Can GameFi Still Unlock the Metaverse?

Has GameFi's ambition to build an united metaverse been derailed by collapsing in-game economics and gaming NFT pushback？ Ornella Hernandez believes the answer is no. Blockchain gaming is still a driving force behind the interoperability of virtual worlds. And, regardless of economic situations, the need for gaming will continue. In my talk with Ornella, we bring everyone up to speed on market circumstances, opposing groups, and the metaverse's future consequences.

Ornella is not alone in her optimistic outlook. Absolute released an analysis that predicted over 2.8 billion in GameFi revenue over the next six years.

However, before developing a new paradigm, the GameFi industry must address an identity problem. The industry is attempting to change from a play-to-earn paradigm to a play-and-earn model. Ornella feels the industry should go a step further and alter the phrase “blockchain gaming” to “fun games made on-chain.” It has to focus its innovative energies on gaming innovations rather than in-game economics.

She also claims that the gaming industry is changing. As the popularity of hyper-casual gaming grows, more women are showing interest. If GameFi is to create a gaming-first society, it must include these types of games as well as a diverse range of representation.

What are play-to-earn games, and is play-and-earn a real solution？

GameFi's first generation consisted of play-to-earn games. This category includes games like Axie Infinity, which reward players with digital assets for in-game achievements. On a secondary market, these digital assets can then be bought and sold. The architect's primary objective in this approach is to create an in-game economy that delivers long-term value to its digital assets.

Because it pioneered a new money source for gamers, this model exploded in popularity in 2021. It was especially popular in developing countries because it provided new social mobility in the midst of a pandemic-induced economic slump.

This new economic incentive, however, drew major criticism. Many people thought that the financialization of games like Axie Infinity was the only reason for their popularity. And if it became unprofitable, gameplay would come to an end.

Its detractors were partially justified when Axie Infinity's native token SLP fell from an all-time high of $.39 to $.0044. Simultaneously, the weekly user base declined from 2.7 million to 368,000. A cross-bridge fishing hack also occurred in the game, resulting in losses of more than $625 million at the time.

Despite a flurry of bad news, including new insider trading allegations, the game is still alive and well. In July, creators published a new edition of the game called Origin, and as a result, NFT Axies sales are again on the rise.

This upgrade is part of an effort to answer criticisms of play-to-earn by attempting an improvement known as play-and-earn. In this paradigm, game designers prioritize gameplay over the in-game economy in order to promote engagement that is not based on financial gain. The tokenomics is then built to add value to the whole experience.

For example, new users can begin playing the game by downloading a free starter pack from Origin. Prior to the upgrade, users had to acquire three avatars known as Axies in order to play. Since this update, the number of new monthly accounts climbed from 4,030 in June to 5,387 in July.

While the increase in new users indicates a trend reversal, it is still uncertain whether the new play-and-earn concept can drive interest apart from the 'earn' component of the games. Because the financialization component was originally integrated into Axie Infinity, it is difficult to argue that the upgrade is truly play-and-earn.

To test this new approach, the industry requires games that incorporate a gaming-first attitude from the start. In her weekly Web3 Watch report, Ornella is keeping a close check on Star Atlas and Shrapnel as prospective examples. Star Atlas is a strategy game that immerses you in space exploration, territorial conquest, and political dominance. Their virtual world is huge, with a Discord community of 220,000 members. Shrapnel, a first-person shooter seeking to compete with Call of Duty and Halo, recently hosted two Comic-Con panels. They are built on the Avalanche blockchain and leverage narrative-driven game design to incorporate the play-and-earn principle.

What role will play-and-earn have in the metaverse？

Institutional investors are watching to see if on-chain games can draw players outside of the crypto native ecosystem. If there is evidence of crossover appeal, the sector may be worth $178 billion. More importantly, an increase in users will lay the groundwork for a unified metaverse.

The metaverse, according to Ornella, is an indefinitely growing virtual realm with its own digital economy, but it is mostly about the gamification of social interaction. However, the industry cannot agree on what that virtual realm is or what its future holds. As a result, various virtual spaces/economies vie to be the metaverse.

Ornella explained in a subsequent conversation that interoperability is one answer to this challenge. Rather of awaiting the ultimate succession of a single virtual world, such as The Sandbox or Decentraland, these worlds will find a means to trade meaning and value across virtual borders.

Blockchain technology, in theory, provides the framework for interoperability but not the incentive. According to Ornella, the gamification of digital social interaction will ultimately drive these critical improvements. And the user base gained through the gaming-first play-and-earn approach may provide the social foundation for that networked world.

The metaverse as the gamification of social interaction

One could argue that the web has always been about social connection and will continue to be so. Individuals owned much of the connection infrastructure but not the actual content in Web1. With sites like Facebook, social engagement became increasingly centered in Web2. In Web3, also known as the ownership economy, users can claim direct control of their online identity and expression. But what exactly does this ownership provide？

Ownership establishes limits. It provides a form of score card, similar to house deeds, that may be used to gauge value in relation to others. It is for this reason that private property has always been a type of gamification.

Digital ownership records are an extension of the same game. They are simply a new approach to use ownership to generate social capital — and vice versa. This is seen in NFT culture. Influencers utilize their social capital to raise the floor price of NFTs, and people with money buy these NFTs to gain social capital. NFTs can potentially be used as collateral for loans.

This gamification of social interaction is a distinct feature of Web3. However, an impartial and autonomous arena for digital expression is lacking. There must be a space where ownership in one virtual world can be represented and utilized in conjunction with ownership in other virtual worlds. NFT markets and social media platforms are examples of neutral online spaces that provide a semblance of this, albeit with restricted user experience. Furthermore, the platforms are managed and controlled from a single location. At its most basic, the metaverse provides a solution by transforming the neutral and reciprocal space between virtual worlds into an immersive experience.

And as the popularity of virtual worlds and the games contained within them grows, so will the demand for a unified metaverse. This demand appears to be users requesting innovative ways to leverage their ownership of digital assets. These could be methods for gaining access to exclusive networks or monetizing digital creations. Because of this intrinsic proclivity for social gamification, a unified metaverse appears to be unavoidable. That is why GameFi is critical to unlocking that future.

As a reminder, WikiBit is ready to help you search the qualifications and reputation of projects in a bid to protect you from hidden dangers in this risky industry!