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How GameFi contributes to the growth of crypto and NFTs

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How GameFi contributes to the growth of crypto and NFTs

The crypto industry has grown tremendously over the past couple of years, and one of its biggest drivers is the GameFi industry. 

GameFi — a portmanteau of gaming and finance — enables gamers to earn rewards while playing.

The market has been growing steadily and presently has a token market cap of approximately $9.2 billion. Notably, GameFi networks have continued to thrive despite the crypto winter. Indeed, the industry is forecasted to reach a $74.2 billion valuation by 2031.

How GameFi networks work

GameFi ecosystems are based on blockchain technology and use different in-game economic setups to reward players. The rewards are usually in the form of nonfungible tokens (NFTs) that are tradable on major marketplaces. The items are typically in the form of virtual lands, costumes and weapons and are instrumental in diversifying user experiences.

The difference in gaming strategies and economic setups is what makes each game unique.

One of the most popular GameFi economic setups is the play-to-earn (P2E) model. The model is designed to keep users engaged while enabling them to earn rewards.

It allows players to indulge in the games without spending any money. However, progress can be curtailed due to the lack of assets needed to compete successfully. As such, gamers are sometimes compelled to purchase in-game items in order to advance to top levels where they can obtain bigger rewards.

Popular blockchain gaming networks utilizing the P2E GameFi model include Decentraland, The Sandbox, Axie Infinity and Gala.

Why GameFi is popular

The GameFi world has attracted millions of users over the past couple of years. This is impressive considering that the industry was practically non-existent before 2015.

Today, the industry attracts over 800,000 daily players. Many of them are drawn to GameFi due to the medley of benefits it provides.

One of them is the ease of trading digital assets. A recent market report published by CoinMarketCap found that about 75% of gamers are willing to trade in their in-game assets for some form of currency. This advantage is one of the main reasons why GameFi is so attractive to players.

Some virtual assets, such as land, can also be rented out to other gamers. Users who wish to generate passive income without playing games can also indulge in liquidity mining by staking assets. This is a huge incentive for retail investors and people who wish to monetize their gaming time.

Recent: ETH Merge will change the way enterprises view Ethereum for business

Another merit that many GameFi players appreciate is the low transaction costs. GameFi environments usually utilize cryptocurrencies, and this makes fund transfers relatively easy to execute and cheap.

This is a major bonus when compared to conventional money transfer modes, which are expensive, especially when it comes to making cross-border payments. This aspect was highlighted in the 2021 Blockchain Game Alliance (BGA) survey report, in which 17% of participants named lower transaction costs as a major GameFi benefit.

Another innovative element that captivates GameFi players is the support for user-generated content. This capability not only allows GameFi platforms to engage users with different tastes but also encourages creativity among players while propagating an autonomous environment in which assets can be created, listed and traded publicly. In the 2021 BGA survey, 47% of respondents ranked creativity and gameplay among the top reasons why they liked GameFi.

These distinctive advantages, as well as other auxiliary factors, contribute to the consistent growth of GameFi.

How GameFi boosts growth

GameFi projects rely on cryptocurrencies to settle transactions, and this has contributed greatly to the increased adoption of digital currencies in recent years.

According to a recent report published by DappRadar — a platform that tracks activities on decentralized applications (DApps) — the number of unique active wallets (UAW) wallets tied to the blockchain gaming sector rose sharply in the third quarter of 2021, accounting for approximately 49% of the 1.54 million daily UAWs registered during that period. The data confirms the disruptive potential of GameFi and the increased use of cryptocurrencies in the sector, subsequently promoting their use and adoption.

Another related survey report released by Chainplay — an NFT game aggregation platform — recently revealed that 75% of GameFi investors got into the crypto market through their involvement in GameFi, showcasing GameFi’s growing impact on crypto adoption.

