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GameFi is blockchain gaming combined with decentralized finance (DeFi). Blockchain has made it possible to have interoperable, decentralised, tokenised assets on everything. The vision is that each game in the future could exist as its city-state with its currency or digital collectibles being exchanged with other assets generated in a parallel game economy.
Can a game serve as a pandemic lifeline? A roaring ‘yes’ was the answer from a small rural community in the Philippines. The Philippines was severely hit by the COVID-19 pandemic and the ensuing lockdowns, resulting in a surge in unemployment.
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A documentary aired in May 2021 brought to light a blockchain game - Axie Infinity. A hybrid of Pokémon Go and Cryptokitties, Axie Infinity deals in non-fungible tokens (NFTs) called – Axies, which are cute unique digital pets bred to battle. The game created by Sky Mavis, a Vietnamese startup, is a decentralised application (dapp) on the Ethereum blockchain, which facilitates the monetisation of Axies.
This set up the Play-to-Earn model, where, as the player progresses and amasses tokenised digital collectibles – Axies, in this case, it is owned by them and not by the game developer. In a larger and more advanced context, a player would trade these NFTs within inter-operable game universes or secondary markets and not just within the source game title. This model liberates players to use individual game assets in multiple games if allowed.
So, with Axie, dedicated players started earning up to 15,000 pesos a month, a sum more enthralling than what the job market was offering them at around 9000-10000 pesos. As the game became famous and more players became acquainted with Axie, the cost of purchasing them also shot up. The game requires the player to own at least three Axies to begin playing. The Axies, which earlier cost between $3-4 each, settled close to $70, thus making it cost-prohibitive for new players to enter the game. This is where Play-to-Earn Guilds emerged.
These guilds set up by regular players fund the upfront costs for new players to help them get started. Guild members rented in-game assets instead of buying them. The new player would allot a percentage of their earnings to the lender. In turn, the player gets what they need to start gaming.
In a short time, Axie became a community-backed source of income for pandemic-struck natives of Cabanatuan City, Philippines. It stands as a great case study to demonstrate the financial and community value of NFT games, the ease with which non-crypto users jumped on board, and the dawn of GameFi and the Play-to-Earn business model.
Why India should focus on GameFi
GameFi is a paradigm shift in the power equation of ownership, financials, and flexibility accorded to players. GameFi is blockchain gaming combined with decentralized finance (DeFi). Blockchain has made it possible to have interoperable, decentralised, tokenised assets on everything. The vision is that each game in the future could exist as its city-state with its currency or digital collectibles being exchanged with other assets generated in a parallel game economy.
Who will drive the GameFi revolution in India?
Native-crypto and native gaming companies will be the primary drivers of GameFi in India. They will create new jobs across companies and platforms that will make whole economies of the future. Both the crypto and gaming industries have raised capital aggressively and proven that the quest for technological leapfrogging for developing economies is a necessity, not a choice. The gaming industry could very well witness a jump directly from a Pay-to-Play model to a Pay-to-Earn one.
As the industry progresses, the policymaking must also advance its steps to capture the nuances of the socio-technical system of games. It would be a shame for the young and vibrant Indian market to be left behind. More so, as other markets start building interoperable game economies.
Establishing harmony between scientific research, industry, and the government will increase the likelihood and robustness of the industry’s sustainable progress.
Also Read | Online gaming: A new age career option
Not just Esports, Fantasy or Real Money Gaming
Debates such as the Brightline test to gauge games of skill from chance and how e-sports will form a league of its own are crucial to legitimising the industry as it stands. But larger revolutionary gains from India’s gaming industry lie in setting the groundwork for gamified services and GameFi.
Gamification would put the success of Digital India to services that haven’t found their footing in the physical world. There are many gaps our conventional systems in education, healthcare, and civic governance haven’t been able to plug due to issues of accessibility, scalability, or just stigma.
Gamified interventions offer myriad possibilities where users can better comprehend financial literacy, seek sex education, even avail therapy, all in a virtual, safe, and customised environment. Some serious games have shown massive success, like Endeavor RX, the first-and-only FDA-approved video game treatment for ADHD in the US. And another one is called Underground, which stimulates trainee surgeons to put in more practice hours than they would on expensive hospital simulators.
Gamified environments also can act like a sandbox where one can test policy programs in the virtual world and results replicated later in the real world.
Defining policy aims
However, heartwarming the love affair with Axies, Filipino officials at the Bureau of Internal Revenue (BIR) are now looking at taxing this alternate source of income, sending ripples of anxiety through the Axie community.
With no precedents to follow, the agency and the region’s finance undersecretary Antonette Tionko has a tough job ahead of him as they try to test if this kind of income that consists of multiple, tiny, in-game transactions and is often earned by people outside the tax system can enter the mainstream.
The central bank Bangko Sentral ng Pilipinas (BSP) and the country’s Securities and Exchange Commission (SEC) will have to decide if the Axies should be treated as a currency or a security. Tionko stresses that all internet schemes that allow people to make money would be taxed regardless of the categorisation.
Learning from the GameFi episode in the Philippines, India should move towards a proactive gaming policy to avoid any ruptures in its success story. When policy and regulations are not in tandem with industry rapidly affecting millions of livelihoods, it does a disservice to the very people it aims to protect by pushing them into unregulated spaces. An anxiety-ridden sector cannot soar to its potential unless the government decides to cut down the regulatory rigmarole.
With announcements on the Metaverse and Web3, India’s policymakers cannot afford to be entangled in this cat and mouse game catch-up with technology. The Indian gaming industry deserves better than hopping from one state to another, arguing the merits and demerits of pre-internet colonial laws guiding an ever-expanding virtual world. Hence, our policy discussions need a jump-start to ideate the numerous possibilities that GameFi would bring.
We need to set the architectures of digital labour that go into the industry while addressing the evolving social practices that position activities straddling labour/leisure into a commercial framework.
—Swati Sudhakaran is a public policy consultant based out of New Delhi. Views expressed are personal.
(Edited by : Yashi Gupta)
First Published: Dec 4, 2021 1:45 PM IST