League of Ancients is a top play-to-earn (P2E) crypto game and will soon offer yield farming! This practice allows players to lend their assets to gain higher rewards in return — particularly in the form of valuable cryptocurrencies. Yield farming is an investment approach borrowed from decentralized finance (DeFi) platforms.
Yield farming has gained much traction over the past years as crypto owners can stake their assets or lock in crypto to support the security and operations of a blockchain network to generate more rewards within a short time. Along with the growth of yield farming came the popularity of nonfungible tokens (NFTs), cryptographic entities with values directly linked to a particular asset; among other physical items, NFTs are ideal for owning digital commodities like game skins and virtual trading cards. And now, we’re seeing these two concepts combine through NFT farming.
What is NFT-based yield farming?
CoinDesk reported that NFTs on their own initially seldom held attention for very long. The collectible CryptoKitties popularized these one-of-a-kind tokens, and the tokens made it easier to “own” that type of media. GameFi — P2E blockchain games offering economic incentives to players — changed this by tying the value of NFTs to certain games.
When you play a blockchain game, you can earn cryptocurrencies and NFT rewards when you complete tasks, battle players, and progress through levels. This type of gaming differs from traditional games because you can transfer the items out of a game’s virtual world and trade them on marketplaces or exchanges.
NFT yield farming takes this to another level by using NFTs to stake for value, which provides players an opportunity to earn money by trading their NFT on the network. When you stake your token in a pool, you can earn rewards, unlock exclusive items, or access new levels based on your proportion of the total pool. In turn, developers’ ecosystems grow more robust, and you can hold tokens not already on the market.
Are there risks when you do yield farming through games?
Yes, there are risks to NFT-based yield farming — whether you play through games or otherwise. FXCM highlights how yield farming comes with risks – as with any other investment opportunity. Common risks associated with yield farming include market volatility, hacking, impermanent loss, and regulation.
Scams through fraudulent liquidity pools also occur, particularly in fake DeFi projects; case in point, November 2021 saw developers of the Squid Game cryptocurrency abandon the project and take off with investor funds — pocketing $3.4 million in the process. Gamers should be careful and assess their readiness in terms of time, money, and gaming skills before investing. Players should also consider the credibility of a particular game and its developer to understand potential risks.
Which games offer this type of model?
Gamified yield farming will likely change the economic potential of online gaming as users can now make money from every single in-game asset they own. They can buy collectible NFT game cards to use and earn even more digital goodies or sell these on various NFT marketplaces. For instance, a new collectible card game called Matterlight will allow yield farming using Tezos-based NFTs. When you sign-up for tournaments and receive Victory Point, you can trade these for Control Points to stake on the map in hopes of claiming 1% of the Revenue Bank pool.
There’s also Mobox, a cross-platform GameFi metaverse combining game NFTs with DeFi yield farming. MOMOs, the Mobox NFTs, can be acquired through Binance NFT Mystery Box launches; you can trade MOMOs, stake them to farm for MBOX tokens, or even use them as collateral within the greater MOBOX metaverse. There are plenty more games that are looking at this model, and this list is by no means exhaustive, especially as gaming continues to look at crypto and NFT applications.