Besides advancing the use of cryptocurrencies, GameFi has also contributed immensely to the rise of the NFT industry. GameFi relies heavily on NFTs for in-game assets, and this increases their use on the blockchain. Not surprisingly, the rise of the GameFi market in 2021 coincided strongly with the NFT boom.

GameFi NFT sales rose to $5.17 billion in 2021, up from the $82 million recorded in 2020. The sales numbers helped to solidify the growth of the NFT market.

GameFi attracts more investors and gaming companies

Droves of investors are injecting money into promising GameFi projects. The development is bound to help the blockchain industry gain greater credence in mainstream markets as a viable investment space.

According to data derived from Footprint Analytics — a blockchain data analytics firm — over $13 billion has been raised so far by blockchain gaming companies. Over $3.5 billion of this was raised during the first half of 2022.

Speaking to Cointelegraph, Ilman Shazhaev, the founder and CEO of GameFi project Farcana, said that the industry is rapidly evolving, hence the rising interest among investors:

“Investors are particularly interested in GameFi because it represents a sector of the broader blockchain ecosystem that has earned a genuine interest worldwide. They are betting on the future, as only a few industries have a chance of attracting more users in the long run than GameFi.” 

He added that the sector was still at a very nascent stage with significant room for improvement, especially when it comes to innovation.

As things stand, major enterprises, including mainstream gaming companies, are jumping on the GameFi bandwagon as the industry continues to advance.

Eminent gaming powerhouses such as Ubisoft are already making moves to conquer the GameFi frontier. Earlier this year, the gaming firm announced a partnership with Hedera and the HBAR Foundation to come up with Web3 GameFi games for the brand. The gaming behemoth is behind the popular Far Cry and Rainbow Six franchises.

Zynga, another renowned game developer, also announced plans at the beginning of the year to unveil its own NFT-based games. The mobile gaming giant said that it was working toward building a blockchain team and making alliances with accomplished blockchain partners in order to bring to life its own collection of NFT games.

Mainstream tech conglomerates such as Tencent, the Chinese multinational technology company, have also started investing in the GameFi sector. The company was recently named among the top contributors in Immutable’s $200 million fundraising event. Immutable is the developer behind NFT games such as the Gods Unchained and Guild of Guardians.

The entry of such players indicates increased competitiveness for a share of the space. This is likely to increase GameFi investments and drive innovation over the long term.

Cointelegraph had the chance to catch up with Anton Link, the co-founder and CEO of NFT rental protocol UNITBOX, to discuss this phenomenon.

Link said that the industry’s highly positive growth indicators were among the main reasons why investors are flocking to the sector.

“Unlike other application areas, it [GameFi] allows for implementing of tech here and now, and the sector’s growth forecasts and indicators speak for themselves.”

He also noted that some game developers were looking to dabble in GameFi in order to obtain a more engaged demographic.

Some challenges that the GameFi industry is experiencing

While the GameFi sector attracts hordes of players, investors and gaming companies, there are still some significant issues to overcome before it captures a sizable pie of the overall gaming industry.

Security issues

The GameFi market has faced some serious hacks in the recent past that are likely to negatively impact user sentiment in the sector.

One of them is the Ronin bridge hack attack that happened earlier this year. It caused Axie Infinity players to lose over $600 million in crypto. Most recently, a newly launched Web3 game dubbed Dragoma suffered a rug pull that caused users to lose $3.5 million.

These are just a few of the reported losses from GameFi intrusions and scams. Such incidences continue to erode trust in the industry.

Poor gaming experience

Furthermore, blockchain-based games suffer from playability issues. While they allow players to control and transfer their in-game assets, graphics, immersion and gameplay often lag far behind their mainstream competitors. 

Many blockchain games lack game mechanics beyond “grinding,” i.e., completing repetitive tasks to be rewarded with assets.

Complaints from gamers show that the appeal of blockchain-based tokens isn’t everything and that players still value the vivid experiences offered by popular mainstream games over the benefits provided by GameFi.

