Brief description of the four major GameFi models and their characteristics

Author: 0xShan, Jack Ding｜W3.Hitchhiker

Revision: Marina, Evelyn｜W3.Hitchhiker

1. GameFi Overview

GameFi has become one of the hottest tracks in the crypto industry. According to Newszoo’s 2021 annual gaming industry report, the entire gaming industry contributed $180.3 billion in revenue, an increase of nearly 1.4% compared to 2020; however, at the same time, GameFi projects and games that earn money through P2E are disrupting the traditional gaming industry. Since July 2021, the success of Axie Infinity has sparked interest from traditional gaming companies—giants like Ubisoft are entering the GameFi market.

According to the above chart, Axie's market trading volume was still $4.2 billion in mid-March this year. Unsurprisingly, the rapid popularity of GameFi is due to the fact that players can earn money by spending their time and energy—after all, who doesn't like the idea of enjoying themselves while making money? For users unfamiliar with blockchain games, entering the market when it is highly popular can be extremely risky.

Therefore, this article will start from the historical development of GameFi, exploring the gameplay models of blockchain games, the economic systems that may form within the games, the impact of guild DAOs, and the future development direction of GameFi.

This article will also analyze the following points:

1. P2E: Games that drive player participation from a profit perspective.
2. Chain-Reformed Games: Games that achieve blockchain transformation through asset on-chain from traditional games and models.
3. AAA Titles: Games developed on the blockchain with grand and complex worldviews, narratives, playability, and economic systems, requiring a long development time.
4. Games or IPs that include creative NFTs: The definition of creativity will be explained later.

2. Brief Overview of the Development of Blockchain Games

At the World Blockchain Conference in Wuzhen in November 2019, the founder of the blockchain game publishing platform MixMarvel discussed how cryptocurrencies could completely change the video game industry, marking the beginning of GameFi's journey in China.

For Western readers, this term first appeared in a tweet in September 2020, when Andre Cronje, co-founder of yearn.finance, believed that future DeFi monetary policies would lean towards gamification, and the funds staked by users might become equipment in DeFi games. The industry is still imitating TradFi, but may eventually shift towards gamified GameFi.

Although GameFi only started to gain popularity last year, its history can be traced back to the king of cryptocurrencies—Bitcoin. Early integrations of BTC in Minecraft servers, Gambit.com in 2013, and games like Bombermine can be considered some of the earliest attempts in the GameFi field.

Additionally, peer-to-peer services that allowed players to monetize mainstream games through BTC can also be seen as early efforts. Later, projects like Huntercoin used blockchain technology to enable players to mine cryptocurrencies for profit, rather than just for payments.

The emergence of Ethereum in 2015 opened up new possibilities for video game developers, marking the beginning of an era where applications could be developed on-chain through smart contracts, including blockchain games like CryptoKitties.

It represented in-game assets in the form of non-fungible tokens (NFTs) defined by the newly established ERC-721 standard. NFTs sparked tremendous innovation in the crypto gaming industry, leading to explosive growth in blockchain games.

3. Detailed Classification of GameFi

I. P2E

Traditional online games generate revenue by selling equipment/items in-app, doing marketing, and placing ads. As a gamer, you need to spend money to purchase items in the game to gain a better experience and the joy of winning, and of course, these expenditures go directly into the wallets of game operators.

Aside from the experience brought by the time and energy spent playing games, the items you purchase do not provide any other economic benefits. Overall, P2E (play-to-earn) is a game model that drives player participation from a profit perspective, ushering in a new economic era for gaming. Its characteristics include:

1. The degree of internal circulation in the economic model determines how long the system can be sustained.
2. Scalability determines the upper limit. Scalability includes the expansion of the game (the possibility of the economic system moving towards external circulation) and the expansion of participants.
3. Playability stabilizes the lower limit.

