Decentralized finance (DeFi) has become a buzzword in the blockchain space. Despite the recent market downturn, the total value locked in DeFi protocol has jumped from $45 billion in February 2021 to $87 billion in February 2022.
For the uninitiated, decentralized finance is all about offering financial services such as lending, borrowing, yield farming, insurance, derivatives trading and much more on public blockchains, eliminating the pesky middlemen and unlocking new opportunities for participants.
With DeFi still in its infancy, we are witnessing incredible innovation in the space. Primex Finance is one such innovative DeFi protocol. It facilitates DEX-agnostic cross-margin trading. Lenders deposit their cryptocurrencies into a liquidity pool, where borrowers are matched with the assets they wish to lend from that pool. What sets it apart is that it creates risk buckets to help lenders manage risk. Lenders can diversify their risk across multiple assets, specific traders, and risk buckets. A risk bucket is a smart contract with a set of trading rules, enabling lenders to allocate their assets at the risk levels they are comfortable with.
Another blockchain-based phenomenon that has caught the attention of not just investors and traders but also gamers is play-to-earn gaming. P2E gaming, also called GameFi, is where a lot of action is these days. At the core of play-to-earn games are the non-fungible tokens. NFTs are certificates of ownership on the blockchain that prove that you own things in the online realm.
Millions of people have entered the world of crypto, DeFi, NFTs, and play-to-earn gaming since last year. Some are drawn to them for their real-world benefits, transparency, and inventive technologies, while other users are riding the hype.
Play-to-earn games and NFTs
The total number of daily unique wallet addresses interacting with gaming-related smart contracts reached 1.3 million at the end of 2021, up 46x from merely 28,000 a year prior.
To understand how DeFi and P2E gaming are propelling each other’s growth, let’s take a look at the play-to-earn games. In most online games, users collect digital assets that help them upgrade their avatars and weaponry, or to further their progress. You earn them by completing challenges, reaching milestones, or by spending real money.
The harsh reality of traditional games is that all the digital assets you’ve earned or bought are not yours. You merely have “access” to them rather than having ownership. Try selling or lending these items to other players. You can’t.
The play-to-earn games not only immerse you in the gaming experience but they give you “true ownership” over the in-game assets you have earned or purchased. They leverage the immutability of blockchain to create in-game items and rewards as NFTs that are transferable and provably unique. You can export them to a crypto wallet, borrow against them, sell them, or rent them out.
Most of the blockchain games including Axie Infinity and Decentralad have native tokens for in-game activities and for trading between players. If the community around a game keeps growing and the value of the native token rises, players benefit from the price appreciation as well.
How DeFi and P2E games complement each other
To start playing any P2E game, you have to buy some in-game assets using the game’s native token. For instance, if you want to start playing CryptoTanks, a live-action title that will remind you of the classic Tanks 8-bit game, you have to buy or rent NFT tanks first using the game’s native $TANK tokens.
You can choose from dozens of tank models for game characters and face opponents in the Battle Area. In CryptoTanks, every Tank NFT has its modification of armor, weapons, speed, and complete customization. These aren’t cosmetic features, as varying stats will lead to different gameplay styles for each player.
You can buy the NFT tanks from the platform’s Shop or from other users through the P2P marketplace. But how do you get your hands on the $TANK tokens in the first place? By going through a decentralized exchange (DEX).
If you’ve accumulated plenty of $TANK tokens as in-game rewards, you can use them to buy more CryptoTanks. But if you want to sell some of these tokens or stake them to earn some extra income, you’ll again find yourself heading to a decentralized exchange.
As P2E gaming gathers momentum, more people will be using DeFi protocols to access financial services native to blockchain. The games will attract a new generation of users, who in turn will be using DeFi protocols for crypto staking, lending, borrowing, on-chain payments, and other financial services. On the other hand, the crypto games need a decentralized financial infrastructure to drive economic activity within the games.
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