Uncertain regulations

Additionally, many GameFi platforms are operating in a regulatory gray area and are likely to face major headwinds in the next couple of years. Right now, the United States Securities and Exchange Commission (SEC) is considering whether to classify blockchain gaming tokens as securities due to the “expectation of profit.”

Classifying them as such would bring them under the purview of the regulatory authority. This would oblige many GameFi platforms to make extensive disclosures about their clients and revenue models. Networks that fail to meet SEC requirements are usually forced to bar U.S. investors and players from joining their platforms to avoid fines and sanctions. This is likely to undercut the growth of the sector.

Technical complexities

Novel blockchain concepts usually experience myriad teething problems. The decentralized finance sector, for example, experienced many of these problems because many users found the platforms hard to understand and use.

GameFi is experiencing some of these issues as well. Buying and selling of NFTs, for example, is a complex affair and remains a major hurdle for newcomers.

The sector is still bound to the wider crypto market

GameFi is a subset of the crypto industry and is therefore affected by the booms and busts of the digital currency market. Consequently, the GameFi sector experiences a rise in activity during uptrends, but the opposite happens when there is a downtrend.

To maintain interest in GameFi platforms, developers face the uphill task of developing enthralling games to help ecosystems weather market slides.

Recent: What the Ethereum Merge means for the blockchain’s layer-2 solutions

Currently, GameFi investors are focused on improving gaming experiences to build on sustainability, but the task is easier said than done.

Developers face myriad challenges, but if they are successful in attracting players with top-tier gameplay, the future of blockchain-based gaming looks bright.

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California fraud cases highlight the need for a regulatory crackdown on crypto

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California fraud cases highlight the need for a regulatory crackdown on crypto

The California Department of Financial Protection and Innovation (DFPI) announced last month that it had issued desist and refrain orders to 11 entities for violating California securities laws. Some of the highlights included allegations that they offered unqualified securities as well as material misrepresentations and omissions to investors.

These violations should remind us that while crypto is a unique and exciting industry for the public at large, it is still an area that is rife with the potential for bad players and fraud. To date, government crypto regulation has been minimal at best, with a distinct lack of action. Whether you are a full-time professional investor or just a casual fan who wants to be involved, you need to be absolutely sure of what you are getting into before getting involved in any crypto opportunity.

California has toyed with setting up a crypto-specific business registration process for those looking to do business in the state. The proposed framework was vetoed by Governor Gavin Newsom as the resources required to establish and enforce such a framework would be prohibitive for the state. While this type of compliance infrastructure has not been employed yet, it points to concerns that regulatory authorities have related to the crypto industry.

There appears to be a pattern that new industries, especially those that garner as much international attention as crypto, are especially susceptible to fraud. One must go only as far back as cannabis legalization to find the last time California had to deal with fraudulent schemes at this scale.

Related: The feds are coming for the metaverse — from Axie Infinity to Bored Apes

It appears inevitable that California, known to be a first mover in regulation and compliance, will create some form of crypto-specific compliance infrastructure in the name of consumer protection. If history is any indication, once California releases its framework, other states will follow.

Federal and state representatives have been attempting to draft legislation to establish financial standards for crypto with little luck to date. At the federal level, Senators Cory Booker, John Thune, Debbie Stabenow and John Boozman co-sponsored a bill to empower the Commodities Futures Trading Commission (CFTC) to serve as the regulatory body for crypto, while Senators Kirsten Gillibrand and Cynthia Lummis co-sponsored a bill to establish more clear guidance on digital assets and virtual currencies. Lawmakers have even reached out to tech luminaries such as Mark Zuckerberg to weigh in on crypto fraud.

