What is GameFi?

The financialization of video games is referred to as GameFi. GameFi is a combination of the terms “game” and “finance,” similar to the famous crypto phrase DeFi, or decentralized finance. GameFi is a wide phrase, and as we’ll see later in this article, different titles that are called GameFi may have completely different financial aspects. Some blockchain games, for example, reward players for performing in-game objectives, while others enable revenue production from a player’s numerous assets.

GameFi

History of GameFi

The phrase GameFi dates back to November 2019, when the creators of MixMarvel, a blockchain game publishing platform, talked at the Wuzhen World Blockchain Conference in China about how cryptocurrency technology may change the video gaming business.

How do GameFi games work?

Today, GameFi is available in a variety of formats. As a result, the methods through which players can earn money from their games differ. There are, however, a few key elements worth addressing. To monetize the activity, many of today’s most popular blockchain games employ a mix of the following characteristics.
Play-to-earn: Players in certain blockchain games are rewarded financially for accomplishing game objectives. The monies provided in these play-to-earn games are usually sourced from a smart contract’s native token reserve.
Asset ownership: The notion of ownership of limited digital assets is at the heart of many blockchain games today. The blockchain established digital scarcity, and NFT technology built on it. NFTs may be used to represent a variety of assets, both digital and real, as well as in-game goods. Digital ownership of one-of-a-kind goods opens up previously unimaginable economic possibilities. In CryptoKitties or Axie Infinity, for example, users may mate two NFT-based creatures to generate a third monster. They may then utilize this new asset to take advantage of a game’s play-to-earn features, sell or lease it to other gamers, and share any cash made between owners and borrowers.
DeFi features: To reward gamers, several GameFi initiatives use DeFi elements. Anyone who has worked with DeFi will be familiar with concepts like yield farming, liquidity mining, and staking, which may be used to create passive revenue from a blockchain game.

How to get started playing blockchain games?

  1. Create a web 3.0 wallet
  2. Acquire any assets needed to play
  3. Log in via your Web 3.0 wallet

Tax implications on GameFi

  1. Every time one sells coins to play a game a taxable event occurs.
  2. Whenever one sells the earned income a taxable event occurs.
  3. Coins earned on the GameFi platform are considered as ordinary income which are taxable
  4. Farming or In-Game Defi Transactions are also taxable.

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