▶️ Taking Axie Infinity as an example

This game includes two ERC-20 tokens:

$AXS (native governance token)

$SLP (game breeding fuel, with no upper limit on total supply)

1. Internal Circulation of the Economic Model

According to the timeline indicated in the above chart, the first wave of market activity came from the launch of the Ronin chain, which reduced interaction costs:

• On July 1, the breeding fee was adjusted, increasing the $AXS cost per breeding action from 2 to 4, and the required $SLP consumption increased.
• On August 9, the breeding fee was adjusted, reducing $AXS from 4 to 2, while $SLP doubled. Additionally, the gold output from Axie was halved.
• On September 23, the breeding fee was adjusted, reducing $AXS from 2 to 1, while $SLP doubled.
• On November 4, Axie launched the decentralized exchange Katana on the Ronin sidechain, allowing players to exchange their gold earnings for $ETH within the Ronin chain.

2. Lifecycle

▶️ Based on Axie Token Inflation Analysis:

• When the game is in its early stages or low inflation, adjusting a certain parameter in the economic model can quickly raise the token price (because the supply-demand balance in the game is disrupted). Meanwhile, players will flood in, and the game enters a rapid development phase. However, although traffic accumulates, the influx of large amounts of capital gradually shortens the investment recovery cycle, sowing the seeds of high inflation.
• As the game gradually declines from its peak, the rationality of the initial economic model design determines the effectiveness of adjustments, i.e., the speed of decline from the peak. The economic model of Axie, to some extent, has failed; neither adjusting the gold output nor the breeding fees has salvaged the price of the circulating token SLP, leading the game into a weakening phase. Traffic continues to accumulate, but capital begins to flow out.

Viewing the over-bred Axies as the dealer and capital accumulation chips, the dealer's chips gradually increase, pulling up the token price. As the number of over-bred Axies decreases, it means either retail investors are rushing to take over, or the dealer is not breeding and is preparing to withdraw. In any case, it signifies that the game is beginning to decline.

• From September 23 to November 4, the token price remained stable under high inflation, largely due to AXS staking mining, which generated expectations for the project's scalability.
• After November 4, the Ronin sidechain launched the first on-chain DEX Katana to support the exchange of various assets generated by applications on that chain, solidifying the value of game traffic on the Ronin chain and shifting the inflation bubble of SLP to Ronin.

▶️ Based on Axie Holder (User) Data Analysis:

• From May to July, it was the initial stage, with slow user growth; the bubble was consumed in the form of breeding Axies, with production materials in excess of demand, and the supply-demand balance of gold tokens was roughly balanced.
• From July to September, guilds intervened to promote on a large scale, accelerating user growth, and the game developed rapidly. New producers began to take over from previous consumers, driving up the token price. However, the influx of many new producers formed significant selling pressure, and the trend of supply exceeding demand gradually intensified, leading to a decline in token price after reaching its peak.
• From September to November, the game entered its late stage, with user growth slowing down. The consumption threshold for new producers was insufficient to absorb the sell-off from earlier producers, leading to a continuous supply-demand imbalance and the game heading towards collapse, with token prices falling.
• From November to now, the user growth rate has decreased again. However, new narratives absorbed the bubble from existing producers, stabilizing the token price. Once new models emerge, the game will enter the next phase.

Observational Indicators:

1. Inflation of gold tokens
2. Capital inflow situation
3. Growth rate of NFT (production materials) holders
4. Implementation of new narratives

3. Scalability

• Scalability of the Game Itself

"Web3 games build various economic systems of different sizes through their token economic incentive mechanisms. The project party, as the primary driver, can propose the game's world design, themes, player types, player operations, player worlds, game assets, etc.; based on this, to attract more participants, they can allocate game tokens or limited NFTs to participants, early supporters, and players.

The economic incentive mechanism connects early participants, and the early distribution model often determines the community's loyalty and future support. Games that truly develop may not necessarily be grand from the start.

Perhaps starting from a certain point, a new mechanism can attract a group of loyal community users, such as players, builders, and investors, continuously breaking through from this foundation. When the game develops to a certain extent, there will be combinability and user creativity, leading to some games having stronger ecological resilience."

The gameplay update of Battle V2 increases playability, while weakening some of the earn attributes under existing traffic. After introducing land, it reassigns new value to production material Axies, transforming from user acquisition to user creation, thereby increasing user stickiness.