Cryptocurrencies, California, CFTC, Legislation, Law, Scams, Fraud, Bitcoin Scams
Source: Chainalysis

None of these or other similarly crypto-focused bills are expected to pass in 2022, but this level of bipartisan cooperation has been unprecedented in recent times. The collaboration should reflect just the sheer magnitude of the need for a regulatory framework. Said another way, Democrats and Republicans speaking to one another about anything should stop the presses, but the fact that they are co-sponsoring multiple bills should tell us that there is a monumental requirement for guidance.

How should one approach investing in the crypto space if the government is not going to establish controls for crypto? There are a few general points that one should consider if they are presented with a crypto investment opportunity.

Related: GameFi developers could be facing big fines and hard time

When reviewing any opportunity, do your due diligence! Do not take anyone’s word without some level of substantive support. If crypto is not an area of expertise, reach out to professionals who do have qualified experience. Make sure to utilize crypto monitoring and blockchain analysis tools, if possible, as part of the vetting process.

A common strategy of fraudsters is putting undue pressure or artificial timelines on a potential close. Slow down the process and use any and all time necessary to make an investment decision.

If it sounds too good to be true, it probably is. As overplayed as the cliché may be, it does bring up a valid point. There have been instances of schemes offering to pay initial and ongoing dividends for any new investors that are brought in and for additional dividends to be paid from any investors that those new investors bring in. If this sounds like a pyramid or multi-level marketing scheme, that’s because it is. Terms like “No Risk Investment” get thrown around as well. Ultimately, if no one knows where the opportunity is coming from, beware.

While crypto can be a fun and electrifying topic with many legitimate opportunities, there are bad players who will take advantage of the lack of government oversight and the excitement of overenthusiastic or undereducated investors.

Zach Gordon is a certified public accountant (CPA) and vice president of crypto accounting for Propeller Industries, serving as fractional chief financial officer and adviser to a portfolio of crypto and Web3 clients. He has been named a Forty Under 40 CPA, sits on the Digital Assets Committee for the NYSSCPA and has been working with crypto clients in a variety of capacities since 2016.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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NFT space bridges passions for tennis legend Maria Sharapova

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NFT space bridges passions for tennis legend Maria Sharapova

Tennis legend Maria Sharapova appeared at the Binance Blockchain Week Paris 2022 to share her interest in nonfungible tokens (NFTs).

During an exclusive interview with Cointelegraph, Sharapova mentioned that “she is exposing herself to this new world of crypto and Web3,” noting that the sector will help her better engage with her fans. Sharapova was also one of the strategic investors behind MoonPay’s Series A financing round, yet she mentioned that she aims to bridge her personal experiences to the digital world moving forward.

Maria Sharapova (right) with Cointelegraph senior reporter Rachel Wolfson (left) at Binance Blockchain Week Paris 2022. Source: Rachel Wolfson

Cointelegraph: What are you doing here today at Binance Blockchain Week Paris?

Maria Sharapova: I’m crypto curious and would like to figure out how to bridge the incredible physical experiences that I’ve been able to have with my fans over so many years. I’m now finding ways to include experiences in the digital world, so that’s what I’m most excited about. Also, as a female entrepreneur, I believe it’s important to pave the way for other women to enter Web3. Money is a topic that I feel we don’t speak enough about as women.

CT: Do you have plans to launch an NFT project?

MS: I’ve been looking at this space for several months now, as I’m someone who is more in favor of opportunities for the long haul. When I saw the opportunity to bridge physical with digital experiences, I knew I wanted it to be a long-term experience for myself. Storytelling is very important and it’s a huge component of Web3. I think stories will be told better for both parties when thinking about a project long-term.

Recent: The Caribbean is pioneering CBDCs with mixed results amid banking difficulties

CT: Do you think NFTs can help create better fan engagement?

MS: Absolutely. NFTs are about finding ways to communicate with the right communities interested in what I’m doing within a different type of space. For example, I was seen on a television screen every week playing tennis for so many years, yet I no longer have that platform on a daily basis because I retired a couple of years ago. The Web3 experience has given me access to my fans in entirely new ways. I feel like I’m more engaged with them, as opposed to them just being engaged by watching me compete.

