Any savvy bettor can see that today’s online betting landscape differs significantly from a few years ago. The blockchain adoption is one of the forces behind these changes in online betting. One of the major developments influencing the future of cryptocurrency casinos is the incorporation of blockchain technology. Through the creation of a public ledger of all transactions, blockchain technology can improve online gambling’s openness and safety. This guarantees that all transactions are safe and unchangeable, and it enables players to confirm that games are fair. Blockchain technology has the potential to completely transform the online gaming market and provide players more confidence and trust.
In this article, you’ll get a first-hand review of blockchain’s changes to online betting. You’ll also learn what the blockchain is all about and some limitations holding back its innovativeness.
What Is the Blockchain?
The blockchain technology offers an advanced database for transparent information sharing within a network. This technology stores its data as blocks, and all these blocks link together in a chain.
When this occurs, the data becomes chronologically consistent. With this feature, no one can modify the data within these blocks without a majority consensus from the network.
This makes blockchains highly reliable for creating unalterable databases. Such databases are typically used for tracking payments and other similar transactions.
What Are the Key Components of a Blockchain?
Some basic features must be present for a network to be termed a blockchain. These include:
Decentralization
Another potential revolution in the online gaming sector is the emergence of decentralized casinos that run on blockchain networks. By doing away with the requirement for a centralized authority, these casinos enable participants to place bets directly against one another. By ensuring openness, equity, and trust, this decentralized method offers players a distinctive and thrilling game experience.
This is a feature of the blockchain that denotes the transfer of the decision-making process from a central authority to a group. It’s an upgrade from traditional databases, where all the power is kept by one authority. Although a singular authority can ensure fairness between two parties in a transaction, it also represents a vulnerability. If that singular authority is compromised in some way, then the fairness of that transaction is gone.
Hence, decentralization shares this power among all network users, preventing this vulnerability. Decentralization also brings about the concept of being “trustless” in the blockchain.
Consensus
Since there’s no hegemony in the blockchain and all users possess the same power, transactions are only recorded with a majority consensus. This means that most users on the blockchain network have to approve a transaction for it to be true.
The consensus mechanisms for blockchains can differ, but the most popular ones are:
- Proof of work consensus
- Proof of Importance
- Delegated proof of stake
- Hybrid proof of activity
- Proof of stake
- Proof of capacity
- Proof of authority
Immutability
No recorded information can be changed on the blockchain system. While this can be an issue when a user makes a mistake, it also offers a strong point in security. That’s because no one on the network can alter any information that has been recorded.
Of course, there is also a solution for when users make mistakes in their transactions—just create a new one.
Types of Blockchains
Blockchains are classified into four categories: public and private blockchains, hybrid, and consortium (sometimes called federated) based on their criteria and intended usage. Every one of these blockchain networks accomplishes its goals and provides a solution for a specific issue; also, every blockchain has unique characteristics that set it apart from the others.
The four major types of blockchains that exist are:
- Public blockchain network
- Private blockchain network
- Hybrid blockchain technology
- Consortium blockchain technology
Public Blockchain networks
Due to the permissionless, non-restrictive nature of this distributed ledger technology, anyone with an internet connection can join and participate in a blockchain network. Such a blockchain is mostly used for mining and cryptocurrency exchange. Additionally, it keeps the confidence of the whole user base because everyone on the network is motivated to contribute to making the public network better. The Bitcoin blockchain is the first instance of a blockchain that made transactions possible for everybody. Another couple of instances of public blockchains are the Litcoin and Ethereum blockchain.
Private Blockchain technology
Only those who receive an invitation and provide legitimate and confirmed identification or other necessary information can join private blockchain networks. The verification is carried out by the network operator(s) or by a precisely specified set protocol that the network implements using smart contracts or other automated approval techniques.
With private blockchains, network participation is restricted. The network’s private nature may limit which users are able to carry out the consensus procedure, which determines blockchain mining rights and incentives, if the network is mining-capable. Furthermore, the shared ledger may only be maintained by a small group of users. The power to override, amend, or remove any essential entries from the blockchain as needed or as the owner or operator sees fit is reserved.
Hybrid Blockchain technology
The best way to characterize a hybrid blockchain is as one that aims to combine the advantages of both public and private blockchain technologies. In a perfect scenario, a hybrid blockchain will combine freedom with controlled access.