• User Scalability

In the early stages, as blockchain games increased, participants' time and money were more likely to become decentralized. Initially, blockchain games would also experience situations similar to those in DeFi, where funds would flow to whichever DeFi protocol offered higher yields. In this scenario, focusing on players becomes increasingly important.

1. Guilds, which form community culture, where players are not just investors in the project but become interest-bound through the guild. Additionally, guilds create social networks to enhance user stickiness. However, how to prevent guilds from becoming too large and harvesting non-guild retail investors or even project parties is also an important measure.
2. Lowering entry barriers and simplifying the game. The game should primarily focus on light gaming. Because whether users join spontaneously or through guild-driven methods later on, they should have low time and learning costs. Currently, the large gaming demographic still primarily consists of young people who enjoy this type of game, with little motivation for other groups to join.

As the accumulation of game players (traffic) increases, the game has the opportunity to attract more builders (I believe the source of user creativity comes from a stronger value consensus), thereby generating a larger game ecosystem.

Thus, the early economic incentive mechanism is crucial. Because the economic mechanism determines traffic, traffic determines the attractiveness to builders, and the entry of builders brings a better gaming experience, which in turn brings greater traffic, thereby entering a positive cycle.

4. Limiting P2E from Becoming a Capital Game

From the perspective of the project party, to determine whether the project party will become a "scythe," the following indicators can be used for judgment:

1. Token unlock time for the project party: If the unlock time for the project party's tokens is too early and too much, the project party becomes a major holder, increasing the likelihood of profit-taking.
2. The protocol revenue when the project absorbs incremental funds: The generated protocol revenue distribution is an important indicator. If the project party accumulates a large amount of revenue during the influx of funds without distributing it to token holders, this is undoubtedly unfair. If we understand the project as a company, the protocol revenue is the company's net profit, which must be distributed to all shareholders. Thus, the project party, by occupying a large share through the founder's identity, can also enjoy the benefits of share appreciation, shifting operations towards enlarging the cake rather than increasing their share of the cake.

From the perspective of major holders (guilds):

1. Raising the threshold for profit-sharing: Incentives should be given to true contributors, allowing them to settle down, rather than rewarding capital that flows back and forth. Currently, a relatively realistic measure is that liquid tokens cannot participate in the distribution of project profits and can only enjoy the benefits of price increases. Reducing the amount of such tokens weakens the influence of major holders.
2. Nationalization of major holders: The project party itself can form a guild, using its information advantage to absorb and release chips, thereby weakening the profit motive and increasing the project party's influence on the market.

Observational Indicators:

User composition analysis

User gaming time analysis

II. Chain-Reformed Games:

By putting traditional game assets on-chain, assets can be traded through the blockchain. It is believed that chain-reformed games are currently more realistic than other types of games, possessing a certain level of playability, and their economic models have undergone verification and updates in the traditional gaming market (the various game economic models currently on the market are generally similar, differing only in models, skins, and backgrounds).

1. Advantages of Chain-Reformed Games Compared to Traditional Games:

• The free circulation of assets will direct some of the project party's revenue to production-oriented players.

For a game to become a blockchain game, assets need to be on-chain, which means they can be traded and freely circulated on-chain. In traditional mobile games, assets are generally bound to accounts, preventing free circulation to ensure that players' expenditures are all recharged to the project party rather than other players.

Once asset free circulation is enabled, player outputs will inevitably form a negative premium compared to official sales, reducing official revenue, with some income going to production-oriented players, forming a P2E cycle within the game. The ceiling for this P2E income should be the price at which the official sells the same resources; when the price of resources sold by players equals the official selling price, P2E earnings reach their limit.

• Using NFTs and Tokens as driving forces may increase the game's lifespan.

In traditional games that do not undergo chain reform, the main means of maintaining vitality is through operations like opening new servers or merging servers to stimulate player spending, extending the revenue period. However, the ultimate revenue of the game economic system is directed to the project party, leading some players to lose their motivation to spend or choose to invest only time. The exit of these players is likely to be permanent, ultimately leading to new games or weakened narrative backgrounds, with no new players entering, resulting in a decline in lifespan.

