How Blockchain Ecosystems May Change the Face of Online Gambling

Apr 09, 2019 at 09:27 // News
Author
Nina Lyon
Numerous problems found in traditional gambling businesses vary from causing addiction to trespassing the fine line delimiting grey area from crime.

Gambling has always been a very profitable venture, provided you are the casino owner, not the gambler. Numerous problems found in traditional gambling businesses vary from causing addiction to trespassing the fine line delimiting grey area from crime. However, with the advent of the internet things have changed.

A regular brick-and-mortar casino cannot risk meddling with the games directly. The stories of magnets placed under roulette table are the fables of distant past: nowadays possible repercussions from being caught cheating massively outweigh the potential benefits for a casino. Instead, big casinos rely on so-called house edge, which basically means that in the long run it’s way more likely for a casino to have more wins than the gambler. In order to keep the gambler involved for a longer while, casinos may even go as far as to offer them free drinks that lower the responsibility threshold. 

An online casino can’t make the player drink unless they send everyone a complimentary box of vodka. Unlike regular casinos, online gambling houses have a wider range of cheating options with substantially lower risks of being caught. 

Unfair Play 

Basically, there are two popular ways to cheat for a casino: they either make it impossible for you to get your winnings, or they may make it impossible for you to win. 

A centralized online casino is basically a black box for the user. All operations like dealing cards or rolling the roulette occur on the server, which means that the player can’t even check whether it’s duly randomized. So any game may be fair, but it’s just as likely to be rigged. If the algorithms remain unknown (and unseen) to the user, there’s literally no way for them to know that for sure. 

The honest online casinos use licensed software that can be trusted as it has been duly audited. Others use their own software that can do whatever its creators programmed into it. 

The other way for an online casino to cheat is to make sure the winner never gets their win. They may just pull an exit scam taking bets and paying out minor wins for a while, and then just disappearing in the mist with all the bets. Alternatively, the casino may quote ceaseless technical difficulties that prevent the user from withdrawing their money. Additionally, the withdrawal fees may be too high. 

A more subtle way to withhold any payments for a bad online casino is to rely on the people’s general unwillingness to read complex legal texts. Meanwhile, the user agreement may contain provisions like “we won’t pay you unless you’re 90 or older,” “we won’t pay you if you’re from the Northern hemisphere,” or even “we are not obliged to pay out anything.” Once the user has accepted this bull without even reading it, there’s actually no way for them to get their money unless they somehow manage to be a 91-year old online gambler from Australia, and the casino decides to pay some respect to a potential WWII veteran once in a while. 

Those tactics are well known, and they generally undermine the trust towards online casinos. Yet, with the advent of blockchain tech, it has become easier to ensure there is no cheating on the part of the casino, which is one of the reasons why there are so many gambling houses that use decentralized tech. 

Theory and Practice of Gambling on Blockchain 

The theory is fairly simple: blockchain, being a decentralized and immutable ledger, reflects all transactions and actions by the player and the casino alike. It means that if the player has any doubts, he or she may easily check whether the game had been rigged. The decentralized nature of blockchain would prevent the operator from manipulating the funds. 

Another important feature is that such blockchain casinos work with cryptocurrencies (in fairness, it would be difficult for them to be decentralized without it). Cryptocurrency ensures that cross-border transactions are simple and fast and adds an additional layer of anonymity that many gamblers value very high. 

The introduction of smart contracts in online gambling has been a true game changer. If a game or a casino is operated by a smart contract, there’s no way for it to cheat as all payments and games occur automatically and in a transparent fashion. Most such casinos use Ethereum blockchain as it was the first to introduce smart contracts. 

However, such casinos rarely comply with the idea of being just a casino. Their owners see the potential of the technology and wish to expand their venture into a real ecosystem. There are several examples of such projects that are not blockchain gambling houses but gambling ecosystems. 

Thus, an international project DAO.Casino is an ecosystem that enables game developers, casino operators, and gamblers interact in a trustless environment. The ecosystem’s protocol can be integrated into any online casino in order to guarantee the transparency and fairness of all games. Additionally, the project has introduced “bankroll sponsors” and “random providers” that enable independent game developers make money on the games they had developed without any copyright infringement. 

Another project, Xether, has developed an ecosystem driven by smart contracts that fully automatizes the gambling and payment processes while retaining provable fairness. Unlike most casinos, Xether smart contracts manage all payouts, and additionally allow token adopters to gain passive income from casino profits and token turnover. Notably, no registration is required in order to play. The platform works with any web3-compatible ETH wallet. The developers hope other casinos will come onboard as well, “provided they value openness and transparency.” 

One more project aimed at bringing blockchain to the entire online gambling industry is JoyToken, a gambling ecosystem using smart contracts to reward game developers for their game creation efforts, and to guarantee and audit all transactions in the system. Additionally, the developers claim they endorse the features valued by the younger generation of gamblers, namely anonymity, trust, and provable fairness. The company says they have already struck deals with major gambling networks. 

Conclusion 

While cryptocurrencies offer a greater degree of convenience for online gamblers, transparency and guaranteed fairness arguably remain the greatest feature of blockchain tech when it comes to online casinos. The use of blockchain makes things easier for all involved parties. 

Still, blockchain opens the gate for something greater than just fair play: the emergence of ecosystem projects might herald the advent of a new architecture of online gambling where trust doesn’t have to be earned but is ensured automatically. For now, there are not too many projects like that, yet their number is slowly growing. Their very existence is the ultimate proof that a casino can and should work honestly.

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