Bitcoins are often referred to as the ideal casino chip, and 2014 saw the emergence of a number of bitcoin casinos, while some established payment processors also began to accept the cryptocurrency as a payment method.
The online gambling industry is undergoing sustained growth and it is estimated that it will be worth £41.2 billion by the end of 2015. It currently only accounts for around 10% of the entire gambling industry, but with the growth of mobile gaming, there is clearly huge potential. Secure Trading cites mobile gaming, social gaming, and bitcoin currency as the three online gambling trends for 2015 and beyond, and the three are very much intertwined.
The early part of 2015 has seen a continuation of this theme, and despite various challenges, the online gaming industry and the fledgling bitcoin industry appear to be a match made in heaven for a number of reasons.
The bitcoin network only began six years ago in 2009, and research by bitcoin exchange Coinsetter estimates that 1 in 5 bitcoin transactions over the first five years were related to online gambling. More recent figures from Coinometrics suggest that up to 40% of all current bitcoin transactions are associated with gambling, and it’s clear that the gaming industry has helped to drive the bitcoin industry.
AnoniBet claims to be the first bitcoin-only sportsbook and casino, having been in operation since 2011, while Satoshi Dice pioneered the use of blockchain betting; and there are now well over 150 bitcoin-only casino and gambling sites in operation. Online casino software developer SoftSwiss, told they had received around 400 requests for the launch of bitcoin casinos in the first six months of 2014, and that they consistently have 3-5 casinos in the set-up phase.
The Perfect Online Casino Chip
There are several advantages to using bitcoins for gambling in preference to fiat currencies, and the benefits are for both users and operators.
The fact that bitcoin transactions are anonymous is appealing to many users as they don’t have to provide personal information and it makes it impossible for operators to limit successful players.
There are zero transaction fees, which enables bitcoin gambling sites to accept very small wagers on an unlimited basis without any associated costs.
Deposits and withdrawals can be made instantly, and the digital nature of the currency means it is easier to place large bets as large transactions can be carried out quickly and easily.
Another key advantage is that most bitcoin casinos are ‘provably fair’ as they have implemented cryptography technology which allows users to verify the ‘shuffling’ algorithms used to run games. This is akin to cutting the pack in a bricks and mortar casino, and the concept of ‘provably fair’ is starting to make its way into the mainstream online industry.
In addition the global reach of bitcoin is a huge benefit. No conventional payment method can claim that sort of coverage, and with the introduction of bitcoin ATM’s in recent months, it is possible to see how many of the world’s ‘unbanked’ population may be able to access online services and gambling sites with bitcoin currency.
In a recent interview with CoinSpeaker, Jeff Young of leading btc gambling review site bitcoin casinos said, “Bitcoin currency and online gambling go hand-in-hand. The growth of online and mobile play has left the industry looking for faster, cheaper payment processes and bitcoin is emerging as the perfect currency”.
Trends and Challenges
There are, of course, significant challenges to overcome, with regulators around the world unsure of exactly how to react to bitcoins; while there are also security and technical issues surrounding the way the currency is used.
Insidebitcoins recently reported that the UK intends to regulate the bitcoin gambling industry, requiring any operators offering services to UK clients to have a UK license to do so. Major operators are said to be interested in introducing bitcoin, but are reluctant due to a lack of clarity over regulations.
Vera&John became the first high-profile online casino to temporarily accept bitcoins in January 2014, converting them into euros which were added to a players account. The casino was keen to stress that it was using bitcoin as a payment method then converting to euros, rather than as a currency, but had stopped regardless by April 2014 after consultation with the Malta Gaming Authority with which it is licenced. Vera&John promised to return to bitcoins when there is a properly regulated framework in place.
Security is another big issue, and bitcoin site PrimeDice recently offered a detailed explanation of how it was hacked for $1 million by one of its users. That particular case involved the manipulation of the Random Number Generator (RNG) and provably fair system, whereby the user was able to predict results before they happened and win every time.
The Future for Bitcoin Gambling
The regulatory environment may make major operators reluctant in some respects, but there is considerable potential in developing markets, and bitcoin is on the rise in regions like Asia and South America.
The digital currency is ideally suited to these growing economies, which have under-developed payment systems and large sections of the population which are unbanked. Bitcoin allows user to transact globally without the need for a bank account or credit card, and growth in the use of bitcoin is slated for countries like Vietnam, Cambodia, Laos, Philippines, Indonesia and Malaysia.
Bitpay, one of the largest bitcoin payment processors, registered 3,509 bitcoin transactions in South America in June 2015, a sharp rise from the 2,602 recorded in the previous month of May. Large operators began aggressive marketing campaigns across South America last year, and the news that bitcoin exchange CEX.io is set to support customers on the continent will make it much easier for residents to access bitcoins without excessive fees or currency conversions. Analysts predict that South America will be the largest growth area in online gambling in the next few years, and bitcoin currency looks set to play a significant role in that growth.