If you follow tech and business news even vaguely, you surely have seen the word blockchain being thrown around. Interestingly enough, the term blockchain now flirts a lot with the gambling industry too. But what is this blockchain, and how can you combine it with gambling? Well, to put it simply, a blockchain network uses peer-to-peer technology to share data between multiple entities. The process is decentralized and there is no need for any third-party institution to validate the data entries.
Blockchain technology relies on cryptographic methods to secure the data on its network. The data gets gathered in “blocks”, which are then compiled on a “chain” composed of a series of data blocks. Hence, blockchain. These decentralized databases are extremely difficult to alter via fraudulent methods. They are also secure in case of technical malfunctions, as the blockchain is not contained in a server or any other single entity.
These characteristics make this innovative technology lucrative for the iGaming scene. Blockchain gambling is becoming mainstream mainly as a payment solution. Cryptocurrencies, which are based on blockchains, can be used instead of traditional currencies for transactions. Blockchain gambling also comes in the form of a software structure for sportsbooks and casinos. Many modern blockchains incorporate their own programming language, which can be used to create decentralized gambling platforms.
How does Blockchain in Betting work
The most common use case of blockchain in sportsbooks is to facilitate deposits and withdrawals. Many popular brands now accept blockchain-based cryptocurrencies like Bitcoin, Ethereum and Dogecoin. Crypto payments circumvent most geographical restrictions and are invisible to financial institutions. Certainly a big advantage for players that like to keep their betting activity under the radar.
Many cryptocurrencies like XRP and Dash allow for near-instant transactions. That makes the withdrawal of winnings an extremely convenient process. Below we will explain how a crypto transaction is processed and how crypto gambling taxes work in a blockchain network from the moment you authorize the payment. That will help you understand how the technology works.
Blockchain Gambling for Dummies
Let’s say that you have registered in a bookie of your choice, and you want to make a Bitcoin deposit choosing the best crypto wallet for online gambling. In order to complete the fund transfer, you will first have to type in the amount that you wish to deposit and the bookie’s BTC address. As soon as you click ok, your wallet confirms and signs the transaction using its private digital key. After the confirmation, different processing units (nodes) that are part of the Bitcoin network validate the transaction.
Note that these nodes are decentralized entities that need to come to the same conclusion in order to validate your transaction. This process blocks any fraudulent actions, ensuring the neutrality and safety of the network.
After the validation by different nodes is complete, your payment will be included in the next data block, which will contain the last transactions executed via the Bitcoin network. These blocks are generated by “Miners”. Miners are processing units with immense computing power that solve complex mathematical problems in order to forge a new block and add it to the blockchain.
Bitcoins are, in fact, the miner’s reward, as setting up a mining rig is extremely costly and consumes a lot of energy.
After the new block is added to the Bitcoin blockchain network, the different nodes again confirm the result and transmit it to all recipients. After this last step, the crypto anonymous bookmakers will receive the notification that he has received Bitcoin from you and will add your funds to the account.
Note here that some bookmakers may require more than one block confirmation before crediting the funds to lower their risk. That is because each subsequent block strengthens the blockchain.
What to keep in mind for blockchain transactions
It is important to say here that transactions in most blockchain networks are transparent. With blockchain gambling, you can resolve transaction disputes right away. Of course, that also means that if someone knows your wallet address, he/she may check all transactions that went through it.
Be careful with whom you share your wallet address. You can always check Monero and Zcash if you want to keep things more private. Additionally, keep in mind that these days Bitcoin is considered old blockchain technology.
New blockchains contain new features and technologies, but the base of any transaction is the same as above. Now the basics behind a blockchain-based transaction should be more clear. Before we proceed with the rest of our content, feel free to check the list of the best bookies that can facilitate your blockchain payments. These bookmakers offer a value Bitcoin sports betting bonus, good payout and execute fast withdrawals.
Blockchain Gambling & Decentralized Applications
As we have already mentioned, blockchain usage in the gambling industry is not limited to cryptocurrency payments. Different networks can be used to host complete sportsbooks and casinos in the form of decentralized applications (Dapps). Instead of being based on a server or a cloud service, they run on a blockchain.
Ethereum, Tron and EOS are the main networks for this type of gambling Dapps. These gambling sites use each network’s native blockchain for data storage and their programmable language to enable gambling functions.
These services have extremely low operational costs and so have the ability to offer almost 100% payout. Of course, they are still in their infant state and one must be really tech-savvy to use them. Sadly, due to the blockchain’s unregulated nature, various Scam Bookmakers hide behind many innocent-looking Dapps. They will outright disappear with your hard-earned funds and there will be nothing you can do, so be very careful.
It would be a mistake not to mention the provably fair calculator for casino games. In these games, a blockchain-based algorithm determines the result. That way, you can check the legitimacy of the results yourself by running the algorithm on third-party platforms. This provides transparency like cryptocurrency transactions and helps the building of a trusted relationship between brands and players. Provably fair games do not require a gambling Dapp, as traditional online casinos can also host them.
Advantages and Disadvantages of Blockchain Betting
At its core, blockchain technology is not something difficult to grasp. It is a huge database that is stored on multiple devices and accessible to everybody. Imagine an enormous Excel spreadsheet with data visible to everyone, but no one can tamper with it. All participants must confirm new entries by cross-referencing each other.
Transparency is the primary method that securely protects the blockchain data structure. This technology seems to be the future for different industries, like finance, logistics, banking, healthcare and gambling too. The gambling industry has always been an innovator in adopting new technologies.
