Gambling dates back thousands of years and spans several ancient civilizations. Playing cards could be traced back to the Chinese civilization as early as the 9th century; similarly, rolling a pair of dice was very common in the Egyptian civilization. These suggest that betting was a widespread practice across different social strata.
Gambling has gone through several revolutionary changes over the years, with the game's commercialization being the most significant one. However, with the advent of online gambling, and the exponential growth of technology, gambling shows no signs of stopping. Few say that the introduction of online casinos in the mid-1990s has helped the game survive and subsequently explode in this era of increased internet penetration and proliferation of electronic gadgets. However, despite being such an influential player in the online market, online casinos raise serious concerns regarding privacy, safety, transparency, and reliability. These concerns can be addressed and solved by integrating blockchain technology into online casino platforms. In this article, I shall be discussing how online casinos and blockchain technology crossing paths can bring revolutionary results.
What is blockchain technology?
A blockchain is a repository of digital records which is cryptically stored using a cryptographic hash. In a layman's term, a blockchain is a method in which data is secured and stored in interconnected blocks and forms a chain. For each block, a hash is generated, which is similar to a fingerprint—since it varies from person to person. Once data is stored in a block, and a hash is generated, that data becomes final and irreversible. In this data leak and hack era, the hash algorithm provides extra security to the data stored. However, the data stored in blocks can be changed through a consensus algorithm. To alter or modify any data in a blockchain, one must obtain the consensus of at least 51 percent of the participants in the said blockchain.
The popularity behind blockchain has been due to its practical resistance to any manipulation. That is why blockchain has become increasingly popular as more and more industries have started
to use it.
The deficiencies of online casinos
It is not a secret that online gambling, a sector worth $40 billion globally each year and is projected to increase to $127.3 billion by 2027-end, is marred with several deficiencies, reducing its players' confidence in the industry. It is safe to say that the platform has not seen any significant paradigm shift ever since the mid-1990s and continues to operate similarly with very low consumer/player confidence.
Moreover, security remains a major challenge on online casino platforms. Conventional online casinos operate on centralized servers and demand excessive personal information to vet their users. With centralized systems, data is stored, updated, and managed through one location. Hacking can spell trouble for all the data that fall within its ambit.
Akin to security concerns are concerns regarding withdrawal and deposits. Withdrawal and deposits pose serious problems related to invariability as different jurisdictions have different legislatively imposed limits on fiat transfers and deposits. Furthermore, the phrase "the house always wins" is more popular on online casinos as there is no transparency of operations—online casinos like to hide their winning data game results and pay-outs. The odds are always stacked against the player, and despite losing, he never gets to know what the numbers were. This brings in the question of transparency, as it is often said that online casinos are rigged, unfair, and designed to make players lose more money than they earn.
Additionally, due to the addictive nature of the game, a player keeps coming back despite losing money to recover their losses. This serves as a great opportunity for online casinos to earn more money. At last, even if the player manages to win, their losses overpower their wins.
So how does the integration of blockchain change online casinos?
The integration of blockchain technology across various industries has yielded extraordinary results. As discussed earlier, online casinos have their deficiencies. With the integration of blockchain, most of them (deficiencies) can be addressed. However, in the long run, the game will still win more than it loses. However, players will be presented an opportunity to hit the big jackpot in a system that is not unfair and rigged and keeps data safe.
Firstly, the integration of blockchain technology increases the security of online casino servers. Since blockchain technology stores data across multiple computers known as nodes, it becomes tough to hack, manipulate or falsify data. There is no primary source to which the entire data set is susceptible. In other words, there is no way to "cut the head off the snake" as there is no head. Further, they have also gained popularity in risky jurisdictions where the market is not as heavily regulated. Casino websites in countries like Georgia and Belarus are not heavily monitored, which is why many payment gateways choose not to provide their services in sites based in these jurisdictions; that is why crypto-based sites are thriving in these jurisdictions. Along with blockchain, crypto casinos can also use encryption protocols to prevent the sniffing of vital information.
One such prominent encryption tool is the Secure Socket Layer [‘SSL’]. Today, major online casinos have started using SSL encryption to protect user data. Therefore, blockchain coupled with an encryption tool like SSL protects against illegal trading of digital assets and curtails the risk of hacking and payment duplication.
Secondly, cryptocurrencies, as of now, do not have any regulations and are decentralized. Thus, unlike fiat money, cryptos do not have any set daily transaction limit. This entails players making any transactions as they want without the fear of any governmental interference. For example, several online casinos use PayPal, widely regarded as the world’s leading e-wallet, as their payment method. However, quite often, PayPal’s maximum deposit and withdrawal limit is around $7,500, which can be less than the jackpots one can win on any given day.
