Humans have gambled since the beginning of time. Whether you’re a Japanese samurai in the fourteenth century BC casting dice or a freelance writer buying a lottery ticket around the corner because you think it’s your lucky day (it wasn’t), gambling seems to be an inherent, almost unavoidable part of our society.
There’s something about the calculated risk and the possible reward that makes gambling so difficult to resist. In fact, gambling can be so addictive that governments try to protect their population by strictly regulating gambling or even making it illegal. Of course, hotspots like Macau and Las Vegas allow adults to gamble as much as their wallet allows them to, and then some.
Over the last fifteen years, online gambling became an increasingly sizeable part of the total gambling industry. Online gambling went from a global market size of $20.51 billion in 2009 (already sizeable) to $37.91 billion in 2015, and is projected to grow to $59.79 billion by 2020. There wasn’t a single year where the industry shrank.
This is understandable, because online gambling is much more convenient than actual gambling. The more people have access to fast Internet, the more people can gamble. Before, you had to go to an actual casino and play. Now, you can stay in, go online and gamble in your pyjamas.
Don’t Trust the House Anymore (And Why That’s a Good Thing)
Blockchain generates so much attention because it’s a foundational technology. It increases transparency and spreads power over a network instead of centralizing it in one place. This is why blockchain can improve aspects of a wide variety of industries, from voting to finance to gambling.
“The house always wins” is a common saying in gambling. It means that the house, the casino, or the operator have better odds than the players. This house edge can vary from 1% for certain card games to double-digit percentages for lottery-type games such as slot machines. It’s how casinos earn money and the reason why it’s very lucrative business.
The issue isn’t necessarily that the house edge exists. Gamblers know it does and still continue playing. The issue is that no one knows exactly how high the house edge is. It could be 5%, 20%, 50%. There’s no way to know.
That’s what blockchain can change. Smart contracts on a blockchain will give gamblers insight into exactly how much edge the house has. This also removes the need to trust the operator. Because how do we know that the game they’ve made is fair? Particularly with online gambling, where it’s often difficult to know who’s running the website or app, gamblers have to blindly trust the operator. There’s always a risk of being defrauded.
For operators too, blockchain has many benefits. Because the blockchain is an open, distributed and immutable ledger, manipulating anything that’s happened in the past becomes impossible. With the blockchain, players will no longer be able to defraud casinos when making a deposit or withdrawing money. Payments are irreversible. It will also become impossible to hack the casino’s back-end technology.
Gamble Wherever You Are, Whoever You Are
Although you could easily stay anonymous on the Internet in the 2000s, this is much more difficult nowadays. A few big tech companies know exactly who you are, where you are, and who you talk to when you’re browsing the Internet.
Anonymity doesn’t exist for gambling either. Every legal gambling company will have to comply with the strict regulations of the country it operates from, which means every gambler needs to go through Know Your Customer (KYC) procedures.
This means you’ll need to send through bank statements, utility bills, pictures of yourself, and more. It could take days before your online gambling account is set up and you can gamble. Which is a shame if Liverpool is playing tomorrow and you’re certain they’ll win.
On the blockchain, however, you can be entirely anonymous. Already, blockchain gambling platforms exist where you don’t even need to enter your email address. All you need to do is send money to the crypto address associated with the outcome of a bet, and the smart contract will distribute the money according to the bet’s outcome.
This also removes the upper limits often placed on gambling accounts and will make withdrawals much faster than they currently are. It will also allow you to gamble wherever you are, because all you need is an internet connection.
Of course, this is a double-edged sword.
Problems with Blockchain Gambling
Blockchain gambling allows you to circumvent all the regulation put in place by the government. You could be a fifteen-year-old kid in China and gamble however you please through casinos built on a blockchain.
Additionally, certain platforms such as Augur allow people to make whatever kind of bet they please. As such, bets have been placed on whether Donald Trump, Jeff Bezos, or Warren Buffett are likely to be assassinated in the near future. Illegal cryptocurrency wagers, and regulators are powerless to act.
Although this is a significant hurdle that blockchain gambling will have to overcome, it’s important to remember that any new powerful technology can be abused by the wrong people. It ultimately shouldn’t depend on governments to intervene with regulation, but on blockchain casinos themselves to find a balance between what’s possible with blockchain while also complying with government legislation.
This is in the best interest for anyone involved in the industry.
Blockchain Gambling Projects
Already, interesting blockchain gambling projects have appeared. One such example is DAO Casino, an Ethereum gambling protocol. The protocol connects casino operators, game developers, affiliates, and players.
Basically, it’s using the blockchain to allow casino operators to run their own, white-labelled, decentralized casino. Game developers can use Dao to build their own decentralized apps (DApps) that they can earn revenue from, and affiliates receive money through the blockchain for the players they send to the casinos on Dao.
All the transactions on Dao’s blockchain happen through their BET cryptocurrency. Holders of BET can act as banks for certain games, and can lend their tokens out for a monetary return. It’s a mechanism where smart contracts incentivize each party to create a gambling experience that much improves upon traditional online gambling with fiat currency.
Recently, Dao released the second phase of their Sandbox project, which allows participants to develop games using Dao’s development tools. The company also co-hosted the biggest international blockchain hackathon, which was attended by John McAfee, founder of McAfee cyber security software.
Another interesting project is Edgeless. Edgeless has a casino license and is entirely compliant with the required gambling legislation. It also has a 0% house edge, which means that gamblers are at no disadvantage against the house, and everything is entirely transparent through the Ethereum smart contracts.
You can already dice, blackjack, baccarat and crash on their platform. The platform has its own EDG token, which you use to play the Edgeless casino games. Cryptocurrency transfers are instant and cost-effective.
What Does the Future Hold?
As it stands right now, blockchain gambling is a teeny tiny part of the total gambling industry. But it will increasingly become inevitable technology in all online gambling. It won’t necessarily be transformative from the gambler’s point of view, but it will make online gambling a much better experience for them.
Gambling will become much more transparent. You won’t need to trust the house anymore. The house edge will be reduced or even eliminated. There will be less fraud. It will be easier and faster to deposit and withdraw money.
Game developers can build DApps on decentralized gambling protocols and earn money from them. People with plenty of tokens can act as banks and earn a healthy return. It will be easier for affiliates to understand how much they’ll earn from the traffic they send.
All these are big changes. But if we want to go bigger (and a bit more speculative), we need to look at some of the big technology trends that are converging. Decentralized gaming (DGaming) is a growing industry. And Virtual Reality (VR) is becoming much better.
So imagine a future where you don’t have to use your computer, laptop or phone, but where you pull your VR headset over your eyes and are immersed in a virtual gambling city. You can walk around and play any of the DApps you see around you.
Stats will pop up that show you the house edge, how much money people spend, how much they earn. You can instantly deposit cryptocurrency into your account and “walk” into a DApp to play. You’ll see avatars of the other people you’ll be playing with. You play a game of poker and win (obviously). You walk out of the DApp and send your newly won cryptocurrency tokens back to your wallet.
That’s how the future could look like. And while I generally don’t like the use of big words such as transformative, tectonic or any other word that implies overthrowing an industry, you can’t deny that this kind of future looks very different from anything that we’ve ever seen before.