What are crypto gaming coins, and how do they work?

As the name suggests, crypto gaming coins, gaming tokens, or GameFi tokens, are created for almost exclusive use as part of online video games. They are an integral part of the GameFi ecosystem, the convergence of online gaming and decentralized finance. Gaming coins or tokens, therefore, serve as a form of reward or currency for play-to-earn (P2E) games, which can also be traded for in-game items, such as swords or wands. Unlike previous gaming models, this in-game economy allows players to generate value rather than merely extracting value from “customers”. As such, the increased property rights and diminishing transaction costs result in a flourishing in-game economy and greater benefits for everyone involved.

In this article, we take a closer look at the evolution of online gaming and GameFi, what crypto gaming coins are, and offer some examples from this growing, lucrative industry.
 

The evolution of online gaming

Since the invention of the first board game, people have played games for money. Prior to the dawn of online gaming as we know it today, the “reward” was generally earned by winning the game in question, such as checkers or chess. Then, with the advent of online gaming came pay-to-play (P2P) gaming in the 1970s. This model would generate profit for the game developers simply by charging players for the initial purchase of the game or a subscription. Players earned little to no value from P2P gaming aside from the sheer enjoyment of playing and competing. 

In the more recent past, the introduction of GameFi made way for the play-to-earn (P2E) gaming model, whereby players are rewarded for the time they invest in the game. This incentive forms part of gaming tokenomics and not only generates value for the players themselves but also for other participants and the game’s developers. The first example of GameFi emerged when blockchain-based game Axie Infinity (based on Pokémon and Tamagotchi) launched its Ronin sidechain to Ethereum in February 2021 and achieved an outlandish transaction volume within weeks. On some days, Axie Infinity and cross-chain fantasy RPG DeFi Kingdoms reached more than $400 million in transaction volume.
 

How to leverage crypto gaming coins

Gaming coins or tokens created on blockchain networks are integral to online gaming ecosystems. They facilitate in-game transactions and help create player-owned economies where the players can manage and trade virtual assets. These players also earn gaming coins by participating in these ecosystems, which can subsequently be exchanged for other fungible cryptocurrencies, such as Bitcoin, or sold for “cash,” earning players a tangible income. As digital currencies, gaming coins also benefit from the transparency, security, and transferability offered by blockchain technology. Although they tend to be fungible assets, gaming coins can also take the form of non-fungible tokens (NFTs) and represent ownership of specific virtual items, characters, or properties within a given game.

Aside from using these coins as currency within a game, there are several other ways to use and leverage crypto gaming coins. Many users opt to store or ‘hold’ their tokens in a secure wallet in the hope that their value will increase over time. Gaming tokens can also be traded on platforms such as Limitlex in order to acquire other cryptocurrencies of greater value to the user. Finally, gaming tokens can also be used to participate in staking programs, allowing users to maximize their holdings by leveraging idle coins that would otherwise remain stagnant in wallets or trading accounts.
 

Examples of popular crypto gaming coins

As of April 2024, some of the most popular crypto-gaming coins have reached a market cap of well over a billion dollars. The highest value coin, BEAM, the native crypto asset for the Beam network, a gaming network empowered by the Merit Circle DAO, has a market value of $1.62 billion. Returning to the example of Axie Infinity, this game operates with both Smooth Love Potion (SLP), a utility coin rewarded once players have completed a quest, and Axie Infinity Shards (AXS), the game’s governance token. Axie Infinity also witnessed one of the largest digital land sales in the NFT and metaverse sector to date when one of its Genesis Land plots sold for $2.3 million in 2021. As regards staking, in 2024, investors have staked over $501 million worth of AXS.

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