After bringing such games on-chain, NFTs and Tokens will inevitably exist. If the acquisition models of NFTs and Tokens are linked to the competitive models within the game, it can enhance the competitiveness and increase user stickiness from an economic perspective, reducing player attrition.

Because chain-reformed games inherently include competitive models in their economic models, introducing Tokens into this competitive model carries low risk, and Tokens and the game system itself are no longer isolated, which can stimulate player participation in competition.

2. Observational Points for Chain-Reformed Games:

In addition to general observational points (website traffic, user numbers, etc.), the following dimensions can also be observed:

• The negative premium of resources produced by production-oriented players compared to the official resource prices.

If the negative premium is small, the value is close to that of the resources sold by the official, considering that the resources produced in the game have relatively stable consumption, and the internal supply-demand relationship is normal.

If the negative premium continues to expand, it suggests a weakening of internal demand and an increase in supply.

• The floor price of NFTs with production capabilities, closely associated with Tokens, and having a foreseeable upper limit on total supply.

Aside from blue-chip projects, NFTs currently on the market generally have poor liquidity; a continuous decline in floor prices may indicate weakening buying interest.

• The relationship between Tokens and NFT empowerment:

Tokens serve as competitive incentive rewards; players have income demands for their investments, which can create selling pressure. Some NFTs must serve as carriers to reduce selling pressure and lock in liquidity to slow down system inflation. If the empowerment relationship is not well-crafted, the "Token-NFT" on-chain system may collapse before the game, causing the game to lose its significance of being on-chain and revert to traditional gaming, while players who entered based on the "NFT-Token" system may exit.

• The project party continuously and long-term launching discount activities to seize the earnings of lifestyle players:

When the negative premium of resources produced by lifestyle players is very close to the official selling price, the project party launches activities to seize profits, disrupting the original supply-demand relationship. This indicates that the project party's desire for increased revenue is strong, leading to resource devaluation and ultimately causing players to exit due to the need for continuous investment in a flooded resource environment.

III. AAA Titles

Games developed on the blockchain with grand and complex worldviews, narratives, playability, and economic systems, requiring a long development time, such as Illuvium, Star Atlas, QBIT, etc.

Problems with AAA Titles:

1. AAA titles are initiated later and require a longer development cycle. If GameFi exploded in 2022, there are still no projects on the market in the first quarter. Due to the vastness of AAA titles' worldviews, systems, and graphics, there is a high possibility of continuous delays in launch.

2. AAA titles require pre-sale NFTs to raise funds, and NFTs themselves have high value. If continuous fundraising through NFTs is needed, NFTs are likely to decline in price due to oversupply before the game launches, negatively impacting NFT sales in the later stages of the game.

3. AAA titles may launch a front-end version (browser mini-games) to stabilize NFT value, focusing primarily on output. Since the internal economic system of the game has not yet launched, NFT mining Tokens will inevitably create selling pressure. This sacrifices the speculative value of Tokens to maintain the value of NFTs, resulting in a transfer of value.

4. The front-end version of AAA titles has three narratives:

   A. The narrative of the expectation for the landing of AAA titles (as long as it does not land, it will exist).

   B. The P2E narrative of the front-end version of AAA titles.

   C. The speculative expectation of AAA titles themselves.

If these narratives hold, AAA titles will fall into the category of P2E games, but with stronger narratives than typical P2E and capital games.

IV. Games or IPs that Include Creative NFTs

NFTs accumulate traffic through games, but at the same time, NFTs also exist in a "universe," such as land NFTs that can be used in other games with the same background. After this type of NFT completes traffic accumulation, its value will not decrease due to the game's decline cycle, meaning there will always be places to go and points to generate income, and future games can even be built based on these NFTs.

The emergence of this type of NFT represents a shift in users from participants to creators. Therefore, the larger the traffic accumulation for the game, the easier it is for user-created NFTs to form a value consensus, and the threshold value of this land or user-created NFTs will also be higher.