Blockchain gambling is no different, as it already disrupts several iGaming norms. For example, the current global trend is that many markets are now in the process of getting regulated. This will limit the available brands for bettors.
Cryptocurrency payments and blockchain-based gambling sites are the optimal way to circumvent these regulations, so each player can have the best betting edge they can get. However, blockchain gambling is not always the sunshine and rainbows it appears to be, as it holds several downsides too.
Benefits of blockchain technology in Gambling
The use of blockchain technology in transactions with gambling sites is undoubtedly the major benefit. Banks and other similar third-party financial services will no longer have a say in your fund transfers for gambling purposes. Although a bit different, blockchain gambling mimics, in a way, old-school cash hand-to-hand exchanges.
Say goodbye to blocked funds or frozen accounts due to audits and AML checks. Moreover, the lower costs of blockchain networks mean that bookies, decentralized or not, can offer you better offers and payout. Let’s summarize a few key advantages.
✔️ Anonymous Transactions
The correct term in crypto slang is “pseudonymous”. That is because transactions and addresses in most blockchain-based cryptocurrencies are publicly available. Nevertheless, the only thing someone will see is an alphanumeric wallet address. No name, surname or address. If you add to this the fact that most crypto-friendly bookmakers do not require any KYC documents, you can see that your privacy is highly protected.
✔️ Low Operational Costs
Deposits and withdrawal fees via a blockchain network are usually way lower than bank transfers, e-wallets, or debit cards. In this way, a bookmaker can offer you overall better welcome bonuses, offers and higher odds, as you can check in our 1XBit review. More and more gambling sites are adding crypto deposit methods.
In fully decentralized sportsbooks, you will find close to 100% payout as there is no bookie behind that needs to make a profit. You are just trading bets with other players.
✔️ More Efficient Transactions
An established blockchain network knows no bank holidays, no service downtime and no failed transactions. When blockchain gambling, all your deposits will go through, and you will receive your winnings as soon as the bookie confirms the payment. Also, forget about geographic restrictions. If there is internet access, there is crypto. Moreover, each transaction can be verified through the blockchain, and there are no disputes.
Disadvantages of blockchain in iGaming
Despite the simplified ways we used to describe blockchain, the truth is that it is complex technology. Also, it is always evolving as new projects and platforms appear left and right. One should do diligent research before converting a part of his bankroll to cryptocurrencies and indulging in blockchain gambling. Many players do not want to complicate things, and rightly so, as gambling should be primarily an entertaining activity. Blockchain payment methods are also currently in a grey area legally. Additionally, many cryptocurrencies have been associated with illegal activities, and that discourages plenty of bettors.
❌ Ongoing Regulations
Blockchain-based cryptocurrencies have become too big to ignore. There are billions of Dollars circulating each day in crypto exchanges, and that got the attention of international and national regulatory bodies. Governments and central banks are orchestrating their next move in order to keep this phenomenon in check. Nobody knows how this situation will evolve in the near future, so one must be very careful when investing a part of his capital in cryptocurrencies. These regulations may heavily impact blockchain gambling in a positive or a negative way. Keep yourself informed.
❌ Gambling Licences
Bookmakers that accept crypto payments usually hold offshore licenses. Even if there are many popular legitimate bookies, these licenses are generally considered less reliable. Keep this in mind and try to avoid eventual disputes, as you will have a hard time dealing with them.
Decentralized sportsbooks, on the other hand, hold no licenses as they are completely independent. No one can guarantee your safety there, you are the sole responsible. Try doing the best research possible before buying any tokens of a gambling Dapp.
❌ Cryptocurrency Inefficiencies
There is no optimal digital coin for blockchain gambling. A cryptocurrency may have the lowest fee possible, like XRP, but its service is extremely centralized, and that lowers your privacy. Ether was considered one of the best choices, but due to network congestion issues, it now (2023) faces extremely high transaction fees that no player will want to deal with.
The benefit of a risk factor is not the only issue. The decentralized nature of blockchain cryptos means that you will have no support in case of a wrong transaction. Immense sums lie lost in various networks that will never be recovered.
Is Blockchain Gambling worth it?
I am confident that blockchain and gambling will continue to go hand-to-hand at an increasing rate. There are too many benefits for operators and players alike. Any future regulations, even if they are on the negative side, will slow down the process. Blockchain-based networks and digital currencies are like the Internet, they will never be fully under the control of anybody. Any attempts at restricting them will bring forth more creative ways to circumvent these restrictions.
A determined bettor should seriously consider learning as much as he can about blockchain and cryptocurrencies in general. Learning how to gamble with cryptocurrency is the optimal way to retain your privacy and settle transactions efficiently. Each different digital coin and gambling platform greatly enhances your edge. That is provided you understand the risks and limitations and keep clear of scams.
A blockchain is a distributed database. You can think of blockchain as a decentralized digital ledger that records all data that go through its network. Data is stored in the form of blocks, that then get chained together, hence “blockchain”.
An incorrect comparison. Bitcoin is a cryptocurrency that is based on blockchain technology. Most cryptocurrencies are based on blockchain networks, but this technology may be used in a variety of other sectors.
Blockchain based cryptocurrencies, which facilitate blockchain gambling are as legal as any other currencies, even if they are unregulated in most countries. Decentralized gambling sites are also legal, albeit unregulated too.
It might not be the definitive answer to everything, but it may offer efficient solutions to a multitude of industries. It is a relatively new technology, so there are still a lot of developments and technological advances due.