Blockchain is an increasingly popular technological innovation that underlies cryptocurrencies such as Bitcoin and Ethereum. In order to understand cryptocurrencies and the impact they will have on the gambling and bookmaking market, it’s important to first understand how blockchain functions.
Blockchain is a method for tracking transactions using a public, globally distributed ledger. Transactions can include anything of value (e.g., houses, patents, intellectual property, cars, software, contracts), but is most commonly used for digital currency, most widely known as cryptocurrencies. Blockchain automatically and securely keeps a historical record, or ledger of all transactions. New transactions are saved in a block and added to the existing chain.
This record has a number of encryptions and redundancies which ensure it cannot be changed, falsified or altered. As such, the blockchain remains unbroken, and free of error or tampering. The unbroken record is shared and distributed among everyone who uses blockchain. This means that everyone has a record, which can then be compared across individuals to ensure there are no anomalies. When a new transaction is added to the record, it is time-stamped and verified by all those who are using the blockchain. This ensures that no records are falsified or altered.
Cryptocurrencies are one of the first applications of blockchain. There are many types of cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Zcash, Ripple etc. Since cryptocurrencies use blockchain technology, you can think of them as a ‘chain’ of digital signatures. Each owner of the cryptocurrency transfers to the next owner by digitally signing the previous transaction, adding in the public key or identifier, of the next owner and amending this information to the end of the ‘chain’. Then, before the new owner can transfer to the next, the process repeats itself. Hence, there is an unbroken chain of digital signatures and verifications tracing the transactions of the cryptocurrency.
Any payee can follow the signatures to verify the chain of ownership, and this feature helps to eliminate any fraud. Cryptocurrency includes built-in validation and authentication mechanisms, which removes the need for intermediary financial institutions.
Cryptocurrency is becoming increasingly accepted as a legitimate source of funds. Earlier in March, Malaysian ministry proposed legal tender of cryptocurrencies. Online casinos and bookmakers are also accepting cryptocurrency as payment and there are even casinos that are built using blockchain technology and operate exclusively for cryptocurrencies.
If you want to make a bet using cryptocurrencies, it’s important to understand where your money is going and how the bookmaker you are betting with, makes money. The cost of a bet is not just the amount you stake, it’s the margin that is added to the odds. Bookmakers can add whatever margin they want and this makes for odds you bet with different to the true odds of something happening. Different bookmakers will have different margins that are not disclosed to the players and players would have to figure out these margins by themselves. One thing to remember is that the higher the margin the less value is there for the player. Most reputable crypto bookmakers operate somewhere between the margins of 3-8 percent.
In addition to adding margin to the odds, a bookmaker would also balance the book to ensure a profit. They will take the bet and audit the potential outcomes for an event, then change the odds based on the audit if they have to payout for any particular outcome. Changing the odds make one outcome more appealing than the other and over time as more players join in to place their bets, the bookmaker will find a balance to ensure that their profits are higher than their losses.
Bookmakers that use blockchain technology are open to verification, so players can ensure games are fair. Due to the blockchain technology, there is no way for bookmakers and gambling operators to cheat, or interfere with outcome, odds or payments.
People who use and gamble with cryptocurrency offer a potential new customer base for the bookmakers. Cryptocurrencies can be used to gamble by anyone with an internet connection, and there is no need to have access to traditional banking services. Although some technological knowledge is currently needed to use cryptocurrency, the level of knowledge is decreasing. Mainstream wallets and exchanges are available and are becoming easier to use and understand.
A report by Statista states that online gambling and betting sites are also a part of the global financial system and are expected to reach a market size of more than $550 billion USD by 2022. It’s no secret that most casinos have the odds stacked against a player but with blockchain technology, there is the element of transparency that can ensure a fair game.
