Bitcoin has seems unstoppable over the past year-and-a-half. The one-time experiment has outperformed real-world currencies, given financial institutions something to think about. Recently, it has become a regularly traded commodity with millions of investors, miners and sellers interacting with the ecosystem. Granted, it’s had its hiccups lately, and there are plenty of pretenders to the throne who are jumping on the bitcoin bandwagon, but the first true cryptocurrency is really showing the world it’s potential applications and how problems like scaling are being solved.
One industry that could change massively from increased use of bitcoin is the online gambling industry. Built completely on millions of online transactions, gaming companies could see that way that their services are paid for transform if more people were to adopt bitcoin as a preferred currency. There are plenty of implications for both players and the owners of these companies, many of which could end up saving both sides plenty of money. But are cryptocurrencies the best currencies to gamble with?
No More Middleman
The big advantage of bitcoin is the lack of an agent to transfer funds. Bitcoin negates the need for a bank or credit card, with the trade taking place directly between the customer and the business. This could result in a huge cost saving for online gaming sites, which would eventually be passed on to the customer. The other side of the coin is the time taken to transfer funds, although playing online games like poker is extremely convenient, players are often left frustrated with the amount of time it takes for them to get their hands on their hard-earned winnings, if online poker sites were to adopt bitcoin the waiting time would be none existent. Unfortunately, for certain banks and credit card services, there can be a wait for several working days before funds become available in the player’s bank account after a win.
One of the biggest outgoings for online gaming sites are currency fees. This can be anything from a credit card charge to the costs associated with exchange rates. Dealing with banks, credit companies and even companies like PayPal instantly means surrendering a percentage, usually around 1-2% of the initial payment from the player before any profit is made. This can often be in the millions per month when large numbers of players carry out multiple transactions and payments in a short space of time.
The trouble with credit card details are that they can be easily stolen, and with the amount of big-profile hacks seen in 2017, customer details are big business for cybercriminals. We already know about the benefits of blockchain technology for casinos and how much more secure it can be, and this is definitely another advantage for players who wish to deposit their funds using a cryptocurrency. Thanks to the anonymity afforded by bitcoin, there’s also no personal details to file, or any personal information held by the online casino that could be stolen.
Anonymity could be a problem for online gambling companies, however. Crimes like money laundering are already a problem for physical casinos, and allowing anyone to deposit sums in a gaming account without any indication as to who they are could be fraught with issues. The best workaround for this is for all users to register with their personal details before they can deposit anything with their bitcoin account, but there’s still the risk of information being falsified. In addition, it’s a lot easier to buy bitcoin than it is to register a bank account.
Accepting or making payments in dollars or pounds is a pretty safe option for gamblers and online gaming companies. It’s unlikely that the currencies will devalue or rapidly increase in value over a short period of time, and it can be favorable to generate interest from money being held in multiple accounts. Although bitcoin has the same growth elements, it is nowhere near as safe as a traditional currency in terms of predictability and stability.
It’s key to remember that bitcoin is unknown territory. We had never seen a cryptocurrency before bitcoin arrived, and for a long time the growth of bitcoin was both exponential and rapid. Last year, a price of $20,000 was topped, before a rapid decrease to a current price of around $8,000 per coin today. This huge change could be very problematic if, for example, a casino accepted payment in bitcoin, but then offered the option to withdraw in a different currency. The easiest solution is to only pay out in bitcoin if payment was made in bitcoin, but then online casinos don’t have the benefits associated with holding cash.
There’s also the more extreme possibility of cryptocurrencies collapsing altogether. Bitcoin may be fairly solid with plenty of public interest and a solid investor base, but there are plenty of others looking to take market share who may not last as long. Accepting payment in a less established cryptocurrency could spell problems if it doesn’t take off, or even disappears altogether with customers expecting a payout.
With bitcoin prices at just over $8,000, and with previous prices over $20,000, it’s unlikely that people will be betting that amount in one go (unless they’re Floyd Mayweather). The average stake in the U.K. is just under £9, so expecting anyone to have that sort of cash on hand is unrealistic. Bitcoin can be fractional, but this creates more hassle in terms of transfers and mathematics.
Bitcoin miners have realized this issue, and so have their competitors. Bitcoin cash is the latest challenger, a cryptocurrency aimed at being closer to Satoshi Nakamoto’s original concept by being less about boosting value through investment and more about daily use. As the people behind bitcoin cash are all ex-bitcoin ‘enthusiasts’ (bitcoin is anarchic, with no management or staff, managed totally by an online community), then this could be the hard fork that splits bitcoin truly down the middle.
The big advantage with cryptocurrencies at the moment is public interest, and increasing trust. The blockchain model is extremely secure and practical, and is even being applied by organisations to provide more transactions, and the immediate, fee-free transfer of funds is very attractive for both users and businesses. But a big detractor is that cryptocurrencies are still fairly unregulated, and possibly even prone to the bubble effect. Speculation is managed in real-world commodity and stock trading by governments and financial regulators, but bitcoin and other cryptocurrencies are parallel to traditional financial institutions. If bitcoin collapsed tomorrow, there’s little in the way of insurance or financial protection.
Although cryptocurrencies have a long way to go, they’re still a great way of placing a bet. As well as being quicker and more secure to use, you’ve also got the possibility of your preferred currency actually growing as you gamble with it, something you wouldn’t get from using a traditional currency. The risk of losing everything is slightly higher, but then again you’re about to gamble with it anyway, so we’re sure you’re happy to take a risk! We’d recommend choosing a provider that accepts and pays out in both bitcoin and other currencies though, so you can take advantage of any market growth if your coins are currently being held by your gaming provider.