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Blockchain Gaming Part 3: Gambling

Opinion

Blockchain Gaming Part 3: Gambling

This is part three of a three part series on Blockchain Gaming. You can read part one with ecosystem research on Blockchain Beach!

Legality of Online Gambling Today

Online gambling operations are predominantly banned in Eastern Europe and the US, legal in Africa and South America, regulated in Europe and have mixed regulations throughout Southeast Asia

The Rise of Online Gambling

Online gambling is a burgeoning industry that’s becoming mobile and consolidating. Yet as it grows, its trust and authenticity issues are becoming more onerous

Explosive Growth

  • According to a report published by British consulting company Juniper Research, the growing demand for digital products will drive the online gambling market to $1 trillion by 2022, with the total number of online gamblers exceeding 684 million

Mobile

  • H2 Gambling Capital believes that by 2023, over 50% of gross online gambling revenues will come from mobile devices. As of September 2018, 68% of mobile revenue comes from betting

Consolidation

  • According to data provided by Global Betting & Gaming Consultants, in the past few years the global gaming market has been characterized by a consolidation of assets by such companies as Paddy Power, Betfair, Ladbrokes, Coral, Bwin, and GVC Holdings

Future Growth Driven by Sports Betting

United States – the fastest growing sports betting market

  • May 2018: Supreme Court strikes down law banning sports betting outside Nevada
  • June 2018 to November 2018: 7 states (Delaware, Mississippi, New Jersey, New Mexico, Pennsylvania, Rhode Island, West Virginia) legalized full scale sports betting
  • Seven additional states have passed a bill, but full legalization is pending

United Kingdom / Europe: The longest-standing sports betting market

  • Online betting has been largely regulated in the UK and Europe for the past two decades
  • The UK is the largest regulated online market in the world, generating ~£5.6 billion ($7.0 billion) in gross revenue each year

Asian-Pacific Region (APAC): the largest sports betting market by market share

  • Residents falling in the APAC region are responsible for 47% of the world’s sports wagers
  • Even so, APAC is projected to witness major growth in the upcoming years because of the improving economic conditions throughout the region (increasing disposable income for population base of more than 4 billion people)‍

Hottest Sports Betting Market is eSports

eSports is the fastest growing sector in the expanding sports betting market, a indication of the rise in popularity of virtual competition

The Flaws in Online Gambling

  1. Users cannot be certain whether the gambling website is working against them by tweaking the odds in favor of the house
  2. Platforms themselves have to bear the risk that their clients might cheat
    – Because countries restrict online gambling, the operator has the ability to block a user from withdrawing of funds after winning a jackpot
    – Unlike banks, players’ deposits are not insured if an operator is shut down, becomes insolvent, is seized, or goes offline
  3. Bad actors can register multiple accounts by using remote server connections to give the appearance of operating in a different jurisdiction, making it easier for them to move money undetected
  4. If a hacker steals money from the website, both operators and users suffer

As the online gambling market continue to advance and proliferate, it is imperative these flaws be addressed in conjunction

‍The Solution: Blockchain-Based Online Gambling

  1. The implementation of blockchain technology will make the operations of gambling websites more transparent, allowing each party to verify that the gambling process is fair. We believe it will also solve the issue of security
  2. Transaction costs can be reduced dramatically, and money withdrawals will be much faster. While payout withdrawals presently take between three to five days, cryptocurrency transactions are almost instantaneous
  3. The use of cryptocurrency will attract new clients to the market – those who cannot use centralized gambling sites due to a lack of access to banks or residency in a country where financial institutions do not allow gambling transactions‍

Degree of Cryptocurrency’s Impact on Online Gambling

There are degrees to how cryptocurrency can impact online gambling / sports betting

  • Using cryptocurrency to gamble on non-digital assets
    Example: using Bitcoin to wager on real world professional sports
  • Using cryptocurrency to gamble on digital assets
    Example: using Bitcoin to wager on eSports or online poker
  • Future: using cryptocurrency to gamble on NFTs
    Example: using Bitcoin to bet on a digital horse participating in the Virtual Kentucky Derby

Most offshore sportsbooks already accept Bitcoin for both deposits and withdrawals. Many of the major offshore sportsbooks were early adopters (starting in 2014)

Ethereum versus EOS and Tron

  • Driven by a) throughput advantages and as compared to Ethereum and b) zero transaction fees to users, Tron and EOS have become the preferred mainchains for blockchain gambling dApps
  • Cost and scalability will ultimately determine which networks see the majority of interactive games built on them

Case Study: Virtupoker

Virtupoker has built an end-to-end protocol using digital wallets and Ethereum smart contracts to bring transparency to online poker

  • By registering, players are issued a wallet and can send either ETH or VPP (native ERC20 cryptocurrency) to their wallet address
  • A poker table on Virtupoker uses an Ethereum smart contract which includes the custom parameters of the game (# of players, game type, buy-in amount, etc). Players join a table by sending the buy-in amount to the table address and waiting for the transaction to confirm
  • When a player leaves a table or when a tournament is over, the table contract auto-executes and pays out each player balance owed directly back to their wallet

Wave Financial, LLC is a Registered Investment Advisor (CRD#292343). This article is for general informational purposes only. Nothing herein is an offer to buy or sell, or the solicitation of any offer to buy, any security or interest in any investment, nor is it intended to be used for marketing purposes to any existing or prospective investor in any jurisdiction, and is subject to correction, completion and amendment without notice.

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Jordan is an entrepreneur, technologist and former finance professional passionate about distributed ledger technology and its ability to transform our world. He previously worked for Guggenheim Partners in their investment banking division and in real estate structured finance for HFF, a NYSE publicly traded company. Jordan received a B.S. in Management Science & Engineering from Stanford University.

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