Cryptocurrency

The crypto factor

As blockchain and cryptocurrency technology becomes more prevalent in various industries, the egaming world remains somewhat in the dark

Despite having first been introduced to the egaming world in 2014, the blockchain conversation remains a brief and awkward one among many industry professionals.

KPMG explored the uses and benefits of virtual currencies in egaming in December 2014, and again at the firm’s annual egaming summit in April 2015, in an effort to inform the industry on how it could take full advantage of the decentralised system.

Yet the discussion has barely progressed in two years which, in the egaming world, is a veritable ocean of time.

Other tech driven industries however, are deeply involved in the blockchain discussion. Governments in the egaming hubs of Isle of Man, Gibraltar and Malta have all warmed to the once taboo subject of virtual currencies.

“I work with a lot of people from big banks and insurance companies and all of them are crazy about blockchain now,” Alex Puig, founder of Digital Currency Summit tells EGR Technology.

Puig works intimately with the private and public sectors as a consultant, with a vast background in the intrinsically linked worlds of crypto and blockchain behind him.

Most recently Puig paired with the Gibraltar government to host a digital currency seminar on the Rock, revealing the jurisdiction’s new regulatory framework that uses distributed ledger technology to transfer and store third-party valuable assets.

Suddenly banks and fund administrators are rubbing their hands eagerly over this innovative alternative to traditional peer-to-peer transactions.

In April the Maltese government revealed a Cabinet approved national strategy draft to promote blockchain within egovernment systems, including health and land registries.

And the Malta Gaming Authority (MGA) also recently revealed a move to initiate a national betting exchange for registered sportsbook licensees. In an effort to “future-proof” the jurisdiction, the MGA is also studying the possible introduction of virtual currencies.

It has been the Isle of Man, however, which has been the true vanguard of blockchain technology development, launching a working group to establish a blockchain database for corporate registries.

Their latest move is an exploration into using blockchain to safeguard the new Internet of Things (IoT) technology that allows devices to inter-connect and exchange data.

The business case Puig insists that there is a strong relationship between betting and blockchain. “A long time ago 50% of transactions on the bitcoin blockchain were actually bets.

Adopting a blockchain system enables operators to eradicate the need for intermediaries and fraud management. I’ve spoken to many companies who have patterns for peer-to-peer poker online,” Puig says.

“They use cryptography to monitor how the cards are being dealt and ensure nobody can cheat on the system. There are patterns carried out in-house that could actually be done with the blockchain. A lot of smart contracts could be used.”

Smart contracts, like blockchain, are a piece of code integrated into the same machine. Blockchain’s ability to hold and transfer money could prove revolutionary for operators. “I think for gaming, blockchain is a natural evolution,” Puig adds.

“It makes a lot of sense. The main difference is if a big gaming operator placed bets through the blockchain, they wouldn’t need to hold their clients’ funds and everybody can trust the system. They could focus more on their core business instead of investing in fraud.”

Tim Heath, CEO of Coingaming, a group that owns bitcoin-driven online casino BitCasino.io tells EGR Technology that speed is the primary advantage for a casino using bitcoin blockchain technology.

“Our customers can deposit and withdraw hundreds of times faster than the industry standard processes using banks and third-party payment systems. Our average speed of withdrawal is just two and a half minutes,” he adds.

Although it is speedy, blockchain has a limit of 20 transactions per second. If there is an influx of players they are at risk of losing their priority on the system and therefore losing the funds they are transferring.

However, as the technology gains traction, Puig is confident that these kinks could be ironed out in time. He envisions a future of cross industry cooperation in tackling fraud.

Blockchain could easily support a decentralized and secure database that blocked flagged players from all sites. Banks are already making strides in this area by sharing KYC information on a huge scale. “Collaborations between competitors is good for everyone,” Puig adds.

Peerplay pressure

Generally, blockchain developers have no specific industry in mind when building their platforms: “They only care that it is fast, reliable and secure,” Puig notes. This is not the case for egaming-focused blockchain system Peerplay though.

The open-source platform offers an integrated gaming network on which players can currently participate in p2p games and jackpot pooling tournaments.

The concept also supports multi-player casino card games ‘on-chain’, meaning that gameplay and wagering is fully centralised.

Similarly, the system offers fantasy league and esports betting. Wagered funds are automatically distributed once official game results and statistics are published

to the blockchain. The Peerplay platform can have any game integrated into it, although graphics intensive games and well-known esports titles are hosted on traditional third-party servers instead of the ‘chain’.

