When Bitcoin first launched in 2009, very few expected it to have such a massive and far-reaching impact on the online gambling industry.
Today, millions of dollars worth of Bitcoin are spent at casinos each year, and a number of mainstream Bitcoin brands have begun to accept the cryptocurrency.
Bitcoin has been the ideal tool for gamblers the world-over. Casino deposits made with Bitcoin are fast, anonymous and low-cost. Many casinos also choose to place very few restrictions (if any at all) on deposits made with Bitcoin, giving those living in high-regulatory environments such as the USA, a chance to gamble online again.
For all of Bitcoin’s gambling benefits, there is one major drawback - price volatility. Anyone who has traded or done business in Bitcoin will know that the dollar value of a BTC transaction can change significantly on a second-by-second basis. A deposit at a Bitcoin casino could find the player’s cashier funds being slashed by 10% or more in minutes, requiring the player to win back their losses just to break even. While many casinos will transfer Bitcoin deposits into their own fixed currency i.e. “chips”, there is often a fee (hidden or otherwise) for doing so.
Stablecoins are a solution to this problem. As the name suggests, a stablecoin’s price remains stable in relation to a fiat currency i.e. the US dollar. A unit of DAI for instance, will always equal $1.00 (plus or minus a few cents). The mechanisms for achieving this price stability are for another article, however the growth in popularity of these stablecoins has been astonishing. Tether (USDT), the largest stablecoin, has over $2bn worth of tokens in circulation with several other tokens also deploying hundreds of millions to the market.
However not all stablecoins are equal. Some stable cryptocurrencies such as USDT and Coinbase’s USD Coin are issued by a centralized party and are backed by US dollar bank deposits that have varying degrees of transparency. It is possible that users who bet at casinos with USDT or USDC could face their accounts being frozen.
On the other hand, stablecoins such as MakerDAO’s DAI are minted in a way that requires no central authority. These decentralized stablecoins offer the user everything that Bitcoin does (speed, anonymity and low-fees) while remaining stable to the USD.
Stablecoins have so far gained very little traction with online casinos despite their potential utility. In their current state, stablecoins have mostly been adopted by cryptocurrency investors who are looking to move in and out of volatile cryptoassets without having to interact with the traditional banking system. Yet the opportunity to gamble with a stablecoin remains elusive.
Previously, stablecoins had been exclusively governed by regulated central authorities, making it difficult for casinos to offer them to their players. However, with the rise of decentralized stablecoins like DAI over the last 12 months, the opportunity for a casino to offer stablecoin gambling has become huge.
But it is likely that decentralized stablecoins are too young for casino operators to consider them. While DAI has been thoroughly battle-tested; remaining pegged to the dollar throughout the cryptocurrency market’s biggest bear cycle in 2018, it is possible that operators simply want to give currencies like DAI more time to prove themselves.
Over the next few years - particularly with the rise of smart contract casinos, for which DAI is compatible - it seems inevitable that this contemporary form of money will replace a huge amount of the Bitcoin gambling that we see today.
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