Gambling is huge. Global Betting & Gaming Consultants recently calculated that casino revenues reached $122 billion in 2017. And how about those who prefer to bet online? Researchers from Juniper predicted that online gambling will jump up to $950 billion by 2021. For comparison the whole cloud services market – thousands of tech companies - was just $153.5 billion in 2017 and is due to grow only by $302.5 bln by 2021 according to Gartner, Inc.
So, yeah, online gambling is due to be at least three times larger than the whole cloud computing industry in the next couple of years. What drives that growth except for the gold rush of freshly baked gambling entrepreneurs? Don’t judge me for being so trivial, but it’s all innovations fault.
Powered by Blockchain and some criminal activities
In the recent article on significant trends in gambling DAO.Casino experts pointed out the future spread of blockchain – it makes online operators hugely trustworthy and opens the whole bunch of possibilities for new players to enter the market – starting from an easy way to launch your casino to running fundraising campaigns to support even the wildest gambling business ideas.
Sounds too good to be true? Or maybe even not good enough yet? It’s both.
You’ve probably heard about one of the most massive ICOs (Initial Coin Offerings) in history: Dragon Corp. Founders were intended to build a floating crypto casino in Macau since Macau has quite a democratic approach to gambling. Dragon Corp. managers claimed to raise $320 mln in Q1 2018 only through inside investing, not taking into account the publicly pledged money.
Six months later and some major flows of that fairy-tale have been revealed. It was backed by gangster Wan Kuok-koi aka “Broken Tooth”, who served 14 years in prison for illegal gambling, loan-sharking, criminal association, and the attempted murder of Macau’s chief of police.
Construction of the casino had never been started. And recently, Brova Idea, the Norwegian company, hired to do the job claimed that the project was abandoned due to numerous changes in the paperwork and payment delays.
Another “great” news is that gambling related cryptocurrency operations are not and would not be allowed in Macau any time soon. And even though, Chakrit Ahmad, CEO of Dragon Coin doesn’t expect to face issues with Macau authorities, since the company is a “blockchain provider” and not a cryptocurrency project, the future doesn’t seem to be bright.
Let’s keep things regulated
Yes, crypto gambling is growing with the tremendous pace, but are all of those newly launched companies are worthy and will blockchain indeed improve the state and reputation of the industry?
According to Marcus Killick, CEO of ISOLAS LLP, the leading law firm in Gibraltar, known for being one of the known gambling and crypto jurisdictions In the world: “Any crypto gambling operations would require a separate gaming license as well as a DLT (distributed-ledger technology) license. Gibraltar is exceptionally strict on granting such licenses as it the dominant player in the U.K. online betting market and regards keeping its reputation as paramount.
Licenses can be granted to crypto gambling projects, though none yet have, for either existing licensed gaming operations entering the DLT environment, or certain other DLT operations that pass extensive due diligence and business plan analysis. We have had crypto gaming, but generally, once they know the gaming legislation requirements, they go elsewhere. We are however working with a well-known player who is applying for a gaming license. It is a long process, but they see the benefits of being in an established regulated gaming environment in gaining trust from customers.”
Yes, legal issues won’t stop the relentless empire builders. The first publicly acknowledged case of the crypto-gambling company acquiring the necessary licensing happened quite recently when
the authorities of Curaçao, a Dutch Caribbean island, scuba diver’s paradise, have issued a casino license to Edgeless, an Ethereum based application. “We already have a Curaçao license while allows us to operate in most countries. Meanwhile, we are working on getting Malta, UK, and USA casino licenses which will expand market reach even more. And so far we didn’t have any legal issues since we strictly follow all local regulations”, – comments Edgeless co-founder, Tomas Drakšas, – Our team has been developing games before blockchain boom. And we saw a proper use-case of a blockchain in the gaming industry, that’s why we decided to improve our product using that element. We are not blockchain first company. We are a game first company which uses blockchain as a value-added element to own games. And benefits are quite strong: it’s not only in-game trust. We provide many more trust elements such as the size of our bankroll, the live feed of deposits and withdrawals and more. All of that can be done because of the blockchain. It increases trust not only from the player side but investors too. Since they can easily access our business metrics”.
True Flip, international blockchain fair games with instant payouts, open source code and transparent prize fund, is another company in the field that has recently got all the necessary licenses. “True Flip gives high priority to the licensing issue and runs all the company operations within the legal framework. In addition to RNG (Random Number Generator) certifications acquired, we’ve recently obtained the Curaçao Gaming License and will continue working on acquiring other gaming licenses. To be more precise, the upcoming Maltese blockchain legislation offers significant opportunities for us. Besides, we also target at UK and Gibraltar jurisdictions. Although both gambling and crypto represent grey areas in most of the countries, there’re some notable developments in this sphere. As long as such reputable gambling jurisdictions as Curaçao are issuing licenses to crypto projects, including True Flip, they more or less accept the legitimacy of a crypto market and take the responsibility of controlling such operations.”- mentioned Konstantin Katsev, CMO at True Flip.