CT: As a female entrepreneur and former athlete, do you have plans to get more women involved in Web3?

MS: I want to allow women to have a space where they experiment with Web3. For example, I was 17 when I won my first grand slam and social media was in no way part of that experience. It took years for me to get comfortable with social media over time. I think Web3 is also an area where one has to get out there in order to learn and grow from it. As I mentioned earlier, the conversation about money, finance, crypto and blockchain is a taboo conversation. People may feel that unless they know about these topics, they shouldn’t speak up. But I think this should be the other way around — you learn a lot more if you ask questions and get involved.

CT: Why did you decide to invest in MoonPay?

MS: I want to diversify my portfolio. In the beginning, my investments were around consumer goods. For example, I invested in the sunscreen brand Supergoop early on. I am now exposing myself to an entirely new category.

CT: What do you think are the biggest challenges associated with Web3 and how can we overcome these?

MS: I’d love to see the quality of Web3 experiences come through a bit more and improve, specifically in the digital space.

Recent: Are decentralized digital identities the future or just a niche use case?

CT: Any additional comments?

MS: I’m really interested in the NFT space because it bridges my passion for fashion, interior design and creating spaces that are unique to individuals and communities. I’ve become more interested in this space because it has more of a design perspective. It’s also an entirely new revenue stream that both artists and women are discovering.

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Bill Aims to Limit Crypto Mining in Kazakhstan Only to Registered Companies

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Bill Aims to Limit Crypto Mining in Kazakhstan Only to Registered Companies

Bill Aims to Limit Crypto Mining in Kazakhstan Only to Registered Companies

New legislation proposed in the parliament of Kazakhstan will allow only authorized miners to mint digital currency, if adopted. The draft has been designed to comprehensively regulate the industry and reduce what its sponsors label as uncontrolled consumption of electricity in the sector.

Lawmakers in Kazakhstan Submit Crypto Mining Law, Seek to Curb ‘Gray’ Mining

Members of the Mazhilis, the lower house of Kazakhstan’s parliament, have put forward a new bill introducing rules for the extraction of cryptocurrencies in the country. Under its provisions, only companies registered at the Astana International Financial Center (AIFC) or non-resident entities that have agreements with licensed data centers, will be permitted to mine digital coins.

Kazakhstan became a magnet for crypto miners following China’s crackdown on the industry and the influx of mining businesses has caused a growing power deficit. AIFC, the Central Asian nation’s financial hub, is in the focus of government efforts to place the country’s growing crypto sector under oversight. Earlier this year, exchanges registered there were allowed to open accounts with local banks.

The current procedure for notifying authorities of mining activities is voluntary, the crypto news outlet Forklog noted in a report on the legislative attempt. The process is regulated by an order issued by the minister of digital development. Only a third of all mining companies operating in Kazakhstan have registered, Member of Parliament Ekaterina Smyshlyaeva revealed.

“The uncontrolled use of electricity by ‘gray’ miners poses a threat to the energy security of Kazakhstan,” the lawmaker insisted. Smyshlyaeva added that the current legislation does not regulate the mechanism for the sale of the mined cryptocurrency or the role of local financial service providers and the circulation of digital assets. “The procedure for their production and the establishment of property rights to them are regulated only at sub-legislative level,” she explained.

According to Kazakhstan’s State Revenue Committee, the contributions of crypto mining entities to the state budget reached $1.5 million in the first quarter of 2022. In July, President Kassym-Jomart Tokayev signed into law a bill amending the country’s Tax Code to impose higher tax rates on crypto miners. The levies now depend on the amount and average price of electricity consumed for the minting of bitcoin and other cryptocurrencies.

Do you expect the new law to reduce the number of entities authorized to mine cryptocurrencies in Kazakhstan? Tell us in the comments section below.

Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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