Online Gambling Is Gaining Popularity, But Without Blockchain Tech The Players Are At Risk

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Source: Midjourney

There has always been a strong appeal toward games of chance, and the hope of winning big.  While physical casinos still exist, they are few and far between, and the true rising of gambling excitement has happened online.  After the field of sports betting was legalized at the US federal level in 2018, a number of online sports betting, lotteries, and casinos began to open up with unique new offerings and older classics.  The individual states still have a say in how the industry is regulated, but this was a big step toward the acceptance of online betting platforms as a whole.   Worldwide this trend has largely been similar, with a growing acceptance of regulated online platforms hosting lotteries, sports betting, and traditional casino games.  The biggest growth however is projected to be in the US, with a massive $24 billion online gambling market estimated for 2024.

So what does this growing industry look like?  There are three main areas garnering popularity among the fans.  The two biggest of these are, according to a September 2021 survey, sports betting and lotteries, with 32% and 31% respectively.  Other games include traditional casino table and card games, along with slots.  All of these translate well into an online format, and can be played anywhere in the world where the law allows.  

While all of this growth is exciting for fans of sports betting, lotteries, and casino games, there is a major drawback to online gaming.  While going to a physical casino is a pain, expensive if it is far away, or outright impossible, there is a certain level of trust that the casino is regulated for fairness.  When it comes to online gaming, this trust all but disappears unless the gaming platform has a massive social following with rave reviews.  Fortunately, this rise in online gaming comes at a time where the very solution needed to instill trust has also come onto the scene:  blockchain.  Surprisingly, blockchain’s core elements contain the technology to bring trust to an online betting platform, and they do so in four key areas:  decentralization, transparency, immutability, and random number generation.  Without any of these pieces, online gambling would have major security issues, but with all elements working together, an online casino can be more trustworthy and transparent than any physical casino.  Let’s dig into how blockchain builds each of these elements to create a foundation for reliable and secure betting platforms worldwide. 

Decentralization

The first challenge faced by a player is how to know if the gaming platform they’ve found can be trusted.  There are several ways to gauge the trustworthiness of an online platform.  The first (for blockchain and non-blockchain) is to search out user reviews of the platform to see what others are saying about it.  This can help to identify obvious scams, but it can’t necessarily prove that a platform is legitimate, as they could flood the web with positive reviews and comments.  However, it can offer some benefits.  More helpful though, if the platform is blockchain-based and decentralized, the ability to gauge the legitimacy is much easier.  For one thing, any particular problems, potential scams, or mistreatment of players is not possible if the platform’s smart contracts don’t allow it.  These contracts should be available for reviewers to examine.  The biggest protection that decentralization holds is a peer to peer transaction system.  If you are playing against someone else, be it the house or another player, you can both submit a bet to the smart contract, which will autonomously transact the game, declare the winner, and transfer the funds appropriately.  With a peer to peer interaction moderated by a smart contract, decentralization removes many of the biggest fraud risks.

Transparency

A close element to decentralization is the transparency that happens as a result.  With transactions happening on chain, it means that anyone can identify and call out foul play.  While proper elements like identities are hidden, the key elements of each game, each payout, and each loss can be shown on chain to ensure full transparency.  This element alone can prevent many forms of misconduct, and the stronger and more reputable betting platforms can use this transparency as a strong feature, showing that there is nothing “up the sleeve” of the platform.  Interestingly, this element is so innovative and unique that physical casinos cannot compete with the level of transparency that online casinos display with their transactions showing on chain.

Immutability

Immutability, the proof that original data has not changed, is another uniquely blockchain innovation.  While possible using complex algorithms, blockchain’s core design guarantees immutability of data, meaning that the transactions, the dealer’s plays and results, the payouts, and all other elements can not be changed in hindsight to cheat the player.  This is a very strong element of blockchain, and it provides a very necessary element of online gambling protection for players.

Random Number Generation

Perhaps one of the most important, yet least appreciated, elements of online gambling is the generation of random numbers.  This seemingly simple task may be performed well enough by rolling a die, shuffling a card deck, or launching a ball around a roulette table, but for online betting (as well as any electronic games within a physical casino), this is the element that could most easily be manipulated to favor the house and cheat players out of their money.  The creation of a genuinely random number is surprisingly difficult using software because everything is made up of calculations.  Thanks to blockchain, we can see a random number generated and if the platform is truly transparent, they can show how these numbers are generated.  However, without proper methods this remains one of the most fundamental risks of online betting.  However, this is also an opportunity for platforms able to solve the problem.  Using some of the same decentralization principles, a tool called Pyth Entropy uses a unique peer to peer system where each party generates a random number, then places the hash of the number (a type of encryption) onto the blockchain.  The two parties reveal their numbers, verify that the hash matches the on chain hash, which guarantees that neither party changed their number.  These two numbers are then hashed again, which creates the actual random number.  All of this is done automatically and quickly, but in a way that all parties can see that the number is truly random.  The technology is already being used by developers from Arbitrum, Blast, Chiliz Chain, Fantom, LightLink, Optimism, and more to ensure that all types of platforms can use true random number generation.

Wrapping Up

Online gambling such as sports betting, lotteries, and casino games have become very popular and are predicted to continue this trend across the globe.  Players can find the best protection and fair games by leveraging the decentralization, transparency, immutability, and random number generation found through blockchain technology.  

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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