But some players go an extra mile. “We don’t just license our operations, but we play an active role in creating those. We are consulting the Malta Gaming Authority in creating a combined license for cryptocurrencies in iGaming. – Shares Christina Roth, Head of Communications in HERO, the decentralized solution for iGaming.
“You can not generally say if gambling, gaming, and cryptocurrencies are legal, it both depends on the local regulations (the country you operate in) and if your product, service, currency is set-up and played out so that you comply to those. The way we have designed, issued and will use HEROcoin as well as how we do gaming & fantasy (game of skill), it complies with all laws in the legislation we are operating in right now and is entirely legal in the countries we plan to roll-out too as far as we have checked so far. It is an on-going process though since you have to check every country individually with lawyers and consultants that are familiar with each legislation.
In Europe, for example, we have the advantage that due to the EU freedom of establishment and services you can get a license in one country like Malta which then complies with most EU countries. Some countries do have stricter rules than the general Malta license, but this means you would only need to work on the missing details,” – she concludes.
Still… Blockchain for president!
In spite of all blind spots in regulations department, the players in the field are still agreed on the vast potential of the blockchain technologies for the industry. As Christina Roth states: “We had the vision before knowing that one day there will be the technology for this vision to come true: peer-to-peer betting. To bring back the fun to betting – what used to be the case when you were just challenging your friends & family – you need to cancel out the middleman and get rid of the fact that in the end “the house always wins”. We created a system where the money always stays within the community. Our esports prediction & fantasy platform herosphere.gg had almost 250k registered users already when we decided to introduce the blockchain to the game. Thanks to the blockchain technology we now offer an environment that anyone can be part of. Every provider can integrate the HEROcoin now and open up to a new community by enjoying the advantages of the blockchain (transparency, trust, security, efficiency ,etc.)”.
True Flip team shares the glee: “We saw a high potential in our unique selling point – fairness of our games. By using blockchain as the core of our business model, we allow our players to easily check transparency of every process and make sure there’re no manipulations both on our side or any 3rd party. At the same time, we’re developing a diversified game portfolio and improving user experience to stay attractive even for traditional players. According to our observations and the games stats, there’s a clear interest towards provable fairness among lots of players worldwide”.
Several kittens who broke the net…
So, let’s say we have a great bunch of people who want to build a legal business in a fully compliant way to bring some joy to those who are striving for it. But how about the current state of the blockchain? We all remember what had happened when the popularity of crypto kittens had risen. The peak for crypto kitties was the number of 14 386 users accessing the app per 24 hours – and they were able to crash Ethereum completely. Hours of waiting for the next transactions to get through. Most of the current crypto-gambling projects are built on Ethereum blockchain. How is that sustainable?
Christina Roth from HERO believes that blockchain’s crucial advantage is trust: “Every betting provider should take seriously if the importance of customer protection is an honest value to them but the blockchain is also a way to increase efficiency & transparency, lower administrative effort, the risk of manipulation & obfuscation, and enhance technical progress. Smart Contracts – that you create on the Ethereum Blockchain, for example, handle processes automatically once programmed e.g., the player’s funds go directly into the contract (and, if they win, back out again), without a middleman.
Also, every company is interested in entering new markets and getting access to a new potential user base, as they would with opening up to the crypto community.
Many projects build their projects on Ethereum because of the possibility of smart contracts and because it is an established environment to bring the first product the market without you having to develop a lot of things yourself in a field that is so new. But with the increase of use cases and more & more developers being educated on Blockchain programming there will be solutions ready in the near future. Either by making existing Blockchains faster or by projects starting to build their blockchains. Also, we do see some efforts in solving this problem: Segwit & Lightning network, changes of consensus system like proof of work to proof of stake (e.g.,. Casper for Ethereum), Sharding & Plasma, etc. It will take a lot of testing and improvements, but eventually, there will be systems in place that radically improve the scalability issues”.
Tomas Drakšas, Edgeless co-founder, confirms the point: “We’ve already optimized our blockchain infrastructure to such an extent that scalability is not a problem. We can handle millions of games without any problems.”
With all that being said and the army of brilliant young people, eager to get things done, the future for crypto gambling projects (Dragon Corp aside) looks nothing apart of bright. Shall we wait and see? Or maybe you would like a bet?