Following the elevation of blockchain technology to mainstream status, mainly thanks to the popularity of bitcoin, swaths of online casinos started using cryptocurrencies. In the process, the critical value of blockchain technology for the online gambling and betting industry was recognized as critical in increasing the transparency of database transactions.
In those instances where, for example, open-source lotteries keep the player return rations a secret, players tend to be highly skeptical of the security levels they face. Using blockchain technology in these cases would enable the players to see the exact way the transactions are processed, thus dispelling any potential qualms they might have. Players would know precisely where their (lost) money is entering the system, therefore knowing how much the website makes of their deposits. This kind of transparency breeds trust.
As blockchain technology develops and permeates every facet of human life, so too will blockchain gambling and casinos gain more traction. With more and more projects attempting to disrupt the status quo by utilizing blockchain payments exclusively, let’s take a closer look at the area of blockchain gambling.
Blockchain Gambling — Solving Problems?
Numerous online gambling websites, which operate outside the ambit of regulatory oversight, offer little to no insights into their methods of selecting winners, who is winning, and if the winnings end up making their way to the players. This can generate mistrust and notions of the website being a potential scam.
On the other hand, online casinos using blockchain technology have an opportunity to reduce mistrust. With the increased levels of transactional transparency, blockchain technology enables players to see what happens with their funds and to have an overview of whose losses benefit their winnings, especially if the stakes are deposited in crypto. These levels of transparency dispel notions of the website being disingenuous, meaning that crypto gamblers could ease a sigh of relief.
Cryptocurrency and Gambling
It may appear, at first, that cryptocurrencies and gambling do not attract investors with a similar behavioral approach: whereas traditional gamblers share a somewhat lax bent to risk-reward calculations, traditional, “mainstream” blockchain users do not like gambling with cryptocurrency.
Also, gambling places an accent on entertainment, whereas cryptocurrencies are perceived as legitimate investments. Still, the intersection of cryptocurrency and gambling appears precisely at the overlap of outcomes, where both gamblers and cryptocurrency investors stake the outcome of their behavior on something over which they ultimately have no control.
Moreover, there are instances in which crypto users and gamblers go hand in hand, such as in the case of online crypto sports betting. The ease of moving cryptocurrencies around has made it more accessible and profitable for companies to organize online sports crypto betting environments to attract more users and generate more income.
Risks of Using Cryptocurrency for Gambling
First and foremost, the risk of using both fiat money and cryptocurrency in gambling is—scam sites. These websites seek to defraud their users and steal their funds, often by refusing payments or disappearing completely after deposits are made. However, there are ways of reducing risks and sticking to websites that are well-known and have a reputable renommée.
Of course, if a regulatory agency oversees gaming sites, there is not a high likelihood of scamming (although you should still be wary). On the flip side, it is safer for players to be gambling with cryptocurrencies—like in the mentioned example of online crypto sports betting—because of the inherent transparency of the underlying blockchain technology. However, you should always be on the lookout—it is always possible to create false scammer websites that use innovative methods of tricking users.
Potential Regulatory Issues for Using Crypto in Gambling
The central problem regulators may face when attempting to manage the intersection of blockchain, crypto, and gambling is tracing the source of funds. For example, on the one hand, if users deposit funds via credit cards, it is much simpler for regulators to trace them—they would need a bank account, which necessitates a previous procedure with a bank, which means a KYC procedure would have had to have been performed. Not to mention the incentives banks have to vet their clients.
On the other hand, crypto gamblers have it way easier. Those gambling with cryptocurrency need just their digital wallet and the address to which to deposit funds—often, no identities are transmitted, and it is not possible for regulators to track the origin of funds. This makes crypto fertile grounds for money laundering.
Because of this veil of uncertainty and vagueness—not to mention the speeds with which funds are shuffled via cryptocurrencies—regulators remain firm and cautious when it comes to regulating crypto.
To stay on top of regulatory developments and ensure that your corporate operations are consistently compliant, it is best to benchmark your operation with experienced external experts like InnReg. Get in touch today and learn more about InnReg’s crypto and blockchain programs and how we can help your company!