Gambling has been one of the more obvious use cases for crypto since the emergence of Bitcoin. An industry which usually operates under heavy regulation or is outright banned (depending on jurisdiction) intersects with the volatile nature of cryptoasset prices, providing a community more predisposed than most to gambling.
Furthermore, the underlying technology meshes well with some of gambling’s pain points:
- Anonymity: Gambling DApps facilitate decentralization in a similar fashion to any other type of DApp. Anyone can participate without the need to pass onerous KYC identity checks. Furthermore, gambling maintains a social stigma in some circles which makes being able to participate anonymously attractive.
- Regulation: These DApps enable users worldwide to participate, even if local laws prohibit it. This includes the largest potential market in the world, the United States, where gambling regulations vary state to state (and even within the same state).
- Reduced costs, reduced fees: Gambling DApps should have lower overheads than traditional firms. This means that they can charge lower fees than centralized competitors. Furthermore, because gambling is illegal or heavily regulated, there are many illegal operations charging outsized fees. By facilitating the involvement of anyone worldwide, these often predatory establishments can be circumvented.
- Transparency: Although not quite the silver bullet it is sometimes purported to be, as all transactions are recorded on the ledger and automated through open source smart contracts, transparency should increase. This is known as being ‘provably fair’ and is evidenced in the likes of dice games which have visible odds. An early example was SatoshiDice, which launched in 2012.
- Speed: There have been many examples of bookmakers and casinos losing or defrauding customers of their funds. Open sourced decentralized gambling DApps, by contrast, should not be able to hold or lose customer funds – although again, this should not be considered guaranteed. However, the instant nature of crypto transactions and the deposit/withdrawal function being carried out automatically should see customers able to withdraw and deposit in seconds; unlike the lengthy period of time they are often forced to wait.
However, blockchain casinos face similar issues to other DApps – namely slow transactions and high transaction costs, as well as a lack of customers willing (or wanting) to gamble using cryptoassets. Furthermore, although gambling DApps are theoretically open to all, many firms have ended up blocking the IPs of any US customers to avoid the frequent investigations which follow.
One such project addressing the gambling market is FunFair, which aims to provide the underlying platform and protocol upon which casino operators can easily build. The first such FunFair backed casino launched in September. CasinoFair offers 10 FunFair developed games, ranging from casino standards blackjack, roulette and baccarat to more slot machine inspired fare, such as Fate of Thrones and Treasures from the Crypto.
Playing on FunFair is at once both relatively straightforward and difficult, depending on your location. There remains a KYC check, known as the ‘FunPass’, but once this is completed customers can subsequently play across any FunFair casino. However, only a limited number of countries are allowed to play. The UK is not one of those, requiring the use of a VPN to access the site.
Customers then have to purchase FUN tokens, the payment token of choice across the FunFair platform. The game then works in a similar fashion to any other DApp. I make my bet, at which point the MetaMask notification appears. Once I have signed the transaction, my bet is placed. My funds are then sent to a temporary escrow and are at no point held by the casino itself.
If I win, the appropriate funds are immediately sent back to me. If I lose, the funds flow to the casino. This is all handled by the smart contract. Anyone who has tried to withdraw from online casinos, especially some of the poker sites, will likely appreciate this speed and ease.
Despite this, it is hard to truly recommend using platforms such as CasinoFair at present, unless you really want to gamble using crypto; and that is from someone who loves both using crypto services and gambling.
Although there are many countries which have onerous gambling regulations, these will also be banned from FunFair casinos. If you are able to use a VPN for FunFair and complete KYC for the Fun Pass, then you will be able to use it to access a normal gambling site in a heavily regulated country. There are good reasons to not trust gambling firms, but there is no doubt that the gambling behemoths in the UK and other regulated countries are likely to be trustworthy enough to use for most customers. Or rather, it is doubtful people care - everyone knows the house always wins, yet people flock to casinos. Cutting the house take from 5% to 1% might not be the differentiator operators think it is when it comes to casual gamblers.
In many ways FunFair sums up crypto’s problems. It takes some of the benefits of blockchain technology but then subsequently detracts from them by implementing KYC and IP bans, before adding in a token which serves no purpose other than to exist. FunFair could easily have launched solely using ETH for payment, but now competes against centralized alternatives which allow customers to use the rather simple fiat, rather than having to purchase FUN. This is not an attack on FunFair; most projects are falling trap to the exact same problems.
It is completely fair that the likes of FunFair must protect themselves, but it highlights the paradox crypto companies face. The sole competitive advantage they have is that they can do something that non-blockchain and regulated companies can’t. But because they aren’t anonymous or try to run the company in a normal manner, they must conform to all of the regulations anyway.