5 reasons why gamers are hesitant to join the Gamefi brigade

GameFi is derived from the two terms “gaming” and “decentralized finance.” Fundamentally, GameFi comprises three distinct elements, Gaming, Decentralized Finance, and NFTs. The games are the bearers of GameFi, decentralized finance is the underlying logic of GameFi, and NFTs are the representations of digital assets of the game such as avatars, skins, or land.

The main attraction of GameFi is that they employ a play-to-earn (P2E) mechanism instead of conventional gaming’s pay-to-play model. A key feature that sustains this P2E model is converting in-game tokens and NFTs into legal currency. 

Due to this P2E system, GameFi has garnered a lot of popularity in a short period. While the tokenization of games is nothing new to the gaming ecosystem, GameFi offers an extra layer of transparency to transactions, building trust and making it attractive. By the end of 2021,

However, not all gamers are convinced by the hype surrounding GameFi and are reluctant to join the bandwagon. Below are some of the reasons some gamers are skeptical of GameFi:

Price Volatility

As with many crypto assets, the price of GameFi tokens is speculative and is dependent on the market forces of demand and supply. A player in the GameFi ecosystem can make money by purchasing tokens for speculation and waiting for the price to rise or playing games to receive cryptocurrency rewards.

The price of tokens could dip due to changes in the game's mechanism or the relationship between the tokens within the game. For instance, Axie Infinity’s reward token Smooth Love Potion (SLP) has an endless supply, leading to inflation, causing the token value to go down to $0.06 from $0.4. A similar situation happened with CryptoMines’ coin ETERNAL whose value fluctuated from $801 down to $5 then back up to $95.

This kind of volatility spooks many gamers who may opt to withdraw all their existing rewards from the game, making the remaining coins on the game essentially worthless. More notably, though, gamers who were considering engaging with GameFi are put off. 

Steep Entry Price

While many different genres of blockchain games, such as strategy games, sports, shooting, etc., are being developed, experts agree that the main attraction of these games is purely the prospect of making money. Blockchain games lack outstanding and unique graphics compared to AAA games, while the gameplay and plot remain pretty basic.

With this rudimentary setup, with popular growing games, players usually have to spend large amounts of money to buy new game items to participate. Axie Infinity, for example, requires players to buy three characters to start the game, and this may cost anything between $1,500 and $2,000. In contrast, a certain character in the Radio Caca project costs approximately $4,000. These costs are prohibitive and act as a deterrent for many prospective gamers.

Meta DAO Guild, a decentralized autonomous organization that developed MetaRent, is an example of a platform that enables P2E gamers to rent NFTs from other users in exchange for a part of the reward.  The Meta DAO Guild is like a set of clans that trains players while allowing them to reap some rewards without fully owning NFTs within MetaRent.

Regulatory Measures

As an application of blockchain, GameFi necessarily has cross-border characteristics, and different jurisdictions have different regulatory controls in place. Asia is one of the most important markets for gaming and crypto, but regulators in countries like China, Japan, and South Korea have enacted hostile regulations to DeFi and GameFi.

The “924 Notice” was issued by the People’s Bank of China effective 15th of September 2021, making it illegal to engage in virtual currency-related business. Therefore, a chain game that incorporates currency issuance, game currency, and ETH exchange, or legal currency exchange runs the risk of administrative violations and possible criminal charges.

The Gaming Industry Promotion Act strictly prohibits speculative acts, gambling, and free gifts in Korea in Article 28. Article 32 of the Act prohibits the conversion of game tokens into cash. On the other hand, Japanese Authorities are convinced GameFi in its entirety ought to be considered gambling. Gamers in these countries are hesitant to join the GameFi because they run the risk of criminal prosecution. 

Players are also hesitant to join the GameFi ecosystem due to the potential tax liabilities that their winning may attract. The United States, the Philippines, South Korea, Australia, and Spain all have some form of tax regime geared towards cryptocurrencies. 

Increased Risk of Wallet Hacking

A digital wallet is a basic necessity to access GameFi as it is where all the user’s digital assets from the game will be saved and from which they use preloaded crypto to purchase starter NFTs. Gamers need to ensure that credible developers create the on-chain games they engage in.

The Securities and Exchange Commission (SEC) recently warned gamers interested in GameFi to exercise greater caution since GameFi transactions make their wallets more vulnerable to hacking. Since it’s still early days for GameFi, many gamers have seen it more prudent to wait until there are greater security assurances before they join in. 

Rug Pulls and Ghost Projects

After Axie Infinity’s success, hundreds of GameFi projects were launched, but there was no clear development roadmap as many of these games had simply been created to follow the trend. Some developers have not even released their actual games yet, but have released the relevant digital token. Therefore, there is great potential for scams amongst these projects. 

The biggest risk of these projects is that the development team may suddenly disappear with the investors’ money, pulling off a rug-pull. The gamers will effectively have lost all the value they have built as their tokens will become virtually worthless. This happened several times in the past, and many gamers are wary of such risks, especially since these are the nascent stages of GameFi.

Author’s Take

Blockchain technology, as with its benefits, blockchain technology is not precisely what tech experts could call perfect. That said, it would be of sound reason for the gaming community to feel a little skeptical of the blockchain’s integration into games. Gamers are still not completely satisfied with the industry as it stands, so convincing them about blockchain could be a case of outrunning the fastest animal on the planet.

However, enthusiasts should give GameFi time to prove its worth because it could be one of the most lucrative ways to make profits in the long run. Rug pulls, steep pricing on entries, and flaws with blockchain technology are problems in the present, but they can also be solved.