Blockchain Gambling
Ivan Mikhaylov
In addition to many finance-related industries, blockchain technology will also transform the gambling industry. Online gambling will experience an 11.5% growth rate over the next five years, reaching a market cap of $150 billion by 2030. However, this meteoric rise will accompany a rise in online gambling fraud as criminals will be drawn near by the large sums of money involved.
Chain 1: How can blockchain solve gambling fraud?
Crypto casinos are based on a decentralized blockchain network. As a result, all transactions, including wins, losses, withdrawals, bonuses, and transfers, are recorded on the decentralized ledger. This ledger is immutable preventing anybody from tampering with the record and creating the double-spend problem. The winnings are paid out using smart contracts, which execute automatically as soon as you fulfil the requirements (e.g. winning the game/getting a jackpot). This significantly reduces the number of payout errors or fraud attempts. Any such attempts will not be verified by the decentralized nodes preventing either the player or the casino from stealing money.
The blockchains on which these casinos are based are open source. This means that anyone can see the underlying code. Players can quickly check what is behind the gambling games and verify their legitimacy and security.
Chain 2: What are the other advantages of decentralization?
Players can play each other directly at gambling games without requiring a casino authority to supervise payouts. As discussed earlier, smart contracts make this an utterly trustless process. Thus, players are guaranteed to receive their winnings and give up their losses. This eliminates the need to pay the casino fees for money security. Furthermore, another middleman is eliminated when withdrawing money. Usually, removing money from gambling sites takes a long time and requires sensitive credit card details. However, blockchain casinos deposit the money directly into your crypto wallet, which takes only 10 min to verify.
Gambling on a blockchain is more accessible because it doesn’t have to comply with the complex gambling regulations of each country. The decentralized nature means that it has no failure points that a government can shut down. Players would possibly be able to avoid gambling taxes in their home country. However, this is bound to be noticed by the government, which will either ban it outright or force it to comply with the regulation.
Chain 3: What are the disadvantages?
Although a public blockchain has many advantages, its transparency may drive away some people who require privacy. Many people, particularly those who value their public appearance, wouldn’t want their gambling activities to be visible to everyone. Gambling is still a frowned upon industry making privacy an essential aspect.
These casino platforms will likely use cryptocurrencies as payment methods. Cryptocurrencies are still volatile assets (lost $2 trillion in 2022). Some people even consider simply owning crypto as gambling. So even after withdrawing your money, you might still lose your money due to crypto volatility. Players will be wary of this possibility and might instead play on platforms with fiat currencies. They will need to weigh the pros and cons and decide for themselves. However, I presume the risk-taking nature of gamblers would push them towards the blockchain option.
Chain 4: Are these developments a good thing?
Gambling being a controversial industry raises the question of whether we want it to grow and attract more people. More people playing will mean a higher social cost for society in the form of worse mental health conditions and a higher bankruptcy rate. On the other hand, one might argue that preventing fraud is always good, no matter the circumstances. Overall, blockchain will make online gambling more secure and fair. It will prevent individual casinos from amassing huge profits and distribute the winnings between the players and the blockchain members. In a sense, blockchain development is aiding the government and allowing it to focus on mitigating the negative impact of gambling rather than investigating fraud allegations.
