Technology drives innovation in just about every industry. This is no truer than in gambling. Perhaps the biggest shakeup in recent years was the arrival of the internet. The global information network allowed casino operators much greater reach into potential players’ lives than ever before.
Innovation has hardly slowed since. Advances in payment technology have meant players can deposit money using many new and convenient methods, the evolving skill of web developers and the tools they use mean games are ever more engaging, and the proliferation of the mobile phone and roaming data means almost every individual now has a casino right in their pocket.
Recently, another new technology has grabbed the attention of casino software developers. Known as blockchain, it’s a major breakthrough for applications that can only function with trust between participants. It may eventually see the casino remove itself from gameplay altogether and allow players to enjoy a much greater opportunity to win.
You probably already know what the “house” is. It’s a term used to describe the operator and host of casino games. To ensure a viable business, the casino runs games with a “house edge”. This sets the casino versus the player, which is an odd business arrangement. On the one hand, the casino needs the players to lose. On the other, it needs them to have fun whilst they’re losing so that they continue to lose and keep the business profitable.
Almost all games have some house edge at traditional online or brick and mortar casinos – a notable exception is poker. Poker is played between the players themselves. The casino takes a percentage of each pot but is not actually involved in the game. In this instance, the casino really doesn’t care who wins because they make money either way.
Blockchain, meanwhile, is a distributed data storage system. You can think of it like a fancy database. Authorised users of a blockchain network can make amendments to the database, providing these changes fall within the database’s ruleset. Other authorised participants can verify the changes and confirm them as part of the blockchain going forward. The first application of blockchain technology was the cryptocurrency Bitcoin.
Bitcoin opened the world’s eyes to the potential of blockchain technology. Of those industries that have taken an early interest in the innovation, perhaps the most notable is gambling.
Some online casinos were quick to accept payments in Bitcoin or another cryptocurrency. Meanwhile, other developers have spent the last few years working on systems to bring greater transparency to the online gambling industry. The products they’ve been working on are starting to see the light of day now and look set to shake up the entire industry thanks to the massive reduction of trust required on behalf of players.
Trust is one of the most important and hardest to achieve goals for casino operators. Traditionally, companies spend millions each year having their offerings audited by the likes of the UK Gambling Commission or the Malta Gaming Authority.
With the development of smart contract (programmable money) platforms, like Ethereum and others, developers can now build their own games directly onto blockchains. This allows the creation of what’s known as “provably fair” games – like being able to check a deck of cards for fairness in a real casino between each hand of blackjack. Some casino operators have recently taken the concept of provably fair gambling to the next level – creating their own almost, or entirely, houseless casinos.
Built directly on blockchain platforms, the likes of Edgeless or Younited currently offer a limited run of games with absolutely no house edge. The casinos make their money by charging a tiny percentage of each transaction and they even run initiatives like a decentralised, community-contributed bankroll. Being that the games have zero house advantage, those who contribute to the bankroll take a risk but will receive a percentage of the casinos excess bankroll in return for their support.
Whilst highly innovative products, houseless blockchain casinos are still very niche. Although the likes of Younited currently boasts almost 80,000 players with only a single game and lottery draws, this is nothing on the heavy weights on the established online gambling industry.
At a houseless blockchain casino, there is no house edge whatsoever. The operator of the service does not care who wins because they have built their business model without relying on player losses. Games can be played versus the other players or versus a house offers games with a 100 percent return to player rating. The lack of house edge means the players themselves are considerably more likely to win, and that’s why we gamble, isn’t it?
As mentioned, blockchain casinos, either with or without an edge, often make their games provably fair. Younited, for example, runs its random number generator directly on its blockchain. Players can check if all possible outcomes in a game were indeed possible. In theory, this should allow operators to save money on auditing services. They can then pass these savings onto the players with attractive bonuses or other promotions.
Given that houseless blockchain casinos are built on public blockchains, almost every aspect of their use is highly transparent. Players can follow deposits, withdrawals, the games themselves, and the bonuses and their recipients on the blockchain.
Traditionally, the operations of casino operators would require an auditor to check all of the above. These audits and subsequent licences are not cheap, and the expense encourages the operator to reduce the likelihood of a player winning.
Given that they’re built using blockchain technology, these houseless online casinos use cryptocurrencies for payments. Cryptocurrencies settle with absolute finality much faster than traditional payments.
This gives the player even greater freedom that possible at a traditional online casino. Withdrawals from most casinos using more well-known payment methods will typically take between 24 hours and a week. With either a houseless blockchain casino or regular crypto casino, it’s settled within a matter of minutes.
Although blockchain casinos sound like they give a far superior player experience than offered by traditional online casinos, they are not without their flaws. It’s highly likely that some of these potential barriers to entry will drop in the future but for now, there are certainly some disadvantages.
Playing at a blockchain casino will require you to use cryptocurrencies. Since most people don’t get paid in digital currencies, this will involve an additional step that users of traditional online casinos wouldn’t have to deal with. For some, getting authorised at a cryptocurrency exchange, depositing, buying digital currency, and sending it over to the casino will feel like a lot of hard work. This is a serious barrier to entry for many of the applications currently using blockchain technology.
Being so novel, many blockchain casinos lack any form of licensing agreement. This makes it much more difficult for a player to be sure that they are playing at a reputable venue. Whilst some blockchain casinos do hold licences, it’s still far from the norm.
Another issue with using cryptocurrency at any casino is the volatility of digital assets. With fixed supplies and demand constantly varying, the price can swing wildly. It’s not uncommon to see 20 percent price moves in a cryptocurrency in just a matter of hours. Your $200 bankroll could be worth just $160 when you wake up!
Since casino smart contracts can hold a lot of value, hackers frequently target them. There have been a few examples of vulnerabilities in the coding of such applications being exploited, resulting in casino downtime or perhaps even losses for the venues. Given that they are not usually regulated, these losses can force the company to leave users out of pocket or even to disappear completely without a trace. The blockchain casino industry is still very much the wild west!
Although the negative points above might make blockchain casinos seem incredibly risky, it’s certainly an innovation to watch out for. Those early examples of houseless blockchain casinos are not without their flaws but their application of the technology today may well be laying the groundwork for a new, much fairer chapter in the online casino story.
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