Blockchain Games Embracing Decentralized Finance

Robert Hoogendoorn

2 years ago

The craze surrounding decentralized finance is huge, and blockchain gaming is also hopping on the train. Finance projects like Compound and especially yEarn Finance have seen their tokens boom as investors pumped billions of dollars into them. With blockchain gaming we're seeing a similar trend, where gaming projects are introducing their own tokens to build their own virtual economy or give the community voting power.

In gaming developers are able to implement all kinds of tokens. Some of these tokens give players for example landownership over virtual land. This can be seen in the strategy game League of Kingdoms and virtual worlds like Cryptovoxels. Ownership is an important aspect of blockchain gaming, as it sets the technology apart from gaming as we know it. Imagine owning a house inside Minecraft or a cool looking car in Mario Kart. That's the dream of every gamer, right?

At the same time there are blockchain games that reward players with tokens. Take for example the Small Love Potions ($SLP) from Axie Infinity, which can be used to breed new Axies. Players can earn these tokens by winning matches. SLP is currently a little bit over 5 cents a piece. To guarantee liquidity for the future of the game, Sky Mavis decided to add a daily limit to the amount of SLP gamers can earn. On a yearly basis players can now earn 36.500 SLP. So the total SLP in circulation will only grow if there are more active players, and not if a small number of players gets more active.


The latest token coming to the gaming party, is the governance token. In essence this token can be used to vote on the development of a project. It's a way for the developers to see what the community wants. Owners of a governance token would need to stake it, and by staking - which basically means that you're locking your coins - your vote gets power. The SAND token from the upcoming virtual world The Sandbox is an example of this.

The utility of a token is not limited to one of these categories. SAND can be used to stake and vote on development proposals, but players will also be able to spend SAND on digital collectibles, wearables or gameplay sessions. At the same time Sky Mavis will also introduce a governance token and add it to their tactical battle game Axie Infinity. However, about this governance token nothing has been revealed yet, but you can bet it also has in-game utility and perhaps it has something to do with the upcoming gameplay on virtual land.

Gaming is such a rich environment for the implementation of all kinds of tokens. Every element from decentralized finance can be applied inside a game world. You earn money by contributing to the virtual economy, these contributions can then be used to acquire land and for example set up a business. However, you could also stake your hard earned money and gain voting power. These in-game currencies are now becoming business opportunities or provide political power inside virtual worlds.

The advantage of gaming

If you want to get into decentralized finance, you need to invest. You will need to put your money away in a smart contract and hope for the best. Obviously this comes with some risks. This month YAM became a two-day sensation in the decentralized finance world, but it crashed after a bug was discovered. Now I am not saying that something like this isn't possible in the world of gaming, of course it's possible. It's just that gaming doesn't require you to pump your fortune in the project.

In blockchain gaming we're seeing a clear trend towards the play-to-earn business model. Because gamers put in time and effort into a game, they are able to create value for the entire community. This value is two-sided, because gamers are rewarded for their efforts. They can acquire resources or earn tokens with actual value. This value can be invested in their in-game presence or sold to the highest bidder on an open marketplace.

Game developers that embrace play-to-earn as a business model, allow gamers to create value just by playing the game. It also requires developers to think differently about their in-game economy. Game design needs to be changed, and some of the governance will be in the hands of the community. However, this also means that game developers can create extra budget for the production of their game. Take Decentraland as an example, which is thriving entirely on the money it created itself.

Decentraland is governed by a DAO that has a budget of 222 million MANA for the next ten years. Every year 22 million MANA is released for development purposes. At the current rate that's more than $2 million per year. Every time MANA is being used to buy land, wearables or something else, a small percentage gets burned. So the total supply of the token is decreasing. That way the ecosystem keeps its token valuable over a longer period of time.

GRAPH - MANA Value January 2020 - Now

Players can't earn the MANA through gameplay, but it just shows that smart developers can use blockchain technology to create more value for themselves. At the same time gamers can also earn from playing blockchain games. In Axie Infinity players earn Small Love Potions, in The Sandbox players can earn SAND by completing quests, and in the upcoming action adventure game Infinite Fleet gamers will be able to earn a cryptocurrency called INF. There's no need to invest money, players who invest time and effort will be rewarded. These rewards can in turn be used as a utility token to buy in-game items or as a governance token for voting power. However, some games like Axie Infinity and F1 Delta Time do require players to first buy some assets in order to start playing. The good news is that these items can also be sold once gamers want to quit.

Nonetheless, it's safe to say the decentralized finance and gaming have plenty of overlap. Making money from playing games is no longer just something for the most competitive, but everybody is capable of adding value. It's very possible to play one of these games a lot, earn enough tokens and then for example buy a piece of virtual land. This virtual land can then be used to create additional income, while you keep playing the game. Just like in the real world, you can grow your value by participating in the economy. Only this time it all takes place inside a video game world.

Links to the games mentioned:
  1. The Sandbox
  2. Axie Infinity
  3. Infinite Fleet
  4. League of Kingdoms
  5. F1 Delta Time

About the author

Robert Hoogendoorn is a content optimization expert and worked for press agencies and video production companies, always with a focus on the video games industry. Now he's a communication consultant for blockchain start-ups and writes for Dapp.Review, his own blog and tech magazines in The Netherlands. You can find him on Twitter @nederob.