The distinction between a hybrid blockchain framework and other blockchain features like integrity, transparency, and security lies in the fact that the former is not available to all users.
Hybrid blockchain structure is fully customisable, as usual. Members of the hybrid blockchain have the authority to determine who can use the blockchain and whose transactions are visible to the public. This guarantees that a business may collaborate with its stakeholders in the most effective manner and combines the best aspects of both worlds. On blockchain network that offers features of public and private ones, some users are granted permission to access the entire blockchain platform, while others are only allowed to access a few things.
Some banks own digital currency, and they store it on such blockchains. Hence, normal users only get access to the public cryptocurrency, while bank-owned digital coins are kept private.
Consortium Blockchain technology
Organizations that require both public and private blockchains are ideally suited for consortium blockchains, also known as federated blockchains. This kind involves multiple central authorities, or more accurately, multiple organizations that grants the blockchain users access to pre-selected nodes for the purposes of reading, writing, and auditing the blockchain. Its decentralized nature is preserved since control is not consolidated under a single authority.
Examples of these blockchains are IBM Food Trust and the Energy Web Foundation.
How Is the Blockchain Revolutionizing the Online Gambling Space?
Using decentralized networks and encrypted data, this new paradigm makes gaming safer than ever before. It also eliminates the possibility of crooks hacking into centralized servers. It is challenging for fraudsters to game the system since blockchain transactions are unchangeable. It is also possible for participants to track their assets and transactions more effectively thanks to blockchain’s decentralized and transparent ledger.
When the COVID-19 epidemic drove people to stay at home, they experimented with the novel games model, which led to massive growth, according to a 2022 Zion Market Research assessment.
In order to stay at the forefront of innovation in the gaming business, major firms have since shown an increased interest in cryptocurrency games and have integrated blockchain technology into their products.
Using blockchain technology in the gaming business network has the following widespread advantages:
Improved Security
The blockchain offers one of the best publicly available security systems when you conduct transactions today. Security on the blockchain protocol is achieved using cryptography and a consensus mechanism.
The cryptographic security mechanism works with the blocks of data that contain information on a blockchain. When new information comes in, it seamlessly connects with one of the earlier blocks in such a way that tampering is impossible.
A transaction requires approval from more than 60% of all network nodes under the current majority consensus system. This way, the network will validate the transaction is true before using cryptographic techniques to add the new information.
So, hackers will need to take control of 60% of all the accounts on the blockchain to make changes to your account. This is a lot of effort for one’s account information.
Fast Transaction Speed
Many players have experienced firsthand how frustrating withdrawals can be at online casinos. Even when the casino processes the transaction within a few hours, the bettor’s financial institution might take days to remit the money.
However, things are different with the blockchain, as bettors can enjoy instant withdrawals and deposits. Some of the transaction speeds of popular platforms include:
- Cardano, with 1,000 transactions per second
- Ethereum, with 15 transactions per second
- Solana, with 24,000 transactions per second
With such speeds, bettors can get started on their favorite games and receive their winnings without delays.
Low Transaction Fees
Transactions with banks, credit institutions, and other financial institutions aren’t free. Whether deposits or withdrawals, players would have to part with some of their betting funds as transaction fees. These fees can be quite harsh when the player doesn’t have much to spend in the first place.
The blockchain only takes an almost insignificant percentage of a transaction as fees. On average, transaction fees on the blockchain are usually less than $1. This is a huge difference compared to what bettors pay traditionally.
Blockchain Games
The blockchain platforms has brought some of the most exciting games to cyberspace, like CryptoKitties, Axie Infinity, and The Sandbox. These games offer pay-to-earn opportunities, a wide world to explore, and many other benefits.
However, the main thing that these games represent is innovation. The blockchain allows betting sites to expand beyond their traditional offerings. This means that players could be seeing new forms of casino games.
Some new casino games could also incorporate augmented and virtual reality features. With this, online bettors can play games for free in virtual reality and enjoy a better experience than traditional live dealer games at platforms like Futureplay social casino.
Transparency
A lot goes on behind the scenes when a bettor places a wager on an online game. The online casino is the only entity with access to data regarding what goes on behind the scenes. They’re the ones who decide if the game is fair or not.
