WHILE DEFI has become a popular buzzword among the crypto hip, it turns out that decentralized game-based finance (GameFi) is increasingly where the action is these days.

Nearly 50% of active cryptocurrency wallets connected to decentralized applications (dapps) in November were for playing games, according to crypto data tracker DappRadar. The percentage of wallets linked to decentralized finance, or DeFi, dapps fell to 45% during the same period, after months of being the leading dapp use case.

The gaming craze was kicked into high gear this year by virtual world of Axie Infinity, where players can earn money by winning battles, selling monsters, and staking or lending their digital assets. The number of participants is rising rapidly, as many crypto enthusiasts are also avid gamers, and the idea of combining the two passions appeals to many.

“We see around 80-100 million transactions in games daily,” said Pedro Herrera, senior data analyst at DappRadar. “It’s just impressive to see the evolution that blockchain games have experienced this year.”

Advocates see room for even wider participation. More than 104,000 people played Axie over a recent 24-hour period, per DappRadar’s analysis of on-chain data. Blockbuster online video games like Counter-Strike: Global Offensive, attract more than 700,000 players on the Steam streaming service.

In recent months, a slew of games, such as Splinterlands, Alien Worlds and CryptoMines, have gained hundreds of thousands of daily users. There are now about 1,200 blockchain games, with about 70 new ones added monthly, according to DappRadar.

Neither sector was spared by the weekend crypto crash. Tokens of many gaming companies slumped by as much as 30% over the past seven days, according to prices on CoinMarketCap. Many DeFi tokens fell as much as well, although the DeFi Pulse Index, which tracks some of the largest decentralized-finance projects, is down 24% for the week.

DeFi is still where much of the money is, but gaming is catching up. The top five gaming dapps recently had a total balance of invested funds of more than $14 billion, compared with $130 billion for the top five DeFi apps over the last 30 days, DappRadar said. Players use these funds to play and earn returns. The gamers also benefit when tokens they earn in games appreciate: Axie’s AXS token has jumped to around $102 from 53 cents at the beginning of the year.

Many players are also renting out their digital goods to others, in a similar fashion as in DeFi. Although dapp games’ financial features can be equally complicated and risky, the sci-fi planets and cute cartoon characters can ease the way to diving in. In a typical arrangement, owners let someone else to use their digital characters or spaceships or land, and the renter splits the gaming profits, often 50:50, or pays fees.

“They create micro economies of their own,” Mr. Herrera said. “It’s something that’s going to be big.”

Rental and other income can be more than $100,000 a month, said Liam Labistour, director of growth at Splinterlands.

To find players to rent their digital properties, some owners employ scouts. The scouts pick out new players, and get a share of the players’ earnings, too.

Other owners actually hire marketing firms, like Michael Bohnen’s EOSUSA, which gives players rewards to play on specific digital lands in Alien Worlds, in which players fly spaceships to distant planets. The marketer gets a piece of the players’ income or a fee, depending on the deal. His company also owns some lands in Alien Worlds that it rents out.

“There’s much more opportunity in the gaming space than there is in the DeFi space,” Mr. Bohnen said. “There’s only so many banks, but there’s always a brand new game of the week. It’s much more of an expansive space in my opinion. There’s more opportunity to potentially make money.” — Bloomberg