4. Expected Economic Systems to Form in Games:

I. Limited NFTs and Unlimited NFTs:

For example, land and planets are relatively limited.

For example, tools and spaceships are relatively unlimited; although the total amount of different types of NFTs is limited, they can produce different types of NFTs.

The unlimited ones mostly serve as entry barriers to allow for the influx of incremental funds. The prices of these NFTs fluctuate within a certain range when the game is in a balanced phase. When the game begins to decline, these assets will also experience a larger-scale drop. However, during the game's development phase, the increase should not be too large (I personally believe that this initial idea should not be determined by the market price but should be set by the project party as a guide price. Due to the existence of Axie, the rapid influx of funds in the early stages will accelerate the collapse of the economic system).

If price increases lead to excessively high entry barriers, insufficient incremental funds will hinder project development. At this point, if the project party chooses to regulate and lower prices, the decline in production material prices will inevitably lead to token devaluation, creating a negative spiral. A large outflow of existing funds will lead the project towards collapse.

Limited NFTs can also be divided into those with earnings and those without earnings:

• With earnings: Taking LOK as an example, the project party released land early to obtain funds, and players received shares. With shares, players can earn income, which I believe is better in USD terms than in token terms. The value of land is actually highly linked to the value of the game because land is essentially shares.
• Without earnings: The overall price reflects the market's expectations for the game to reach the next stage, not fluctuating with the current game's rise and fall. This requires the game to have high scalability.

II. Limited NFTs-Token Integration into the Game and Forming a Strongly Associated System:

If Tokens are viewed as rewards for players in the game, then for players who do not participate in governance, it will inevitably create selling pressure. Moreover, the difficulty of obtaining Tokens cannot be too high; otherwise, the stickiness of bottom players will be low.

At this point, a carrier that can lock in a certain amount of Token liquidity and restrain selling pressure is needed. Limited NFTs serve as a good carrier, directing selling pressure onto NFTs, forming a DeFi 1.0 model. For example, holders of limited NFTs need to stake a portion of Tokens to guarantee the value of NFTs (such as the output rate of the game, resource rate, etc.), allowing NFT holders (the middle class) to absorb some selling pressure from "commoners." Moreover, it must be fully integrated into the game system for interaction; only then will NFT holders have the motivation to absorb selling pressure.

At the same time, the game needs to have a well-developed consumption system for Tokens, regulating the economic system within the game while reducing player attrition (many games have increased consumption limits but faced player complaints, leading to increased player consumption and exit).

III. There Should Be Sufficient Player Division of Labor in the Game, Achieving Supply-Demand Balance.

• Producers: Provide resources slightly below official prices while earning a certain income.
• Consumers: Oligarchs, consuming a large amount of in-game resources with a slowly growing number, existing due to the game's playability.
• NFT Holders: Participate in the micro-regulation of Token selling pressure under the premise of having regulatory pathways.
• Ordinary Players: A reference for oligarchs, participating due to gameplay, with neither strong selling pressure nor significant earnings, but a large number.

IV. Simulating the Development Cycle of the Game:

1. Initial Cycle: Producers and consumers flood in, and the project party does not seize producers' earnings; the game forms a situation of supply exceeding demand, with producers' outputs forming a negative premium compared to the same goods provided by the project party.
2. Consumption Cycle: The influx of producers decreases, while consumers' consumption increases; the game forms a situation of demand exceeding supply, with producers' outputs forming a reduced negative premium compared to the same goods provided by the project party.
3. Oligarch Cycle: After a significant consumption round in the game, players form resource oligarchs, squeezing ordinary producers' earnings, leading to the exit of existing producers. It is worth noting that in games without competition, such as some P2E games, an oligarch cycle may not form. The prerequisite for forming an oligarch cycle is that resources have an output limit within a defined time period and form competition.
4. Stimulus Cycle: After the formation of oligarchs in the game, the project party increases competitiveness (e.g., through server mergers, new server openings, or server transfers), shattering the oligarch structure of a single server or continent, increasing consumption, and allowing producers to flood back in.

