Gambling is a multi-billion dollar industry and was revolutionized by the internet. While there are tools and technologies in various industries like e-commerce, digital media etc. making it easy for people from all walks of life to reach out to an audience of millions with little tech know-how, the same sort of democratization is not true for gambling. However, blockchain technology is set to change that.
What is a blockchain?
Blockchain is a peer-to-peer distributed ledger technology for a new generation of transactional applications that establishes trust, accountability and transparency while streamlining business processes. Technically, a blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. It uses cryptography to allow each participant on the network to manipulate the ledger in a secure way without the need for a central authority.
Why does a blockchain matter?
Once a block of data is recorded on the blockchain ledger, it’s extremely difficult to change or remove. When someone wants to add to it, participants in the network — all of which have copies of the existing blockchain — run algorithms to evaluate and verify the proposed transaction. If a majority of nodes agree that the transaction looks valid — that is, identifying information matches the blockchain’s history — then the new transaction will be approved and a new block added to the chain.
Anytime a change to data or an asset is proposed, a new, unique digital footprint is created. That footprint is sent to each client node for validation. If the footprints don’t match, or if the change to the data doesn’t fit with the network’s agreed-upon rules, the transaction may not be validated. This setup means the entire network, rather than a central authority, is responsible for ensuring the validity of each transaction.
How will this impact the world of online gambling?
The benefits of the blockchain in the world of online gambling is immense since it helps to address the challenges faced by the gambling industry in terms of bringing transparency, trust and provable fairness into the game.
On block chain’s decentralized system, which is built by a coordinated network of independent nodes, no particular individual or entity can have a centralized advantage at any stage of the gambling process. Gambling companies can use block chain to assure users that they are completely incapable of knowing the result of an outcome – such as the dealing of a particular card – in advance. By removing the entire concept of centralization, and by putting the verification of bets in the hands of the network of nodes, the requirement for a third-party point of trust automatically becomes redundant.
With each transaction or bet being visible for verification on the blockchain, the technology provides greater financial transparency for the gambling industry. There are existent trends which suggest that Bitcoin gamblers have a strong preference for fully transparent systems that exist on blockchain, whereby every transaction is conducted on a person-to-person (P2P) basis and the operator is completely prevented from accessing money. This is an inference based on the rise new “Bitcoin 2.0” solutions such as BetXCP.com and Xbet.io, which are suited to gambling activities such as sports betting.
For blockchain gamers, the possibility to use the blockchain itself as a source of verifiable randomness is a big push, meaning that a public ledger rather than a client side server records and verifies naturally the random numbers for the gaming service provided. This is a turn towards a fully self-sustaining blockchain gaming ecosystem, where every vertical in the gaming supply chain is inevitably recorded, monitored and depends on the same chain. This signals a change from trust based gaming, where users differentiate between sites based on reputation and how diligently each may be regulated, to a level playing field where you can test the sites you interact with to assess objectively their level of fairness.
Blockchain also creates immutable data records which can help tracking all operations by a client and/or per game for example in addition to making auditing more efficient. It makes it easier to assess a client’s real contribution to the business, analyse any gambling patterns, prevent fraud and exploits, reward clients, provide audit reports. The cost-saving implications of applying such technology on an industry-wide basis are also thought to be substantial.
Who are the current players leveraging this?
VDice is quickly emerging as the industry leader, but there are other such startups like Firstblood, which has raised over US$5 million on Ethereum in a type of decentralized Kickstarter on the blockchain. They’re aiming to build and launch their own gambling platform on Ethereum. At this stage, California-based Augur is among the start-ups leading the transformation of gambling platforms onto blockchain-based technology. Augur is described as a ‘prediction market’, one which provides a platform for people to bet on any future event that they desire. Blockchain-based Chinese casino Play also emerged last year, and much like Augur, is developing a prediction market betting system. It is also placing the underlying logic of the games it offers onto the decentralized system, in order to ensure fairness for its gamers. Additionally, it has introduced tokens for the system that also function as chips that used in play by Play’s gamers, called Playshares (PLS). The tokens are designed to be both shares of the system and the units in which dividends are paid to network users and delegates of PLAY for their contributions to the system. Given that PLS tokens are used for system ownership purposes by individual players, as well as play games using PLS, ultimately if the house wins then such players also subsequently win.
With the bulk of gambling globally having moved from the downtown ‘brick-and- mortar’ casino and onto the internet, and given the growth of blockchain-related applications over the last year or so including smart contracts and peer-to-peer Bitcoin exchanges, the widespread application of block chain appears to be the next logical evolutionary step for the $41 billion gambling industry.
To summarize, looking at gaming and cryptocurrency is about understanding a new way of levelling the playing field online by the use of provably fair as a mechanism to empower users. Thereafter, it is more likely to see self-sustaining blockchain gaming ecosystems emerge where everything from the RNG, to the games, to the players and bookies are all on the same blockchain, embedding transparency and audit trails into every aspect of this new gaming industry; this will be a radical departure from a somewhat disjointed technology and service ecosystem that exists in online gaming today.