On the bettor’s end, the only thing they see are some buttons that they use to play the game. That’s why some bettors wager on an online casino game and come back to complain that they were cheated.
Of course, licenses from gambling authorities have helped mitigate such issues, but sometimes they are not enough. With the transparency that these blockchain based distributed ledgers called the blockchain offers, players won’t feel like they’ve been cheated.
The information of every transaction on the blockchain, including those governing the game’s results, is laid bare for all to see. This practice also encourages trust between the bettors and the betting platform.
Improved Anonymity
There’s a lot of bias regarding online bettors in society today, and many financial institutions share this bias. They believe bettors will likely gamble away their funds and even take out loans to fuel the habit.
As such, when players enter their bank information into an online casino, most financial institutions block that transaction. This also becomes an issue when the bettor wishes to collect a mortgage or take a loan from the financial institution.
With the blockchain, however, all transactions are conducted using the public keys of bettors, which doesn’t offer any personal information. Transactions on the blockchain don’t need any approval from financial bodies. So, players can fund and withdraw from their betting accounts without their bank being aware.
The anonymity of the blockchain also extends to the information that players leave on a betting platform. In traditional online casinos, players have to provide personal data when registering or funding their account.
For most blockchain-friendly casinos like Futureplay casino, however, the player’s password and email are the only data required to register. When funding their accounts, players will use their public keys, which offer no personal data.
Global Accessibility of Online Casinos
Although the internet is accessible all over the globe, betting platforms are sometimes restricted in their reach. This is mostly due to the differences in payment systems.
What do you think happens when the payment method of a casino doesn’t match that of the players in certain countries? It’s simple: the casino doesn’t extend its services to that country. This is because players in that country won’t be able to fund their account or withdraw from it.
With the blockchain, players don’t need to worry about payment method restrictions. That’s because the blockchain is accessible in all countries worldwide.
Limitations of the Blockchain
Although the revolutionary efforts of the blockchain in online betting are exemplary, they’re not without downsides.
Scalability issues
Although the blockchain promises quick transaction processing, its processing power might limit this. That’s why older blockchains, like the Bitcoin network, cannot handle too many transactions simultaneously. So, when there are too many requests on the platform, its speed in processing them will drop.
When transaction speeds drop, fees increase. For a bettor, deposits and withdrawals will take minutes, if not hours, to complete. Sometimes, they’ll have to pay higher, which could make a noticeable dent in their betting funds.
Acceptance Issues
The governments of most countries, like China, believe that the blockchain is all smoke and mirrors. They see it as an untrustworthy method of exchanging funds since it exists outside any entity’s control. The possibility of criminals using the blockchain to launder money doesn’t help.
The result is that the governments in those countries do not accept blockchain transactions within their borders. This also prevents the establishment of betting sites that use blockchain technology in such countries.
Integrating the Blockchain into an Online Betting Platform Isn’t Easy
Unless a betting site is torn down and rebuilt on the blockchain, it’ll not be easy to integrate the blockchain into it. There’s a lot of work to do in developing smart contracts and decentralized apps to work with the betting site. All of this requires funds and skills that most online casinos can’t afford.
So, while the advantages of the blockchain may be tempting, it’ll be a while before many betting platforms can integrate it.
Energy Consumption Issues
Many miners on the blockchain use high-powered computers to solve the cryptographic problem of mining a block. Ultimately, only one miner can mine that block, verify the transaction, and get the corresponding reward.
This means the others would have used up considerable electrical power for no reason. Of course, this happens numerous times in a day, giving rise to an enormous amount of wasted energy.
That’s why many environmentalists argue that the blockchain and its energy consumption are slowly destroying the environment. Although this energy-intensive process is the defining characteristic of the proof-of-work consensus mechanism, other consensus systems also take some blame.
Conclusion
The distributed ledger technology that defines the blockchain provides trustless and secure transactions between online betting platforms and players. It also removes the necessity for a third party during the transactions between the online casino and the player, making transactions anonymous.
In the end, the revolution of the blockchain in the online betting space is only beginning. With time, more benefits will be unveiled, and most limitations, like acceptance and scalability, will become a thing of the past.