After the stimulus cycle, there may be three types of collapse cycles:

1. Cyclic Collapse Cycle: 3-4 cycles until only one oligarch remains, unable to continue stimulating.
2. Project Party and Oligarch Breakup Collapse: The project party lowers product prices (creating inflation), seizing oligarch profits, ultimately leading to the exit of oligarchs.
3. No New Traffic Collapse: During stimulation, if no new players flood in, producers and oligarch outputs enter a state of internal consumption until collapse.

Dangerous Signals:

1. The emergence of a stimulus cycle while traffic does not show significant growth.
2. The project party and oligarchs competing for the remaining profits.
3. Before entering the stimulus cycle, oligarch suppression leads to negative growth in player traffic.
4. Resource outputs showing long-term negative premiums, failing to stimulate consumption.

As shown in the figure below:

NFT earnings and recovery cycles present a downward parabola and have already passed the turning point.

The yellow line may gradually accelerate upward in the early stage:

After the stimulus cycle, there may be three types of collapse cycles:

The above are relatively dangerous situations. If fluctuations around the turning point can persist for a long time, the game cycle will be relatively extended.

The Best Cycle:

The laws of development always lead from prosperity to decline. However, there may be exceptions: namely, the fourth type of game, which includes creative NFTs or IPs.

"Definition of Creative NFTs": NFTs accumulate traffic through games, but at the same time, NFTs exist in a universe, such as land NFTs that can be used in other games with the same background. After this type of NFT completes traffic accumulation, its value will not decrease due to the game's decline cycle, meaning there will always be places to go and points to generate income. Future games can even be built based on these NFTs.

The emergence of this type of NFT represents a shift in users from participants to creators. Therefore, the larger the traffic accumulation for the game, the easier it is for user-created NFTs to form a value consensus, and the threshold value of this land or user-created NFTs will also be higher.

▶️ Taking Axie Land as an Example:

Although the game has moved from its peak to a trough, the land carries the value accumulated during the game's development process, and the value embedded in the traffic is locked in the land NFTs, not falling with the game's trough cycle.

Perspective: Regarding games with creative NFTs, in the early stages of the game, whether it is P2E, chain reform, or AAA titles, it is necessary to accumulate traffic during the initial gameplay. Once this traffic settles and reaches a consensus, the game enters the fourth cycle: the creative cycle.

Creative Cycle: In this cycle, the traffic is sufficient to support the construction of various games, and the value of NFTs does not fluctuate solely with changes in a specific game. NFTs remain evergreen, breaking free from the constraints of a single game, forming a large cultural universe, while the upper limit of the entire universe is the upper limit of economic benefits.

Unfortunately, there are currently no such games on the market. Axie has only completed the initial traffic accumulation, and Sandbox has not followed the early game path to achieve traffic accumulation, naturally failing to form a value consensus.

Current investment advice is to try to capture NFTs that may enter the creative cycle, aligning with the principles of long-term holding.

From a short-term investment perspective, the yellow line cycle in the above chart is a good choice for "short and quick" gains.

5. The Significance of Guilds to GameFi

I. Views on DAOs:

During the DeFi Summer of 2020, DAOs gained some popularity, with even claims that the end of DeFi would be DAOs. However, from the market trends over the past year, DAOs have not exploded, and it can even be said that there have been no practical applications. From currently mature DeFi projects (Uni, AAVE, COMP), it is challenging for DAOs to land; investors hold massive amounts of chips, and decentralized governance ultimately leads to merely de-retailization governance.

Although PeopleDao in November 2021 failed, it opened a new world for DAOs. From the project's initiation to public fundraising, the entire project was relatively fair, with governance rights corresponding to donation amounts, all starting from the same line, achieving de-institutionalization, which is also the spirit of fairness pursued by native users in the crypto space. Although it ultimately ended in failure, PeopleDao itself will become a symbol.

