DeFi and DAO in Gaming

What is DeFi?

DeFi stands for Decentralized Finance. It is one of the aspects of the broader crypto space, DeFi offers most of the services of the mainstream financial world such as saving, investing, trading, and more that is controlled by the masses instead of a central entity or institution. 

Decentralized Finance is challenging the traditional financial service providers and aims to eventually replace them. DeFi uses open-source codes, giving anyone who has the ability to build on pre-existing applications in a permissionless and composable manner. These codes are open to the public which makes transactions transparent, and anyone who has an access to the internet will be able to use the services being offered in a platform, skipping all the hassles of traditional finance.

Decentralization of finance means that no leading body controls the market. To some extent, traditional finance institutions such as banks have power over your funds, they may freeze your assets, withhold your money, limit your spending, etc. Decentralized Finance eliminates all this. As long as you have access to your internet and remember your account credentials, you will be able to tap into your assets through a digital wallet. 

The decentralization of finances doesn’t only distribute power, but also disperses risks. A prime example: A company holds all of its customer data in one spot, so a hacker needs only to access that particular site for extensive amounts of account data. DeFi eliminates this as data is stored across several locations which removes that potentially singular point of failure.

What does DeFi mean for Gaming?

Decentralized Finance has paved the way for play-to-earn games. It has established a framework for gamers to be able to earn real world money through NFTs. 

How? By letting the players have true ownership of their digital assets that they earned by playing a game which can then be sold on a secondary marketplace. 

Take Axie Infinity for example. Players of Axie Infinity can earn Smooth Love Potions (SLP) by doing daily quests and by battling other players in the arena. SLP is the game’s in-game currency that can be sold for real life money and is required to breed more Axies, and to get into the game, you need a minimum of 3 Axies. 

Axie Infinity depends on the assumption that more people will play the game, hence, the game economy will be needing more Axies creating a demand for more SLPs.

This is a simple supply and demand concept that drives the economy of the game which lets the players earn by simply playing the game or breeding Axies then selling them for a profit. But what if there is an oversupply of Axies? Well, the developers of Axie Infinity have thought of this already and are developing a mechanic to “burn” an Axie in exchange for other in-game benefits. Read about Axie and decentralized finance here.

SLP is now a publicly traded cryptocurrency and is available to be bought and sold in most cryptocurrency platforms like Binance. Read our article on Axie here

More and more games are starting to embrace the play-to-earn concept and create value to their digital assets through different means such as item scarcity, rarity, demand, etc. The crypto space is revolutionizing not just the financial systems, but the gaming industry as well.

What is a DAO?

DAO stands for Decentralized Autonomous Organization. It means that it is an organization with no centralized leadership and that decisions get made from the bottom-up. Direction of the organization is decided by the community limited by a specific set of rules that is enforced on a blockchain.

DAOs are organizations that are owned and managed by their members collectively, usually with treasuries that are accessible only with the approval of the members. Major or minor decisions are made through proposals and then the community votes on a specific period of time.

They operate using smart contracts, which are chunks of code that are automatically executed when the criterias under the contract are met. Smart contracts were popularized by Ethereum, though multiple blockchains are now deploying them. 

The rules of the DAO are established through these smart contracts, and those with a stake in the DAO have voting rights and have the power to influence the direction of the organization by deciding on governance proposals.

This model of DAO prevents proposals from being spammed given that only stakeholders have the ability to create proposals, and a proposal will only be passed once the majority of stakeholders have approved it. How that specific majority is determined differs per DAO and is defined by the smart contracts.

Given that DAOs are open-source blockchains and anyone can view the code, DAOs are fully transparent and autonomous. Literally anyone can audit the treasuries because the blockchain records all financial transactions.

What does DAO mean for the Future of Gaming?

Most games are developed and managed by the company that made it. The gaming community usually just has to accept whatever direction the company takes for the game. The power to make decisions is concentrated within very select individuals of the organization. But if a game is a DAO, it means that the power lies within the community. Community members have influence over the major decisions of the organization, and the direction of the game will be decided by the community members that have a stake in the organization.

Axie Infinity has announced that players will soon be able to stake their $AXS tokens in the organization. (SLP which is the digital currency earned through the game is exchanged for $AXS; $AXS can be bought and sold in any cryptocurrency platform such as Binance.) Having a stake in the game means you get to have a say in decisions that will be made for the game, giving the community power to decide the future of the game. Read about staking in Axie Infinity here.

NFTs are taking the world by storm and it has only just started, and whether you’re a gamer, investor looking for a profit, or a crypto enthusiast. NFT games are definitely worth looking into.

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