Bringing Honesty to Gambling: Implementing the Blockchain in a World of Chance

cryptocurrencies, blockchain

Gambling has been around for as long as there has been money. And as the world has progressed, gambling has become more and more complex, spawning different games with various rules, hosting large lotteries, and having entire industries flourish because people want to try their luck. The thrill of pushing the odds, throwing caution to the wind, and betting it all on one flip of the cards is without a doubt enthralling. But with the progression and growth of gambling, a world of deceit and dishonesty grew in conjunction, putting players in a tough spot. Can they trust the institutions and businesses that are designed to inevitably take money from the players?

We would like to thank the team at Luckchemy for their contributions to the design and implementation of the research and to the analysis of the result.

Real Money Gambling – Then and Now

From the early games of chance in ancient China to the oldest-known dice excavated in Egypt, and all the way to the modern casinos that now encompass entire cities like Las Vegas, humans love to gamble. Real money gambling (RMG) is a gigantic worldwide industry, pulling in around $400 billion during 2016. It is natural for the house to have better odds of winning, since without this it would not be possible for casinos and gambling establishments to maintain their overhead. But how much of that $400 billion profit was acquired through possibly unfair means? The problem is that no one can say either way since there is no way of verifying the data, no way to audit the games, and no way to guarantee that the house is playing fair 100% of the time. This is even more the case as trends move further away from physical establishments and into the online world.

Online Casinos – Can we Trust Them?

casinos

Imagine you travel to a physical casino and decide to try your luck at a slot machine. You insert money, pull the lever, and before you know it you may have tokens clanging into your winning cup. Over time, you may win more than you lose or vice versa. The important thing to note is that in a physical casino, that machine (and all other types of gambling) can be audited, inspected, and verified to be running fair by local regulators. In an online environment you are completely dependent on trust – trusting the code behind the games to be generating truly random odds, trusting the company to be playing fair, and trusting that when these companies are “verified” they present their real code to inspectors.

Types of Online Casinos

There are various types of online casinos that gamblers can try their luck with, but the two most prominent types are desktop and mobile. These two types are both governed by the same kind of regulations (which vary depending on the country the gambler is playing in), but they typically offer different types of games and payouts.
Desktop-based online gambling allows for a far greater selection of games to play because customers can download a desktop client that speeds up play and helps verify that the player isn’t cheating or using third-party software to play for them. Depending on the game you choose to play, you will either play against the house and other players, or just the house – this can change your odds of winning from being based completely on luck to being based on your ability to bluff and read other players.

Mobile casino games are most often limited to slot style gambling, and rely heavily on a random number generator to ensure quality and fairness. Because players are limited by a smaller screen size, lower processing power, and the other limitations that mobile devices enforce, there are fewer types of games offered.

Both types of online gambling want to earn as much money as possible and do so through various means. The house almost always takes a cut, even from the slot machine games, but they do not always do so in the most obvious way. Sometimes you have to buy tokens to play slot games, and these tokens convert differently whether you are purchasing them from the house or selling them back. Payouts can be slow, oftentimes taking two days or more, and institutions will charge a fee when withdrawing too often or too little money. This encourages players to play more instead of withdrawing their money, leading to greater losses overall. The greatest folly in online gambling is forced trust, however, and aside from third-party verification, there is no way for current online gambling establishments to prove they are playing fair.

Enter Blockchain in the iGaming World

blockchain casinos

When it comes to gambling and risking money based on odds, the first thing on any player’s mind is trust. How can a player completely trust the opposing party when their number one goal is to get your money? Until recently, gamblers had no options and had to rely on third-party and government regulations to maintain the integrity of gambling websites, apps, and establishments. But given that we are seeing more and more implementation of blockchain technology in various industries, it was only a matter of time until this technology would be applied to the world of gambling to remove trust and guarantee fairness.

Blockchain casinos work by removing the need for trust in the establishment and creating transparency in all processes involved.  Like traditional online gambling, they allow for browser and mobile access to a large variety of different types of games and lotteries. But unlike traditional iGaming platforms,  the fairness is verifiable on a public blockchain. All of the code is open source, and the winning lottery numbers, slot machine results, etc., are all recorded on smart contracts before bets are placed, and they are then revealed after the winner is determined.

Luckchemy is a provably fair gaming platform that will initially focus on lotteries before moving into more traditional casino-style games. Luckchemy’s lotteries will pay out 99% of total pot to winners, only reserving a 1% total for token holders and market operations. Compared to traditional lotteries in the United States, where 40% of the total jackpot is often set aside for operations and the winners are heavily taxed on their winnings, this is a huge increase of potential winnings thanks to the blockchain removing the middleman. Unlike traditional online casinos, Luckchemy does not require high amounts of personal information from its gamblers, which means that gamblers can protect their personal data from leaks and theft since they never have to share credit card and other sensitive information. And as we’ve mentioned before, paying through cryptocurrency wallets is far more secure than paying with credit and debit cards.

Betrium, a platform similar to Luckchemy, also opens worldwide regulations since the platform isn’t restricted by traditional government regulations that apply to other gambling websites. Like Luckchemy, Betrium is absolved from these restrictions since users will be using tokens and cryptocurrencies instead of fiat currencies, meaning that traditional laws and regulations do not apply in the same way. Contrary to other online gambling websites, these blockchain alternatives typically charge far lower fees, as low as 0-1% in Betrium’s case, for withdraws and deposits.

These lower fees allow for bigger jackpots and winnings, a lower barrier of entry to new players, and because these platforms never hold your funds directly (only in escrow), you are far less likely to experience fraud and theft. Smart contracts are completely auditable, since they are written with open source code, and companies like Belotto (as well as Luckchemy and Betrium) use these smart contracts to run all of their operations. Belotto specifically uses the newest BTC hashes to create their winning lotto numbers, ensuring that no one can ever predict the numbers ahead of time and that they are not being manipulated since they are determined publicly.

With blockchain technology being the key variable in all of these equations, it’s no surprise that these companies share certain similarities. However, the blockchain itself is where the differences start to show, since each company will specifically choose how they wish to implement it into their operations. Luckchemy will use the blockchain to verify not only their own games and lotteries, but also those of other white label operations who wish to operate under the Luckchemy brand. This will provide trust and credibility to those operations, since Luckchemy’s code is open source and proven to be true. Other companies like Belotto will use the blockchain (specifically the BTC blockchain) to draw their lottery numbers from.

For centralized casinos akin to what we currently have online, this means that they could potentially move their operations under a blockchain and become verifiable without having to manage their own decentralization. Spreading this concept of verifiable fairness throughout the gambling industry could be a healthy alternative to relying on third-party and government regulations.

We’ve created an infographic to better explain this idea to you:

The Future of Gambling

Given that gambling has been around for thousands of years, it would be silly to assume that it will be going away anytime soon. With the advent of the Internet in the 1990s, people saw opportunities to bring gambling to the larger world, but they didn’t have the means to do so until the 2000s. After a slew of online gambling scandals it is no surprise that gamblers crave greater security and transparency to ensure that the odds they agree upon are the odds they are actually betting on. It is not certain yet if the entire industry will shift to a more decentralized structure, but as blockchain technology becomes more commonplace in everyday life, it would be silly to assume it won’t play a key role in the future of the way we gamble both on and offline.

All materials on this site are for informational purposes only. None of the material should be interpreted as investment advice.

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