From Binance to Bitmex to Robinhood—in many ways, today's hottest platforms are just casinos disguised as financial tools.
Over the years, online casinos have gotten a bad reputation. Questionable fairness, difficulties withdrawing funds, and poor betting odds were just a handful of problems we set out to tackle when we developed EOSBet (now EarnBet.io) in 2018.
But now the biggest casinos on the block don’t offer Blackjack or Dice. Instead, they offer a host of features like 100x margin, options trading, and yield farming.
The purpose of this article isn’t to criticize innovative platforms like Binance, BitMex, and Compound, but rather to draw parallels between them and gambling sites like our own. The average user understands the risks when they play a hand of Blackjack.
The average user may not understand the risks when they open a 125x margin position on Binance or use Instadapp to short USDT using DAI as collateral.
Let’s take a look at a few examples:
ICOs and Token Speculation is Gambling
Perhaps no event demonstrates the get-rich-quick mentality pervasive in the industry better than the 2017 ICO boom. Over $20B in capital was raised through Initial Coin Offerings around this time. For many retail investors, it was their first introduction to crypto and their first taste of both massive pumps and massive dumps.
Some traders made a lot of money, but many investors got burned. You probably had better odds putting all your money on a 50/50 Earnbet Dice roll than throwing it at the hottest crowd sale contract of the day, but at least you (hopefully) learned something about an exciting new industry.
Exchanges & Trading Platforms Are Casinos
BitMex
Arthur Hayes, a Citigroup and Deutsche Bank alumnus, became a billionaire and one of the ultimate casino bosses by bringing BTC derivatives contracts and margin trading to the mainstream.
Finally, investors could make huge bets with small amounts of collateral using 100x leverage.
Like most unregulated crypto exchanges offering complex financial products, BitMex has faced accusations of trading against their customers, weaponising server crashes, and profiting heavily from liquidations—accusations Hayes has denied.
If the house always wins, BitMex has built itself a mansion.
Binance
Not to be outdone, Binance Casino recently began offering 125x leverage, graciously even explaining why this extremely high-risk position could be more profitable than a boring 20x trade:
Don't you want an extra 1,250 dollars?
Binance recently delisted FTX tokens (leveraged bull/bear assets) explaining that they were too confusing for users. Two weeks later, Binance released their own arguably more complex leveraged tokens.
Robinhood
Even platforms with products outside of the cryptocurrency space, like Robinhood, have realized they can turn their stale retail investing apps into casinos, all without having to attain a gaming license.
Robinhood, which offers cryptocurrency investing, is well aware of the crypto-trader mindset. With an average user age of 31, Robinhood offers tempting gains from penny stocks, margin trading, and options.
"The gambling casinos are closed and the [Federal Reserve] is promising you free money for the next two years, so let them speculate. Let them buy and trade. From my experience, this kind of stuff will end in tears." - Leon Cooperman, billionaire investor
Spend some time trading on Robinhood and it’s like sitting at a slot machine in Vegas. Huge numbers show you the day’s biggest gainers. Confetti bursts when you make a trade.
"It’s almost like being in Las Vegas. They want to maximize the emotional impact of seeing that number” - Dan Egan, MD of Behavioral Finance and Investing, Betterment
Various message boards recruit members to run stocks up in thin after-hours sessions. Now companies advertise on r/WallStreetBets and /biz/ to pump their stocks and undereducated young investors are often left holding the bag.
DeFi is Savvy, Algorithmic Gambling
Let us preface this by saying that we are huge fans of the DeFi space. We have high hopes that these protocols will disrupt the traditional financial system, help bank the unbanked, and usher in a new era of global financial freedom.
Now with that out of the way, in their current form, the most exciting borrowing/lending rates are fueled not by cutting out the middleman, but by intense token speculation—the same type of speculation we saw during the ICO craze of 2017.
But now instead of retail investors depositing into Coinbase and buying the altcoin-of-the-day, it’s smart people in the ETH community borrowing, lending, leveraging, trading, and swapping between protocols and tokens.
We pioneered the “Betting as Mining” model back in 2018, kicking off a wave of dApp casinos across EOS, TRON, and other up-and-coming blockchains.
We rewarded players for their economic participation on the platform by distributing BET tokens and have distributed over $4,000,000 to BET token holders to date.
Asian exchanges followed this model, rolling out “Trading as Mining” (remember FCoin?), and now the DeFi space has finally caught on with “Liquidity Mining” and “Yield Farming” on protocols like Compound. There’s a lot of jargon in DeFi, but the concept is simple: borrow/lend and get compensated with tokens.
This is all good and well, but with market caps approaching $1B and countless articles explaining how to achieve 200% APY, people unfamiliar with these protocols are flooding in.
Flash swaps, leverage, and CDPs are risky--just ask any of the investors suing MakerDAO following their “Black Thursday” losses, or the team at Balancer that just suffered back-to-back hacks. Liquidations, smart contract bugs, and user error are risks that users should be aware of before attempting to replicate transactions like this.
Educated Users, Transparent Platforms
In many ways, the innovations of the above companies have been positive. Crypto wouldn’t be where it is today without crazy ICOs and Binance. And we’re sure many of the biggest decentralized companies of tomorrow will be built upon the shoulders of DeFi protocols being spun up today.
However, if you identify with the crypto ethos that rallies against regulation and government interference, you should also rally for education and personal responsibility. Part of advocating for personal responsibility is providing the tools and information needed to properly inform users of risks. That’s why at EarnBet we list all the house edges on our games, demonstrate that every bet is provably fair, and provide 24/7 support for our players.
So next time you think about trading on margin or opening a CDP position using borrowed funds, just remember: you probably have a better chance of coming out ahead by playing Blackjack.
EarnBet.io is a licensed, fully decentralized, provably fair gaming platform. $BET token holders receive 100% of game profit as dividends. Since 2018, the platform has distributed over $4,000,000 of cryptocurrency to token holders. The company's mission is to leverage blockchain technology to create fair, transparent betting applications and push cryptocurrency adoption forward. Join today and receive $50 of free BTC.