Why Bitcoin Gambling is Turning The Industry On Its Head
Bitcoin gambling is going through a period of enormous growth. Data collected by TheBitcoinStrip.com has revealed that over 2 billion bets have been placed on dice games in the past 2 years. This data does not account for the number of bets placed at Bitcoin casinos, poker sites, sportsbooks or other forms of gambling, meaning that the actual figure for the number of bets placed will be significantly higher. Why is Bitcoin gambling so popular and what are the implications for the traditional online casino market? This article examines the differences between the two industries and why cryptocurrency gambling is revolutionizing the digital casino space.
The problems that Bitcoin solves
If you’re unfamiliar with Bitcoin gambling, then the best place to start is with the problems that it solves. Purchasing and using Bitcoin – in its current form – is more challenging than using US Dollars or Euros, so the incentive has to be compelling in order for players to signup. Why do people use Bitcoin to gamble in the first place?
- High rolling
Many traditional casinos require extensive documentation for deposits and withdrawals. Many Bitcoin gambling sites also require similar levels of paperwork, however a growing number of anonymous casinos are entering the market. Regardless of any Bitcoin regulatory framework, it is likely that there will always be a demand for entirely anonymous online gambling. A demand that Bitcoin can satisfy.
Every transaction that ever occurs on the Bitcoin network is recorded in an open and transparent ledger. This ledger is publicly available on block explorers like blockchain.info. This ledger allows users and businesses to easily prove that a payment has been made, and more importantly smart contracts (discussed later) can automatically perform actions based on the movement of funds. This removes a huge element of the trust that is required at a traditional gambling site. Furthermore, many Bitcoin casinos choose to operate a provably fair algorithm for their random number generator – this allows players to verify each individual bet for true randomness. With Bitcoin, allegations of rigging are a thing of the past.
The current state of the Bitcoin network is far from ideal and transactions can take 30 minutes or more. Despite this relative and temporary slowdown, the speed at which a Bitcoin payment can be made far outpaces a traditional one. Bank transfers are fraught with potential issues – particularly for larger withdrawals – and with all the documentation involved, the process can become an incredibly slow and worrying one.
Banks and 3rd party payment processors like Skrill or NETELLER have been known to freeze player funds without explanation. For Bitcoin players this risk is mitigated from the gambling experience. The user must simply wait for a few block confirmations or roughly 30 minutes before the deposit or withdrawal is processed. Bitcoin allows users to take sovereignty over their own wealth – allowing it to spent or gambled without interference. For this reason however, it is even more essential to never gamble more than a player can afford to lose.
At this stage, Bitcoin gambling is a largely unregulated market. Additional precautions should be taken when gambling with the cryptocurrency, however this lack of regulation does open opportunities for high rollers. There are a number of high roller Bitcoin casinos that will accept any sized bet with effectively no limit. When betting large amounts of Bitcoin though, some due diligence should be taken, particularly around the size of the casino’s bankroll, its ability to pay out and its reputation. Winning bets must be paid out by the gambling site, which is where smart contracts can go a step further to secure trust between player and casino…
Ethereum smart contracts and Bitcoin’s Rootstock blockchain
Ethereum pioneered the concept of smart contracts – real-world agreements written in unbreakable and self-executing code. Ethereum has seen enormous success in this space, creating new business models for insurance, healthcare, supply-chain economics and – of course – gambling. We reported on a number of smart contract casinos earlier this year, however this industry is now expanding to Bitcoin through the launch of the Rootstock blockchain.
What is Rootstock?
Rootstock (RSK) is a blockchain that runs alongside the Bitcoin blockchain. Bitcoins sent to an RSK smart address power the contract’s code which is secured by the the hashing power of the Bitcoin blockchain. Ethereum has already enabled several prototypical gambling services, and these sites can now be extended to the Bitcoin blockchain thanks to RSK’s backwards compatibility with Solidity (the Ethereum smart contract language).
The importance of smart contracts
The significance of smart contract Bitcoin gambling cannot be overstated. In essence, a casino that operates on a smart contract will achieve the following benefits:
- Lower costs
- Lower house edge
- Happier customers
Any costs relating to handling player funds – such as customer service and administration – are wiped out. Smart contracts mean that the house never holds player funds.
Lower costs can be passed onto the player, with many smart contract Bitcoin casinos operating at a 1% or lower house edge. When compared with the 3-5% house edge typically found at a traditional casino, it’s easy to see why a player would move to Bitcoin.
Trust is a huge barrier to entry for many players. Knowing that all payouts are immediate and fair – no matter the size of the bet – is enormously reassuring.
Smart contracts are currently being applied to dice betting, roulette, blackjack, poker and prediction markets. At this stage the software is in its very early stages, but it is likely that by 2020 we will see the first mainstream smart-contract driven Bitcoin casino.
Cryptocurrencies are changing the world
Bitcoin has been slandered and discredited on countless occasions since its creation in 2010, but increasingly the sentiment is changing. Bitcoin and crypto-assets in general provide enormous social, economic and political benefits, and their applications are only just being realized.
- Ripple (XRP) – is revolutionizing how banks make global payments
- Ethereum (ETH) – is creating a world computer that can operate without human interaction
- Bitcoin (BTC) – is creating a store of value proven and secured by the laws of the universe (the same cannot be said about the US Dollar)
- Hundreds of other crypto-assets also exist with their own unique application – from cloud computing to attention-based advertising tokens.
All of these cryptocurrencies are now slowly moving towards interoperability. In the coming years, this technology is only going to expand, creating a network of blockchains that draws comparisons from the internet of today. Online gambling is one of the first markets that this technology is set to overhaul.