Why the Online Gambling Market Needs Blockchain

Posted by Harry Kane on Saturday, May 5, 2018

If you haven’t heard of Blockchain, this is essentially a progressive technology that underpins digital currencies such as Bitcoin. If you have heard of it, the chances are that you’re not fully aware of the importance of this technology and its potential applications in the commercial world.

From banking to the management of global supply chains, Blockchain is an influence technology that will grow to change numerous industries across the board. Despite the diverse and powerful nature of Blockchain, however, there’s no doubt that this technology is set to have the biggest impact in the world of online gambling.

A true growth market, the virtual gambling market is the best-placed to benefit from the continued application of Blockchain, and the most likely to leverage its immense potential. We’ll explore this in the article below, and ask why the online gambling sector will grow to rely on Blockchain and its core attributes in the future.

The Online Gambling Market Circa 2018 – An Overview

This year is set to be a seminal one for online gambling, with the industry set to achieve a cumulative, global value in excess of $50 billion for the very first time. At the heart of this bounty is the rising prevalence of mobile gaming, which according to a study by SuperData Research grew by a staggering 75% during 2016.

The mobile channel also accounts for around 25% of virtual gambling across the globe, as it continues to drive exponential growth and create new opportunities for operators and players alike.

As a result of this, online gambling has evolved to claim a growing share of the gambling industry as a whole, with virtual gameplay now accounting for 34% of the UK market alone (as of 2017’s figures).

With sustained growth and the proliferation of technology comes challenges, however, with the online gambling industry having been beseiged by security concerns and issues relating to consumer trust. This is hardly exacerbated by the estimated 1.4 million disingenuous gambling websites that are created each and every month, while questionable promotional practices and concerns over money laundering have also cast doubt in the minds of online customers.

It can be argued that this indicative of the business world as a whole in 2018, of course, with just 36% of consumers apparently trusting big brands and corporations to do what is right in any given situation.

While this has not impacted on the growth of the industry so far, such mistrust cannot be sustained if the market is to continue its impressive evolution. In some respects, this has left this growth market at something of a crossroads, as it strives to maintain its current rate of expansion despite the fact that customers are becoming increasingly wary in the digital age.

Enter Blockchain – An Often Misunderstood Technology

The concerns surrounding trust and accountability are particularly pronounced in the UK, where the regulator (the UKGC) has already laid out plans to tackle the existing consumer mindset. To this end, it has announced a five-point strategy that will be implemented between now and 2021, and one that is based on improving transparency and rebuilding the reputation of the industry in the eyes of consumers.

With more stringent regulatory measures and a willingness to take the market-leading operators to task is at the heart of this strategy, it’s fair to say that technologies such as Blockchain will also play a pivotal role. This will comes as a surprise to some, as despite its diverse nature Blockchain is often misunderstood and underestimated in the consumer mainstream.

Not only are Blockchain and Bitcoin often considered and being inextricably linked, for example, but the potential applications of the former within the online gambling industry tend to be overlooked.

For a example of this, take a look at the article we penned on the evolution of the Blockchain-powered cryptocurrency Ethereum. According to reports, a man by the name of Tomas Draksas is proposing to develop the world’s first decentralised casino platform based on Ethereum, as he strives to eliminate the traditional house edge and create an entirely transparent gambling experience for players.

Now, while this may represent a ground-breaking proposition and one that will have a huge influence on the online gambling and casino market, it also represents a progressive step-up from the way in which Blockchain is currently applied in the industry. More specifically, Blockchain can be used in far less complex ways when attempting to improve the virtual gambling experience and the way in which it is perceived, and this is why it remains so integral to the overall future of the marketplace.

Why is Blockchain so Important to the Online Marketplace?

With these points in mind, the question that remains is why does Blockchain remain so important to the future of the online gambling market? Similarly, it’s also pertinent to ask how Blockchain can be applied to enhance the appeal and the reputation of the industry, without creating entirely new casino platforms that minimise and eradicate the operator’s house edge.

To answer these questions, we need to step outside the Blockchain bubble and strip away the hyperbole that surrounds its application. In simple terms, Blockchain is a decentralised and readily accessible technology that has the capacity to create more transparent transactions between players and operators, which in turn means that it boasts the potential to build trust within the marketplace as a whole.

Let’s take a theoretical online casino, for example, which has just integrated Blockchain technology into its website. By doing this it is essentially creating a transparent and decentralised ledger of all player transactions, creating a permanent and verifiable (and not to mention unchangeable) record that can be accessed by all relevant parties.

As if this was not enough, there are several more benefits associated with creating a Blockchain-powered record of transactions. To begin with, the technology is inherently capable of tracking transactions in real-time, helping to avoid any breakdowns in communication between players and individual operators. The fact that these transactions are unalterable also helps to breed trust between online gamblers and the brands that service them, which appears to be more important than ever in the current commercial climate.

