Deeply Transform the Gaming Industry
As the global situation gradually improves, people have begun to truly feel the changes that have unfolded over the past year or so. The most striking aspect is that as online communication has increasingly permeated every corner of our daily lives and work, we have unexpectedly discovered that many things originally requiring in-person interaction in the physical world can actually be handled quite well through digital means. The boundary between reality and the virtual seems neither as clear nor as necessary as we once thought. Within the crypto market, the concentrated reflection of this shift is the rise of the metaverse and GameFi.
Even more significantly, once this trend begins, it triggers a degree of irreversible impact. Through this process, the meaning that games carry is also quietly shifting. From what we observe currently, games have gradually evolved from purely recreational entertainment into a multifaceted combination of entertainment, social interaction, and more. As GameFi brings more three-dimensional and personalized gaming experiences, digital virtual characters are increasingly becoming an important expression of self-identity and individuality. From this perspective, we can also better understand why NFT profile pictures continue to defy conventional expectations and repeatedly break sales records. Because at their core, both GameFi and NFT profile pictures represent an extension of unique, personalized social needs from the real world into the digital realm, which is why they have garnered such widespread attention in the crypto market recently.
Let's refocus on GameFi. Earlier, we mentioned the persistent conflict between game producers and consumers in today's gaming industry. So, how does GameFi solve this problem? This is where NFT's critical role must be highlighted. Empowered by NFT, every in-game item players acquire (whether purchased or earned through play-to-earn) receives a unique, unforgeable, and irrevocable "identity verification," which greatly facilitates the process of confirming players' ownership over their items and equipment. In other words, with NFT as the underlying technical support for GameFi, players gain full ownership and disposal rights over their in-game items, with the potential to even enable transfers across different games.
Taking Axie Infinity, a typical representative in the GameFi space, as an example: in the game, every Axie creature players acquire is one-of-a-kind and belongs entirely to the player. Without explicit permission, no one — not even the game's developers, publishers, or other players — can illegally obtain it. Most importantly, unlike the current gaming industry where producers capture the overwhelming share of profits, approximately 95% of Axie Infinity's operating revenue is distributed to players. Other games in the GameFi赛道 also allocate the majority of their profits to players, differing only in specific revenue-sharing ratios. Before the emergence of NFT and GameFi, such a model was simply unimaginable. However, with NFT in place, the issues of trust between players, developers, and publishers, as well as the balancing of interests, have found far more imaginative solutions. The two parties are no longer simply producers and consumers but are trending toward establishing a more equal and harmonious relationship. In this transformation, NFT has played a pivotal role. From this perspective, GameFi and NFT are undoubtedly transformative for the existing business models of the gaming industry.
Looking at the data, according to Axie Infinity's official announcement, earlier this month its daily active users had already reached 993,000, leaving it just one step away from the million-user milestone. According to TokenInsight, the market cap of Axie Infinity's governance token — AXS — currently stands at $4.308 billion, ranking 41st in the crypto market, with a 24-hour trading volume exceeding $634 million. Based on these figures alone, it's hard to imagine this is a game that has existed for less than a year — and that precisely reflects the robust development momentum of GameFi.
Conclusion
Today, internet industry leaders — including those in the crypto market — are paying unprecedented attention to the metaverse. While no one can yet paint a clear picture of what the metaverse will look like, what we can确定的是, GameFi, DeFi, Web3.0, and many other elements will undoubtedly form an integral part of the future metaverse. So, let's consider: what would it take to become a more critical piece in the metaverse? Or put another way, what will be the core competitive advantage in the world of the metaverse? From our discussion on GameFi today, one initial answer we can offer is: attention.
One thing is beyond doubt — from the past to the present and into the future, the information each person receives grows exponentially. In this context, attention inevitably becomes a scarce resource. Whoever captures more attention becomes a significant traffic gateway into the metaverse. In this contest, the gaming world built on GameFi — based on shared experiences and gathering massive numbers of players — delivers an unprecedented social and interpersonal experience that no other TradeFi or medium can replicate or replace. Therefore, the future integration of NFT and GameFi will most likely construct a positive feedback loop, forming an upward spiral of "the better it gets, the better it becomes."
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Disclaimer
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