Blockchain And Cryptocurrency: The Future Of Online Gambling? – Technology

Blockchain technology is emerging as a game-changer in a wide
variety of markets. As we explained in our prior post, Understanding the Intellectual Property Value of
NFTs, blockchain technology is the basis for creating
non-fungible tokens, or NFTs, which have experienced astounding
growth in areas ranging from art to music to video games. This
article discusses how cryptocurrency and blockchain technology are
potentially disruptive technologies for the online gambling
industry.

What is Blockchain – a Brief Overview

In its simplest terms, blockchain is a decentralized, digital
record of all the transactions that take place using digital
assets. It is a database that stores encrypted blocks of data
chained together to form a single chronological ledger of
transactions. In many cases, the data is distributed to create an
immutable record of the asset’s history that is accessible to
the public. The overall purpose of blockchain is to “let
people-in particular, people who don’t trust one another-share
valuable data in a secure, tamperproof way.”¹

Application to Cryptocurrency and Gambling

Blockchain set the table for the emergence of cryptocurrencies,
which are decentralized digital assets that leverage blockchain
technology to ensure security and prohibit double-spending. While
cryptocurrency first emerged years ago, the recent wide-spread
public adoption has driven its growth. Many industries have
benefitted from the convenience and access that cryptocurrencies
provide through user-to-user payment systems. The $60 billion
online gambling industry is particularly well-suited to capitalize
on the trend.²

Benefits to the Industry

The gambling industry has already embraced digital payment
methods.³ Blockchain and cryptocurrencies can greatly
expand this trend. As we explain, this technology can advance
mission-critical objectives of the online gambling industry,
including the security, validity, anonymity, and cost-efficiency of
the industry’s core transactions.

I. Security and Validity

Blockchain technology in online gambling provides an added layer
of protection for users because the databases record all
transactions and store the information in a decentralized ledger.
This technology prevents the prevents the illegal trading of
digital assets and reduces the risk of both hacking and payment
duplication.

II. Anonymity and Privacy

Data privacy is a concern for many online gambling users because
websites commonly require them to disclose personal information,
which creates hesitation among individuals who worry about how and
where their data will be stored. Cryptocurrencies provide an
opportunity for websites to eschew requests for detailed
information because transfers of cryptocurrency are immediately
validated by the public blockchain. This protection of user
information further reduces the risk that personal data will be
compromised.⁴

III. Efficiency and Access

Relatedly, crypto-accepting gambling websites can provide users
with a streamlined registration process because of their ability to
operate without unnecessary personal information.⁵ As a
result, these crypto-friendly websites may be better positioned
than their non-crypto-accepting competitors to attract potential
users, who can begin playing immediately upon providing only an
email address and a username.

IV.  Instantaneous and Cost-Effective Transactions

Blockchain technology and cryptocurrency in the gambling
industry also provides efficiency through instantaneous transfers.
When online gamblers deposit cryptocurrency into a gambling
platform, they do not need to wait for a bank or third-party
company to verify the decentralized transactions, which are not
currently controlled by a central authority. Instead, the
blockchain immediately verifies the transaction and the platform
learns instantly whether it is valid.⁶

The decentralized nature of cryptocurrencies also makes them
more cost-effective than other sources of payment like credit cards
or bank transfers. Many cryptocurrencies-including Bitcoin-have no
hidden transaction fees. Utilizing this form of payment benefits
both the user and the platform, who avoid incurring costs
accompanied by traditional payment methods.

Takeaway

Overall, while blockchain technology and cryptocurrencies are
not new, the gambling industry is in its infancy in terms of market
adoption and implementation. Market participants will continue to
drive the wide-spread adoption of the crypto asset class, which in
turn will result in a broader use of blockchain technology and
different methods of utilization that can advance the gambling
industry considerably. Of course, these benefits do not come
without challenges, both technical and regulatory. Stay tuned for
our follow-up article regarding the regulatory challenges the
online gambling industry will face as it inevitably moves towards
blockchain and cryptocurrencies.

Footnotes

1 Mike Orcutt, How Secure is Blockchain Really?,
MIT Technology Review (Apr. 25, 2018), available at
https://www.technologyreview.com/2018/04/25/143246/how-secure-is-blockchain-really/.

2 Online Gambling Market Size, Grand View
Research (Apr. 2020), available at
https://www.grandviewresearch.com/industry-analysis/online-gambling-market.

3 Emerging companies like Cash2Go, for example,
structured their business product behind the thesis that digital
payment solutions would be a driver in the industry.  Further
information on Cash2Go is available at
https://cash2gocard.com/.

4 The Future of Blockchain Technology in the Gambling
Industry, Chipin, available at
https://www.chipin.com/future-blockchain-technology-gambling-industry/.

5 Anonymous Gambling in Bitcoin Casinos,
CoinGambling, available at
https://coingambling.info/news/anonymous-gambling-in-bitcoin-casinos/

6 The Future of Cryptocurrency in Online
Gambling, BlockchainNews (June 11, 2021), available at
https://www.the-blockchain.com/2021/06/11/the-future-of-cryptocurrency-in-online-gambling/.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.