On-chain games must follow strict procedures, code testing and vetting process to be integrated into the system.

David Barzilay, CEO of peer-to-peer lending platform BondMason attributes the slow evolution of blockchain in egaming to the current low market demand. “Changes in the technology and egaming worlds don’t happen overnight, even if developments may appear fast paced to clients and the media. I think that there will always be a demand for different payment methods, whether that be crypto or traditional services,” he insists.

Some are cynical about the lack of movement, insisting that operators are going to miss the boat if they do not jump on blockchain right away, but Barzilay says that the concept is slowly “becoming more mainstream”.

He tells EGR Technology that a greater demand for cryptocurrency payments will see operators becoming more open to the idea of it. “They want to ensure that they have multiple payment options available in order to keep up with the market and increase their profit margins.

If cryptocurrency continues to soar they will make sure it is more widely available.” Barzilay is confident, however, that blockchain will not eradicate the need for traditional payment methods entirely.

“It will simply form a greater percentage of the pie,” he adds. “I can’t see there being any negative implications; this is part of the natural evolution of the industry and operators will always grow to adapt to that.”

Puig believes operators are waiting for competitors to pick up the technology first so they can analyse the results before making any movements. “When I speak to these kinds of companies they don’t see it as a game changer,” he says.

“Until they understand it they don’t see it being very important.” He predicts that the discussion will pick up by next year, with the first companies to make the move in that direction having a huge advantage over the rest.

He also notes movement being made in Spain, with the state run lottery operator planning to integrate blockchain by 2018 in an eff ort to attract younger players who are less likely to purchase physical tickets.

“It’s not about replacing the old system, it’s about getting to new clients that they cannot reach,” Puig says.

The movement in Spain has extended to the government and mammoth financial institutions like Santander which is pegged to save up to $18bn a year by adopting the blockchain system.

And increasing numbers of countries are issuing licenses for virtual currencies, in turn generating more opportunities for operators.

The UK jumped on the bandwagon in October 2016, allowing licensed operators to include cryptocurrencies alongside traditional payment methods.

On the back of this, a few notable brands have adopted the technology and built their products around it, BitCasino.io being one of them.

The converted

Having been in operation since 2014, BitCasino offers a similar product to the more conventional brands that offer traditional payment methods including casino and gaming content developed by

major providers NetEnt and Quickfire. The domain differs from its competitors through its provision of bitcoin transactions for deposits, withdrawals and gameplay.

Heath says that the lack of interest among UK operators puts his firm at an advantage. “I believe that cryptocurrency has proven its merits as a legitimate, secure transactional method but only with education will the industry as a whole realise this,” he says.

Heath claims BitCasino has experienced promising levels of success, growing faster than most traditional currency using operators. In addition, he says.

BitCasino has been generating interest from “various parties” on the M&A front. Other interesting crypto-driven gambling sites to have surfaced over the past couple of years include casino brand SatoshiDice, which boasts the highest bitcoin betting rate of any site, and the recently announced decentralised sports betting exchange Bookie, built on the Peerplay blockchain.

The crowdfunded start-up promises punters verification-free accounts and instant deposits and withdrawals.

“It also offers extraordinarily low commission rates, and does not penalise bettors who are lucky enough to earn continual long term profits,” a Bookie spokesperson explains.

“Bookie also boasts 100% real-time market transparency – a boon for punters concerned about fairness in today’s online gambling world.”

As the volatility of bitcoin declines, Heath says the price has stabilised and is on a gradual rise. This, he believes, is the key to bringing further investment into the industry. Heath is right to have stuck with his gut feeling on crypto.

During the time of writing this article, bitcoin’s worth had skyrocketed to an all-time high of £1,131, once more finding its way into mainstream media.

“I hope the more dynamic innovation in crypto payments will inspire others to follow suit, for the benefit t of all,” Heath says.

It would appear crypto has brought together a community of keen tech innovators. “I’m always excited to get a new depositing player from some unexpected jurisdiction,” Heath adds.

“It allows the mind to wonder to how, when and where they discovered bitcoin.” With the future of crypto and blockchain looking rosier, the industry is sure to see a shake-up sooner or later, opening up vast new channels of possibility.

bitcasino | Bitcoin | blockchain | Cryptocurrency | Tim Heath

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