From the perspective of people, the initiation of a DAO requires a carrier. Theoretically, if this carrier can provide strong cohesion (things that individual retail investors cannot do, the larger the task, the stronger the cohesion) and a moderate economic benefit, the upper limit of this DAO will be higher. However, if the controllable economic benefits are too large, the governance of the DAO itself will become chaotic, leading to oligarchic divisions within the DAO. (This observation comes from top DeFi projects like UNI.)

II. The Significance of Guild DAOs to GameFi

Currently, games are seen as a good carrier; gaming guilds are organizations that combine a strong sense of honor, strong cohesion, and certain economic benefits. The following groups will emerge within this organization:

1. Flagship figures: Presidents, early initiators, and early investors.
2. Management: Responsible for daily operations and ensuring the guild runs smoothly.
3. Deep participants: Provide suggestions for guild operations, deeply engage in daily activities, and are relatively indifferent to or do not prioritize profit concepts, acting as contributors.
4. Ordinary participants: This group is the largest, joining for economic or honor purposes, hoping to gain benefits unattainable by lone wolves.

This type of gaming guild, supported or driven by profits, is believed to be able to transcend the existence of the game.

Different game mechanisms will produce different user structures:

1. In gold farming-centric games: Ordinary participants hope to enter the game faster through the guild or obtain returns with lower input.
2. In competition-centric games: Ordinary participants complete tasks that cannot be accomplished alone through the guild while obtaining benefits unattainable by ordinary players.

Regardless of the type of game guild, players gathered can become a significant moat that transcends the game. Guilds bring their own traffic, and these players are skilled in operational processes, which has a promoting effect on the early development of the game.

In current games, if the game's moat is low, guilds serve as the main moat in the early stages, and this moat will transmit to the game itself, forming a mutually beneficial effect. GameFi and guilds are ultimately inseparable.

Possible Roles of Guilds in GameFi:

A three-way balance, with guilds acting as a balance point between retail investors and project parties. Strengthening the voice of retail investors in front of the project party while helping the project party regulate retail investors. Similar to voting proxies but maintaining a certain influence on the project party with binding attributes for retail investors.

III. Outlook for Guild DAOs:

For a DAO to transcend the existence of the game itself, profits during the migration process must surpass all other conditions. Therefore, it is essential to address the issue of profit imbalance across different games. If a relatively stable profit distribution can be achieved, the DAO itself will also become a symbol of value.

Additionally, if guild DAOs only attract large players and scholars, they will not survive in this "competition," as any mature small team can build hundreds or thousands of bots to simulate users, and these "users" can mimic real player behavior. Therefore, the value capture of guilds requires other forms of effort (such as esports).

6. Outlook for Future GameFi Projects

From a temporal perspective:

• In the short term (1-5 years), games will be financialized or assetized regarding in-game items/equipment, giving birth to a combination of GameFi + DeFi; additionally, the vast user base of internet games, along with the entry of more key industry institutions, will attract more non-crypto users, further expanding the GameFi market.
• In the long term (5-10 years or even longer), with the rapid development of high technology, various infrastructures such as AR, VR, and improvements in on-chain transaction speeds and computing and data storage will lead to the concept of the metaverse taking shape. Games that reflect real life will also thrive, possibly resembling what is presented in the movie "Ready Player One."

What attracts internet users the most is the Play-to-Earn model; the chain reform model allows users to quickly familiarize themselves with the differences and innovations of blockchain games while ensuring playability; AAA titles, although requiring more time for conception and creation, present grander narratives and exquisite experiences. The most anticipated are games that include creative NFTs/IPs. Once entering this model, a game project can no longer limit the flow of NFTs, potentially sparking new GameFi gameplay, which is also a direction that future GameFi needs to consider and research.

Overall, GameFi has just begun to gain mainstream market attention, not to mention the vast user base of the traditional gaming market that may shift towards blockchain games in the future. The success of Axie Infinity has well demonstrated the growth of this market, and the entry of guild DAOs has injected more resources and profit distribution methods into this track.

Regardless of the model, to attract more users to games, it is essential not only to enhance the playability of the game itself but also to consider the design of the economic model and lower the barriers for user participation while still allowing them to earn profits. This is the most fundamental difference between GameFi and traditional online games.