Reloading GameFi: From Hype to Sustainable Gameplay

**GameFi** is one of the most controversial sectors of the blockchain industry. The journey has been tumultuous, marked by grand promises of passive income through gaming and subsequent widespread disappointment and collapse of several major projects.

During the period of 2020-2021, against a backdrop of soaring decentralized finance (**DeFi**), gaming mechanisms offered by projects like **CryptoKitties** morphed into the **Play-to-Earn** (P2E) model. This allowed users to earn tokens through their in-game activities, drawing millions of players, particularly from economically unstable nations.

At the height of its popularity, **Axie Infinity** enabled players in the Philippines and Venezuela to earn more than the average local salary by purchasing **NFT** pets, engaging in battles, and receiving rewards in the form of Smooth Love Potion (SLP) tokens.

However, the P2E model proved to be financially unstable. Following a significant surge in 2021, Axie Infinity faced a **notable decline**, with its user base shrinking by almost 90% and token values plummeting.

As highlighted in a **2022 study** by Nansen, the model relied on a constant influx of new players, leaving it vulnerable. A massive profit-taking and withdrawal of funds into fiat currency placed additional pressure on the SLP token, initiating a «death spiral.» Consequently, its value plummeted by approximately 86% over the year.

A similar fate befell **The Sandbox**—despite collaborations with well-known brands, the project struggled to retain users. According to **Messari’s** data, by March 1, 2025, The Sandbox had a market cap of $661.7 million, a drop from $1.3 billion in December 2024. The price of the SAND token dropped from $0.54 to $0.27, losing more than 50% in a quarter.

The most telling example, however, is **Decentraland**—despite its prominent status, the metaverse faced persistent activity declines, with fewer than 1,000 transactions occurring daily by October 2022.

The architectural features of the initial GameFi projects posed various challenges:

After the failure of the first generation of GameFi projects, the industry faced a wave of criticism from both traditional gamers and the crypto community. While many teams exited, some remained and began overhauling the architecture of their segment. Projects started to rethink their approaches, embracing the following elements.

**Rational Tokenomics.** The P2E model, primarily focused on profits, often clashed with gameplay quality. It is being replaced by the Play-and-Earn approach, which prioritizes the gaming experience while making income a pleasant bonus. In successful projects like Pixels and Big Time, tokens serve utilitarian purposes: granting access to events, upgrades, and DAO voting. Rewards are limited and in-game economies are balanced.

**Revamped User Experience (UX).** To tackle expensive transaction fees and slow speeds on Ethereum, GameFi projects are transitioning to **Layer 2 (L2)** solutions like **Arbitrum**, **ZKsync**, and Starknet. This shift significantly lowers operation costs and enhances the user experience to a more familiar Web2 level.

Onboarding is also being simplified with passwordless logins, account abstraction, and subscription models. Players no longer need to navigate blockchain intricacies—they can simply join and begin playing.

Analysts from **Delphi Digital** emphasize that second-layer solutions are crucial for enhancing UX and reducing transaction costs. Their report, *The Complete Guide to Rollups*, details the advantages of ZK rollups and “optimistic” rollups—from scalability to minimizing expenses—which are vital for gaming dapps.

**Hybrid Game Design.** Previously, launching a project required merely creating a token. Now, the GameFi community competes with Web2 gaming in terms of mechanics depth, interface usability, and engagement levels.

Many projects are returning to proven monetization models: in-game purchases (skins, upgrades, characters) are optional and do not disrupt balance. This paves the way for Free-to-Play models, where NFTs can be earned through in-game achievements or drops without mandatory initial investments.

This approach lowers entry barriers for newcomers and fosters a fair gaming environment. A prime example is **Big Time**, where NFTs are used solely for customization and do not confer gameplay advantages.

**Growth of User-Generated Content (UGC) Ecosystems.** Games incorporating user-generated content have become a major trend. Through DAO communities and integrated editors, players generate their own maps, modes, and items, influencing project development and generating income.

Projects undergoing significant renovations in GameFi architecture include:

By 2025, it will be clear: GameFi will not die; it will transform.

On the horizon is an even deeper transformation. The integration of artificial intelligence is enabling the creation of adaptive gaming experiences: dynamic **NPCs**, procedural narratives, and personalized scenarios. For instance, developers are leveraging **Large Language Models (LLMs)** that learn and adapt to player actions.

NVIDIA’s company is already testing autonomous game characters called ACE, capable of dialogue, adapting to player actions, and assisting in battles, as demonstrated in a showcase based on PUBG. Developments in **AR/VR** and spatial computing are also accelerating: researchers are utilizing reinforcement learning for dynamic procedural generation of narrative-driven AR worlds.

Cross-chain gaming **addresses** fragmentation: Inter Blockchain Communication (IBC) and Cross-Chain Interoperability Protocol (Chainlink CCIP) protocols allow NFTs and other tokens to move freely across chains, which is crucial for building **multi-game ecosystems**. This all expands GameFi’s potential as a long-term ecosystem and enhances its allure for new players and developers.

It is evident that the GameFi industry has undergone rigorous purging: hype has given way to pragmatism. Instead of racing for tokens, the focus now is on hypothesis testing and selecting viable solutions.

Among the winners are L2 technologies and ZK rollups, user-friendly onboarding tools, Play-and-Earn models, along with UGC and DAO ecosystems. Attention has shifted towards key metrics: daily active users (DAU), retention, total value locked (TVL), and NFT trading volumes.

Concurrently, the integration of AR and VR technologies is evolving, gradually transforming gaming worlds into more immersive and socially enriched environments.

By 2025, GameFi will no longer be an experiment but a maturing niche with a clear logic, prioritizing gameplay mechanics and high-quality products. While mass adoption is still ahead, the ecosystem possesses the necessary infrastructure and an established community.

*Text by: Ekaterina Kostenko*