Shifting to cryptocurrencies can eliminate this boundary as cryptocurrencies do not have any limit on transactions. Moreover, cryptocurrencies do not have any storage cost and territorial restriction; cryptocurrencies can be moved to any part of the planet without additional charges and restrictions. We often see online casinos being territory-specific and not allowing certain fiat currencies; this can be changed by integrating cryptocurrencies due to crypto's universal recognition. Cryptocurrencies can be time-efficient; certain cryptocurrencies, such as XRP, can be transferred in a few seconds. Whereas other popular ones, such as Bitcoin, take only a few minutes. Unlike fiat money, cryptocurrencies are not subjected to any additional transaction fee; one can transfer cryptocurrency to a person next door or halfway around the planet; the transaction cost will remain the same.
Additionally, as discussed earlier, unfairness and transparency remain significant problems in online casinos. These schemes usually work in two ways: making the game impossible to win or making the pay-out impossible to gain by using techniques such as exit-scam. An exit scam is a classic example of scamming where the fraudster stops paying money but continues accepting bets and deposits and then stops operating all of a sudden. The introduction of blockchain can push away all these problems of traditional casinos.
In a blockchain-based casino, the actions of the players and casino are displayed in an entire public registry. Here, smart contracts play a significant role in managing payments. Smart contracts are traditional contracts in blockchain technology. They are self-executing, and the clauses are written in codes that reside on a decentralized and immutable blockchain. Smart contracts are programmed to execute actions that depend on the completion of a specific parameter. Smart contracts are run by Ethereum, which is an open software platform based on the blockchain.
Furthermore, because it is self-executing, smart contracts help reduce the cost of intermediaries while negotiating a contract. Due to smart contracts in online casinos, payments can be made instantly as soon as a player wins. The winning numbers will be programmed and coded as parameters in a smart contract.
A player will fulfill those parameters by matching those numbers in the game, that is, by winning. Once a player can match the numbers and fulfill the parameters, the smart contract payment can be executed then and there. The player will receive their payment instantly. This shall also break the age-long practice of casinos of delaying pay-outs. Moreover, the players can check the actual solvency of the casino any time they want, which can make it impossible for a casino to adopt unfair means.
Crypto-based casino: The bigger picture
I have discussed the various incentives that blockchain-based casinos can bring to the online-based casino platform in the previous section. However, benefits entail drawbacks, and these drawbacks on crypto-based casino platforms must be kept in mind.
Firstly, cryptocurrencies are still in their nascent stage; many individuals are still not well-sensitized about cryptocurrencies. It could lead to complexities as individuals may not understand the functioning of these digital currencies. Further, investing in crypto with a lack of understanding can lead to substantial monetary losses. Thus, the involvement of crypto in various platforms remains relatively new; yes, people will learn over time, but right now, given the high volatility of cryptocurrencies, it could be too risky for someone new to deal with these currencies. Additionally, cryptocurrencies are highly volatile. It is unstable and is prone to significant fluctuations. For example, an Elon Musk tweet can make cryptocurrencies go through the roof.
Secondly, a lack of recourse makes a compelling case for one to avoid crypto-based casino sites. Since no one controls the blockchain, it could be tough to resolve if there happens to be any payment dispute. Casino sites may have customer redressal units, but these units will not influence a blockchain. Thus, transactions, once made, cannot be voided or modified, nor can requests be made to return money paid by mistake.
All these factors point back to the same fact: one must clearly understand cryptocurrencies before dealing with them.
Thirdly, there is the problem of scalability. In layman’s words, the issue of scalability arises when there are plenty of transactions but not enough room on the blockchain. This could lead to a higher waiting period and high fees for every transaction. One may question the need for crypto-casinos if a problem similar to traditional casinos, that is, waiting for pay-outs, persists.
Lastly, the regulation of cryptocurrency has emerged as a hot topic for debate in recent times. Recently, El Salvador became the first country to recognize Bitcoin as a legal tender. Soon cryptocurrencies could be regulated and subjected to legislative restrictions in various jurisdictions, which can negate all the incentives that crypto-based casinos were essentially supposed to bring and reinstate an online casino system akin to the traditional one with a regulated tender and subjected to certain restrictions.
Conclusion: How will blockchain-based online casinos look…
In a blockchain-based online casino, a sequence of random numbers will be generated—these numbers will set the outcome in the upcoming few games. These random numbers are then stored in storage, where the program generates a hash-code of the entire sequence, then writes it to the blockchain. When the game begins, the algorithm retrieves the results from the repository and enters the game. Now the players can see how the ball enters a certain cell of the Roulette, or certain cards are dealt with. At the end of the game, when the results have been declared, the players will have a chance to have a look at the pre-generated results and understand whether the casino has cheated or not. Therefore, the game becomes fairer and more transparent.