[Part 4] GameFi Research: Model Analysis

Please re-read my previous articles (Part 1, Part 2, Part 3). In this section, I will give the basic model of Traditional Game and GameFi, which makes GameFi Model not yet effective.

GameFi Analysis

Overview

(1) GameFi = Game + Finance. In order for a GameFi project to be successful, in addition to the quality of the game, the project needs to have a good economy. There is currently no project that does that. 

(2) The driving force of traditional games is to generate revenue, and GameFi’s driving force is to increase asset value. GameFi’s weakness is insufficient demand to create value for the asset. 

(3) With a game of good quality and attracting users, assets associated with the core value of the game will tend to develop better than other types of assets. 

What Is GameFi?

GameFi = Game + Finance. Besides the quality of the game, the game must also pay attention to the economy of the game. This is not a 1+1=2 problem, because besides considering the quality of the game and the economy of the game, we also have to find a way to combine and balance the two. 

Below is the token performance table of hot games in the wave of 2021:

Most tokens have lost more than 95% of their value from the top, the games that have lost the least value (ranging around 90%) are top-quality games that are still updated regularly. The small drop in Aavegotchi is due to the tokenomics design that restricts both the increase and decrease in the price of the token. 

Consider Axie Infinity, the game that started the Play To Earn trend and is the best FDV growth project. Axie’s daily revenue sometimes reaches more than $16 million/day, at present, this figure ranges from $3,000 – $5,000. 

In short, no GameFi model has been successful and can develop stably like in the traditional market. 

The Cause Of The Failure Of The Current GameFi Model?

The biggest difference between GameFi and traditional games lies in the development motivation.

With traditional games, revenue is distributed directly to publishers and investors. The publisher can therefore focus on creating a game with great content to attract players and generate revenue. 

As for GameFi, the main driving force for development is to increase the value of assets (in GameFi it is tokens and NFT). Besides having to create a quality game to attract players, the project must also create an economy to balance the interests of the parties. All make creating a good GameFi project many times more complicated.

Looking at GameFi’s flywheel, we see that the biggest weakness is that assets backed by revenue must satisfy many components. If sales can’t keep up to create demand for the asset, the asset’s value will drop for sure.

Summary 

(1) GameFi = Game + Finance. Besides the quality of the game, the game must also pay attention to the economy of the game.

(2) Currently, there is no successful and stable GameFi model like in the traditional market. The reason is that there is no suitable design to ensure the interests of the parties. 

(3) The driving force of traditional games is to generate revenue, and the driving force of GameFi is to increase asset value. GameFi’s weakness is insufficient demand to create value for the asset.

Methods of Game Evaluation

The quality of GameFi can be compared to traditional games. Using Maslow’s Hierarchy of Needs method, we can assess the level of player satisfaction and see if the game’s content is considered good or not. 

To evaluate whether an economy in the game is good or not, we apply the most basic law in determining asset value, the law of supply and demand.

According to the law of supply and demand, when the price of a good increase, the quantity demanded will decrease, and the supply will also increase with the price of the commodity. Conversely, when the price of a commodity decreases, the quantity demanded will increase, and the supply will also decrease according to the price of the commodity. 

Verdict

In part 5, we will analyze the operating models of the 3 most popular gameFi today, and present the reasons for their failure based on the method in this article.

If you have any questions, comments, suggestions, or ideas about the project, please email ventures@coincu.com.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.

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