Two years ago, there were an estimated 896 Bitcoin and Blockchain companies in 12 categories across 74 countries with a total of $1.88 billion in funding.
This included Bitcoin casino sites start-ups, with $400,000 in funding on average, that offer gambling opportunities using Bitcoins as stakes, making gambling the least funded by venture investing across the sectors.
According to GoCoin, bitcoin casino sites account for approximately half of all Bitcoin transactions; however, these are small accounting for about 5% of the total transaction value of Bitcoins globally. Many online gambling sites have implemented Bitcoin as a way to make deposits and withdrawals, and this is being increasingly noted and reported by affiliate sites, which help consumers identify offshore sites.
Cozy Games became the first regulated Internet gambling operator to accept cryptocurrency payments. This is outsourced through a partnership with GoCoin which allows the use of Bitcoin and other cryptocurrencies on the 90 games that make up its platform.
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Bitcoin Casino sites integrate its player identity verification procedures within the gambling operators’ platform, thus allowing player identification, a requirement of the Isle of Man Gambling Commission, while maintaining privacy.
This is an example of how legitimate gambling companies can incorporate Blockchain technology and reach new markets while lowering transaction costs. One of the most established games is Satoshi Dice, a Bitcoin dice betting game transformed into a Bitcoin casino that provides slot games and allows players to act as the house by betting on a shared bankroll.
They claim that over four million Bitcoins have been won with over six million individual Blockchain bets placed and to allow payouts of up to 64,000 per bet with a house edge of only 1.9%.
The site is licensed by the Government of Curaçao and states that users must be over the age of 18 to play. It was launched in 2012 and sold for USD$11.5 million in 2013. Edgeless Casino is designed to run on the Ethereum Blockchain with all operations based on smart contracts.
The intention is for users to have a transparent experience and for all games to act how they are supposed to. SoftSwiss online casino has seen daily Blockchain transactions grow from 100 to over 250,000 per day from 2009 to 2016. In 2016, Bitcoin to USD transactions grew from 400 to 1,000.
Virtue Poker is an online poker application that uses the Ethereum Blockchain to hold funds in escrow until the game ends. When players commence a game, they put their funds (using cryptocurrency) into a smart contract, where it is held for the duration of the game.
Funds are distributed to the appropriate winner at the end of the tournament. The cards are shuffled and encrypted by player’s own computers with appropriate permissions shared so that the cards can be dealt and the community cards can be seen by all players.
This architecture allows play between unknown players with trust for games with high stakes online. Operators or other players cannot interfere with the cards or funds, reducing the risk of fraud and cheating. Finally, eSports betting sites Unikrn now has its own cryptocurrency, Unikoin Gold, which will sit on the Ethereum Blockchain as a genuine cryptocurrency, which can be bought, sold, and traded on digital currency exchanges that deal with Ethereum.
While we were sitting at the bar, an older man approached us and introduced himself in English with a heavy accent. For a moment, I was worried that he was one of the casino staff who was turning to us to shame us away. While the Martingale System is not prohibited by the rules of casinos around the world, no casino likes to lose, and certainly not by a method.
People deal in different ways with the primitive urge to get our literally mind-altering chemicals flowing: some will literally risk there lives in driving over the speed limit, extreme sports, others do so competing in business, while gambling introduces an entertainment fashion of dealing with risk.
Blockchain protocols have innovative features that have the potential to transform the online gambling industry. Blockchain allows permanent records, are highly secure, provide a layer of anonymity as well as transparency, removes the need for intermediaries, includes validation and authentication mechanisms, and allows provably fair and trusted transactions.
Blockchain and cryptocurrencies have not been widely adopted to date and may remain too complicated now for use by most consumers and businesses. Currently, high-level technical knowledge is needed to work with Blockchain.
However, this barrier has been true for most technological innovations, which continue evolving to overcome challenges and expand until a tipping point is reached. For example, the transformative potential of the Internet was realised after the creation of web browsers.
Initially lack of understanding and knowledge of the Internet’s capacity, privacy concerns, and security issues represented serious challenges and barriers to widespread acceptance. Thirty years hence, the Internet has become an integral, essential, and commonplace resource to everyday commerce and social exchanges.
Nonetheless, Blockchain technology still faces some significant limitations. Compared to existing transaction processing networks, the Bitcoin network has a very limited processing rate (7 transactions per second vs 2,000-10,000 for VISA). Transactions take approximately 10 minutes to be confirmed and download times are slow.
However, technology is being developed that would greatly increase the capacity of transaction processing. Although the nature of the decentralized network means it is highly unlikely that an attack could occur, hacks have been attempted and security issues may arise. In particular, where Blockchain intersects with intermediaries, such as online exchanges, apps, and websites, hacks or other security breaches may occur.
It will take a significant passage of time and popular acceptance for Blockchain to evolve into a universally adopted platform replacing traditional commerce and finance. Iansiti and Lakhani suggest a quadrant or matrix describing the potential path of transition from single use, to localization of use within a defined community, to broader and increasing public usage, to final transformation and widespread adoption.
Nonetheless, early adopters who understand the many advantages of Blockchain are likely to engage with this¸ including established companies and institutions. Further, it is not necessary for consumers to have a technical understanding of the mechanics of Blockchain to use this, for example, mainstream wallets and exchanges are already available.
However, an easy-to-use consumer interface is needed before Blockchain can move from the proof-of-concept phase of development. To go beyond pilots and start-ups, Blockchain needs to have a system of transparent governance and the involvement of trusted organizations to give others confidence.
Morgan Stanley concur that regulation and government acknowledgment is needed for Bitcoin to reach mainstream acceptance. With a widespread lack of specific regulation and policy concerning Blockchain with regards to gambling, it is likely that there will be many innovative and experimental attempts to incorporate this technology into the provision of gambling.
If Blockchain gambling solves existing problems for consumers, such as increasing return to player and ensured integrity of games and payments, this may increase engagement with this technology. Blockchain is not just about anonymous cryptocurrencies and faster payouts.
It is part of a rapidly growing ecosystem of advanced technologies that will play a fundamental role in the future of commerce and society.
Accordingly, it is predicted that Blockchain will form a strong foundation for gambling opportunities and transactions that will in some way impact regulators, either generating novel approaches to regulatory and compliance issues, or through mass collaboration, eliminate the need for regulators in a self-governing system.
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