In entirely practical terms, players can leverage a Blockchain ledger in real-time and tracks every single transaction that has been associated with them or their debit card. This, in turn, provides immense reassurance of where their money is going, while reaffirming that their account withdrawals and deposits are being managed fairly and transparently at all times.

This is where the aforementioned Ethereum technology comes into play, as on a fundamental level that has been focused on developing a so-called “smart contract” between all parties (namely players and operators). This would serve as a digital agreement between gamblers and service providers alike, and one whose terms are likely to enforced by computer networks.

Operators entering into this type of contract would be accountable for how player’s money is handled, with the impartial network upholding the terms of the contract and allowing for the instantaneous transaction of funds from one account to another. As a result, any potential obstacles to transparency would be removed by Blockchain, to the long-term benefit of players and market-leading operators.

This type of agreement has come under the spotlight recently, after the UK regulator and competition authorities began to investigate the processes used by operators when customers attempted to withdraw their winnings. The findings were stark, with a handful of operating firms accused of creating hurdles for customers (including the introduction of daily, weekly or monthly limits, arbitrary short deadlines and a general lack of clarity and simplicity surrounding the underlying terms).

While the authorities have imposed sanctions and more stringent regulations to negate this, the widespread integration of Blockchain would eliminate the issue entirely, creating a transparent and effortlessly simple contract for all parties to adhere to and ensuring full accountability in instances where terms are not met.

What About the Regulatory Measures for Blockchain?

As we can see, Blockchain is likely to play an important role in the future of online gambling, with its transparent, accessible and agile nature capable of building deeper levels of trust between players and the operators that serve them.

It’s also apparent that the integration of Blockchain within the industry has already started, with a number of initial coin offerings (ICOs) having been launched to challenges the issues of mistrust and revolutionise the industry as a whole (more on these a little later). As a result of this, the important process of regulating Blockchain technology and its role in the marketplace has already begun in earnest.

This represents a positive development, as the regulatory process is arguably one of the most complex elements of introducing Blockchain to online casinos (particularly from a global perspective). After all, attempting to create a consistent and undeniably transparent gambling experience for all will be compromised by the regional variations in legislation, while the diverse range of applications for Blockchain also create an additional layer of complexity.

It helps, of course, that the vast majority of online gambling sites are reputable, while comparison sites also play a pivotal role in helping to identify fully accredited operators. This provides a solid foundation from which regulators can assess the influence of Blockchain, before they being the complex process of creating effective regulatory measures surrounding its usage.

The Last Word – A Look at Future Blockchain Applications

Over the next few years, Blockchain will become increasingly influential in the online gambling market, as operators begin to understand its benefits and leverage its unique characteristics effectively.

As we’ve already said, however, this will only represent the beginning of a process that will ultimately see Blockchain come to dominate the virtual gambling industry. Digital currencies such as Ethereum will play a pivotal role in this evolution, as we gradually shift towards to cultivation of completely transparent gambling platforms that eliminate the classic house edge on individual casino games.

We also mentioned a number of innovative ICOs earlier in the piece, and many of these are already laying the foundation on which ‘zero house edge casinos’ can be constructed.

One of the most prominent of these is the “Monsterbyte” project, which despite being in its infancy has already been established as a true pioneer in the gambling sector. It is also a project that goes beyond creating instantaneous and transparent transactions on behalf of players, however, as it also tackles the core issue of online gameplay.

This is a key premise of the Ethereum casino project, with Monster Byte having beaten others to the punch by offering operators a chance to deliver provably fair and transparent casino games to their players. Undoubtedly, this represents the next logical step for online casinos, as they look to enhance their appeal and reputation by tackling any misconceptions that surround the provision of virtual experiences (and refuting the lingering suspicion that they are not operated fairly).

As we review the potential applications of Blockchain in the online gambling sector, we can quite quickly see a clear path for evolution and its widespread evolution within the industry. Firstly, we’ll see decentralised ledgers used to process, manage and regulate transactions, creating a transparent record that’s accessible to all parties in real-time. This will create a type of smart and binding contract between players and operators, while simplifying the withdrawal process and allowing for instantaneous transactions across the board.

Over time, this will lead onto new and more progressive applications, as the technology improves and operators begin to fully understand and realise its potential. At this stage, we’ll begin to see Blockchain underpin completely transparent and provably fair games, before these give way to virtual casinos that have done away with the traditional house edge entirely and focused solely on the gambling experience and the enjoyment of players.

Of course, the operators that embrace this change fully will gain a competitive edge over their rivals, and ultimately become ambassadors for the online gambling industry in an age where trust and transparency trump lucrative promotions and huge game libraries.

In this respect, Blockchain will drive a significant evolution in the marketplace, while becoming integral to its future growth and continued expansion across the globe.