Online gambling sites and casinos are getting onboard with cryptocurrency and blockchain technology right now. It’s a trend we are seeing very clearly from talking to industry players.
You can see it happening already. Some online casinos, including Stake.com, deal purely in crypto. Others, such as Power Play Casino and 7Bit Casino, are adding crypto payment options. And sports betting sites like Cloudbet are also adopting crypto payments and operations.
Ethereum, Bitcoin, and Litecoin are three of the most prominent coins and are now as simple to use as PayPal and as secure as using a credit card. This has transformed the way people look at online gaming. Bitcoin has captured a sizable portion of the business as it has the greatest “brand” visibility and because it can be easily divided up into smaller units, making it ideal for wagering. There are also so-called “privacy coins”, like Monero, which further increase anonymity, as it’s possible to track back payments made in stablecoins or btc.
It’s not a fad – crypto provides real utility for operators…
For operators, crypto results in lower operating costs. Payments are safe and secure, with the result that operators face far fewer disputes, cutting down on administration and time. Expenses are lower too, as there is no requirement for conversion on cross-border payments, making them faster and cheaper, bypassing traditional financial institutions and their commissions and fees.
Regulation is lower as well, although this is changing rapidly – a trend that is actually favoured by operators as it increases consumer trust. There are some cryptocurrency casinos that are still indulging in questionable practices and regulation will find them out.
Crypto can also have the effect that customers are more inclined to take part because they feel more in control – as we’ll see in the next section. And they are attracted by larger jackpots on offer with crypto-enabled sites: because most digital currency casino platforms have no transaction fees and unlimited daily transactions, it means operators can offer bigger jackpots.
…and for users
At the nuts and bolts level, lower transaction costs with crypto mean players’ expenses are lower. With conventional sites, gamblers often complain about several problems when depositing or withdrawing funds, such as tie down of funds for several days, extra service charges, and extensive third-party verification. Crypto provides faster and more reliable transfers, and double payments are avoided. Third parties are not needed to approve the transfer of virtual currency when a player makes a deposit on an online gambling site. Digital currency is entirely under the player’s control.
Crypto today is also safer for users in an area where scams still happen. American poker, for example, was rocked in 2020 by the so-called “black Friday” indictments against a number of platforms offering fiat dollar prizes. Crypto payments have helped to restore trust. They have a lower risk of fraud, cyber attacks and hacking. No one can tamper with a deal and players can access their funds from anywhere.
Anonymity is improved too, especially using privacy coins. Online casinos make you play under aliases and encourage you to be anonymous, however crypto takes anonymity a step further. Decentralised encrypted technology and the absence of a third-party means you don’t share personal and financial information with anyone. Blockchain technology means gamblers no longer need to sign up for an account, verify their identity, or provide financial details to place bets. You simply need to deposit crypto currency to get verified instantly, and start playing.
There are risks for players too. If a scam does happen, gamblers can’t make claims via gambling regulators as the entire process was anonymous. Cancellations don’t exist using crypto payments either, so players’ options are more limited if they want to change or cancel a bet. And paying in crypto can be error prone, especially for new users, possibly leading to losses.
The future: stablecoins, DeFi and smart contracts
If that’s where we are today, what’s around the corner?
The volatility of cryptocurrency can make gambling risky, as the amount won (or lost) in fiat terms is unpredictable (although the other side of the coin is that there is also the opportunity for huge gains).
The majority of players, wary of volatility in coins like btc, are likely to be seeking greater stability in the value of their stakes and winnings, pointing towards stablecoins taking a larger share of the market in the future. Stablecoins offer most of the advantages of crypto (speed, control, low costs, security, greater anonymity) but without the drawbacks of volatility.
Other cryptocurrency innovations, such as Decentralised Finance (DeFi), are already transforming conventional financial services by enabling transparent, permissionless and programmable “smart contracts”.
The same will be true in gambling and gaming, with the potential for decentralised betting platforms that operate on blockchain technology, offering users a secure way to place bets without the need for intermediaries. DeFi can enable the use of smart contracts in online gambling. Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. They can be used to automate the execution of bets, payouts, and other financial transactions. Programmable incentives are another possibility. For example, a betting platform could offer users rewards for referring new users to the platform.
At a more technical level, DeFi can enable the use of decentralised oracles in online gambling. Oracles are third-party services that provide data to smart contracts. Decentralised oracles can provide tamper-proof data to smart contracts, ensuring that the outcome of bets is fair and transparent.
It’s clear we are still near the beginning of the application of crypto to gambling and gaming. As DeFi continues to evolve, we can expect to see more innovative use cases emerge as part of a bigger picture where the use of digital currencies snowballs because they offer real and significant advantages for both operators and players.