DeFi, also known as decentralized finance, is a financial application built on the blockchain.
There are many financial institutions in the traditional financial industry, such as banks. Banks use money to earn income through lending and other financial activities, and return interest to users.
In DeFi (decentralized finance), financial institutions and their behaviors are replaced by smart contracts on the blockchain. The advantages are:
1. Reduce the operating costs of financial institutions, more benefits will be returned to users;
2. The contract is transparent, all operations can be checked. Reduced the risk of centralization.
2. What is NFT
NFT full named non-fungible token, which has the characteristics of indivisible, irreplaceable, unique, etc.
With its collection attributes and easy trading, NFT can be used in games to make virtual items have a longer lifespan, higher appreciation space, stronger playability, and wider circulation.
If NFT is understood as a game item, let’s take a look at how it differs from traditional game:
In traditional games, the equipments you purchased may be lost due to account closure, suspension of service and so on. Else, price of the equipments may be reduced as the game publisher lowers the acquisition threshold;
In blockchain games, every NFT is permanent and unique that no one can change its information and ownership. The price is only affected by the market.
3. What is GameFi
GameFi also known as "gamification finance", refers to a new gamification business under the integration of DeFi+NFT. Present financial products in the form of games, and gamify the rules of DeFi;
Some analysts believe that NFT introduces differentiated assets based on scarcity to DeFi, and DeFi also gives NFT commercial value through financial means;
Some of the cross-border applications of DeFi that have shown great potential, especially projects combined with NFT.
From the financial:
In traditional finance, users need to spend a lot of time to learn the relevant information. A certain amount of early investment is required, and the operation process is cumbersome. Also, risks and returns is easily induced by financial institutions;
The advantage of GameFi is that it integrates financial attributes into both blockchain and games, which reduces the user’s learning threshold and increases the user’s willingness to participate;
On the other hand, all risks and benefits are open and transparent on the chain.
From the game:
Using NFT in GameFi can enhance the interoperability between games and solve the problems of fast decay of game life and loss of players in the traditional game industry;
For example, you bought an item for $500 in a traditional game. As the life of the game comes to an end, this item will become worthless until the game stops and disappears. It's easy to find that whether the interests of traditional game players can be guaranteed depends on the game developers and operators;
In GameFi, the items you bought can be used in all games at the same time: for example, as a skin in MOBA games or as a miner in farm games; When this item has use value in hundreds of games and can be used at the same time, its value preservation ability will be greatly improved.