Bitcoin went mainstream in the last four years, and with it, many online casinos began to accept cryptocurrencies. The key advantage of blockchain technology being used in the online betting, gambling and casino sector is that it provides transparency in
database transactions.
Currently, there are a lot of new and upcoming open source lotteries, for example, where the return to player ratio is usually kept a secret. And while players are typically skeptical, possibly assuming it was a scam site, by using blockchain they can see
exactly how the transactions are processed, solving this problem. When you gamble online using blockchain, if you lose your money you can see where it goes in the system. This means you can see exactly how much the website earns from your deposit, and how
trustworthy the site is.
In the coming years, the use of blockchain in online betting or casinos will accelerate and become even more mainstream. We are already seeing projects that are disrupting the space by basing their infrastructure entirely on blockchain payments. This gives
complete peace of mind to their players and is proving increasingly popular.
The challenges blockchain solves
Many online gaming sites hosting nontraditional games like blackjack or poker, are not regulated by the likes of the UK’s Gambling Commission or the Malta Financial Services Authority (MFSA). If this is the case, such sites often offer no intelligence on
how they select winners, who is winning, and whether winnings are being returned to players. As such, they could be a scam site.
Blockchain resolves this for customers because, in this context, it replaces the need for those regulators. This is because of blockchain’s technology and the transparency of transactions, you can see what happens to your money and deposits, as well as having
visibility on which other player’s loss has added to your winnings. It will also be clear the amount that the site earns from each transaction, ensuring players do not feel cheated.
Gambling vs Crypto
There is not a huge intersection of people who are interested in both gambling and cryptocurrencies. Gambling has been around for hundreds of years, whereas crypto is a relatively new concept so it mainly attracts younger and more tech savvy people.
Those interested in gambling are attracted to it for the entertainment and are typically not afraid to lose their money. For the younger cohort, however, gambling is not typically appealing as they want to see a return on their investment but also understand
that the house always wins, so it’s a risk.
For this type of person, crypto is a way of transacting, similar to those who do Foreign Exchange (Forex) trading. If they invest in cryptocurrencies such as Bitcoin or other well-known currencies, and keep it there long term – we are talking years, not
days – they are going to see a good return.
The risks specific to gambling using cryptocurrencies vs. fiat
The risks are the same for crypto and fiat when it comes to being scammed, with some lesser-known sites aiming to steal funds or refusing to pay out, although how this is achieved may differ. But there are also ways to reduce risks for both currencies and
using well-known gambling sites is key.
If games hosted by online gaming or betting sites are audited by regulatory agency, as they should be if operating using fiat, the games are highly unlikely to successfully scam you. That being said, the site itself might still try to scam you, perhaps by
saying that the player has not provided the right documents or attempt to avoid paying out if the player wins.
It is ultimately safer for players to use crypto-based gambling sites due to the transparency of crypto and blockchain, enabling players to track and trace their funds. However, crypto-based scammers have less work to do to achieve their goal. For example,
they do not have to integrate a normal payment gateway into their site or have escrow funds. This enables the site to steal your crypto or refuse to pay out, simply because it is not regulated.
Anyone can create a website, host games and claim it is a gambling site, asking users to deposit crypto to start playing. But then it fails to work. Unfortunately, it’s actually easier to create a scam site like this, but the good news is crypto is becoming
more mainstream so there are already well established gambling sites that use it, and as such, the likelihood of being scammed is much smaller.
The regulatory issues between blockchain, cryptocurrency and gambling
When it comes to issues regulating blockchain, crypto and gambling, tracing the source of funds is key. If players make a deposit using credit cards or bank transfers, it is much easier for regulators to trace. This is because they need a bank account, and
to open a bank account they must first provide identification and complete verification checks.
In addition, banks must prevent money laundering so will ask the account holder about unusual activity or where funds are coming from. But with crypto, users can send a deposit to a wallet ID, and because it’s not audited, the money can come from anywhere,
and from any type of activity.
Regulators want proof of where the money is coming from but are unable to force players to reveal this information. And, if the site’s operators don’t have strong measures to ask for source of funds, then it won’t be possible to trace its origins. It is
for these reasons, that crypto unfortunately is the best way of laundering money.
The need for tighter ID checks
Crypto-based gambling sites should be regulated the same way as those operating with fiat, complying with regulations and requiring identification of the customer, such as the date of birth, as well as requesting the source of funds. However, this is not
done often for crypto-based sites because it is not a prerequisite.
In addition, many gambling sites are based in countries such as Georgia or Armenia where it is not as heavily regulated or monitored. While many payment gateways won’t provide their services to sites that are based in risky jurisdictions, crypto-based sites
are thriving there because they do not need to ask permission to accept payments.
Regulators are trying to be stricter and put policies in place for crypto-based transactions, but it’s going to be a long journey and tricky road ahead. For now, as long as players accept the terms of service then it is up to them to decide whether they
believe the site is not fraudulent.