How Cryptocurrencies Revolutionised the Gambling Industry
The online gambling industry is still in its infancy. It wasn’t until the mid 1990s and the birth of the online casino that this industry took hold, and it would be another few years before it became mainstream.
Even as recently as 2002 most gamblers still preferred to visit their high-street bookmaker or even place a bet over the phone, and this wouldn’t change for several more years.
In a very short space of time online gambling went through several major shifts. First came the age of instant play casinos and gambling, then came the mobile age, and now it’s the age of the cryptocurrency.
These days currencies like Bitcoin are seen as the perfect payment method for online gambling. They are fast, secure and completely anonymous—exactly what online gamblers have been waiting for.
History of Bitcoin: The Biggest Cryptocurrency
Bitcoin’s history dates back to 2008, when the domain name Bitcoin.org was registered. This was followed by a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” in the same year, before the very first Bitcoin block was mined at the beginning of 2009.
One of the very first Bitcoin purchases was an indirect purchase of a Papa John’s pizza for 10,000 Bitcoins. At the time, the value of this pizza was less than $20, but in 7 or 8 years those 10,000 Bitcoins would be worth millions of dollars.
Bitcoin was not the first digital currency, but it was the first decentralised cryptocurrency. Since then, over 4,000 other coins have been created and just under half of these are still in use.
Where to Find Cryptocurrency Gambling Sites
The very first cryptocurrency gambling sites were somewhat suspect. To understand why this is the case you need to understand how the online gambling industry works.
Why The Gambling Industry Made Life Difficult for Cryptocurrency Casinos
The online gambling industry works on a series of networks and licenses. If you want to launch an online casino you don’t need to create your own payment systems, games and layouts; you simply purchase cookie-cutter licenses that do the job for you.
You take a gaming license from an authority like the Malta Gaming Authority. You take a gaming software from someone like Playtech, and you work with a third-party payment service to facilitate deposits and withdrawals.
All of these systems are already in place and they merely license their use to you. It makes life easier for casinos, it gives players a sense of security, and everyone wins.
When Bitcoin came into play these cookie-cutter systems were just not ready for it. As a result, casinos that wanted to use Bitcoin had to go their own way.
This is why modern Bitcoin casinos only offered Bitcoin as a payment method, and why they rejected major software companies like Playtech and Microgaming in favour of proprietary software and obscure software.
The Change for Cryptocurrency Gambling
Bitcoin casinos existed for a couple years in this early form. No one really paid a lot of attention to them, casino software developers didn’t make any moves to change things, and some even (rather ignorantly) believed that it would just be a fad.
Then cryptocurrencies hit the headlines, the value skyrocketed and everyone wanted a piece. As soon as retailers began accepting them, casino software developers took notice and the second wave of cryptocurrency gambling happened.
This wave led to the creation of online casinos like BitStarz, where players can use Bitcoin and other cryptocurrencies as well as “regular” payment methods.
Other Cryptocurrencies in Online Gambling
Bitcoin isn’t the only major cryptocurrency out there these days and while it does dominate the digital currency gambling sector, some casinos also facilitate the use of currencies like:
- Dogecoin: This coin is based on an internet meme and is a very unlikely candidate for a leading cryptocurrency, but it’s big and it’s growing all of the time.
- Litecoin: This digital currency is a direct competitor to Bitcoin and it is similar in many ways, but its value is nowhere near as high.
- Ethereum: The main competitor to Bitcoin right now, Ether, as it is known, has a huge value and a very bright future. It also works in a slightly different way to Bitcoin.
Where Cryptocurrencies Differ
There are a few reasons why cryptocurrencies are better than other commonly used payment systems, as well as one major misconception that puts many gamblers off.
They are Fast
Web wallets became so popular so quickly because they allowed casinos to process deposits and withdrawals quickly. They turned the average 4 to 5 day processing time into just a day or 2 and in some cases it takes only a few hours.
With cryptocurrencies, casinos have something that is even quicker. It takes minutes, not hours, and it also drastically reduces the pending time, which means the average casino should be able to process all withdrawals within a matter of hours.
They are Secure
Cryptocurrencies are very secure. There is literally nothing that a hacker can do, even if they do manage to get hold of your information. They can steal your wallet ID, but this will only allow them to send you money, not to take money from you.
The only threat comes from the wallet itself, which is stored locally on your hard-drive. If you lose this, you lose your money, which is bad; but there is no threat of losing it when you make a deposit or a withdrawal online, and that’s good.
They are Anonymous
Cryptocurrencies is completely anonymous—a benefit that no other payment service can offer. If you send a wire transfer or a check, the recipient has your name, address and account details; if you send a web wallet payment they have your address, name and email. If you send a payment using cryptocurrencies, they only have your wallet ID, which is a long string of numbers that can not be connected to an individual.
They are Tailor-made
A lot of currencies currently used by online casinos were created in another age for another purpose. A huge number of online casinos still use checks and wire transfers, even though they are all but obsolete in the modern age, and it’s a similar story with credit cards.
They were created to facilitate quick and secure payments, and their flaws are evident in the high fees they charge and the fact that most casinos won’t let you withdraw money to them.
It is a different story with PayPal, Neteller and Skrill, web wallets designed for online use, but even these have their flaws. They were created to facilitate online shopping, not gambling, and they have higher fees and more problems than you will find when using cryptocurrencies.
Bitcoin was created with online gambling and other secure online payments in mind, and this can be seen in every deposit and withdrawal.
Cryptocurrencies and Illegal Activities
Cryptocurrencies like Bitcoin have been associated with illegal activity since the beginning. It has shadowy beginnings, not helped by the fact that we don’t know the real identity of its creator, and it has also become the payment method of choice on the dark web.
But it’s important to distance Bitcoin from the people that use it. You only need to think back to Western Union transfers of the late nineties and early noughties. It was a legitimate service that offered a quick and secure solution for millions of people worldwide, but it also made life easier for criminals and so it got a bad reputation.
The goal of every payment method is to provide a quick and easy solution for its users, and when you venture into the world of high security and complete anonymity criminals are always going to be interested.
So, while Bitcoin is the preferred payment method for many criminals on the dark web, that doesn’t mean the currency itself is illegal or in anyway suspicious.
It is a similar story with Bitcoin exchanges and Bitcoin thefts. Hackers commonly target Bitcoin users and exchanges and it’s also demanded by ransomware creators, but they do this simply because they know that the money can not be traced once it has been stolen.
In other words, the thing that makes Bitcoin such a great option for gamblers who want to remain anonymous, also makes it a great option for criminals who do not want to leave a paper trail.
The Future of Cryptocurrency Gambling
Cryptocurrencies have a big future and will likely play a major role in future global economies. As this happens they will also play a bigger role in the online gambling sector.
It’s only a matter of time before all major online casinos and sports betting sites switch to cryptocurrencies like Bitcoin. For this to happen, a third party payment provider needs to start offering it as a payment method, at which point others will follow suit and the availability of cryptocurrencies will spread.
But cryptocurrencies are still relatively unstable and that is holding a lot of companies back. Right now, companies are refusing to accept cryptocurrencies unless they believe they have no other choice, and that’s because while it is a great option for players, it’s quite a hassle for casinos.
And when you consider how unstable it is, it’s easy to see why. Imagine if you were in their shoes. They are accepting a payment method that could devalue by the time the payment has been made. Theoretically, it’s possible for them to accept a significant payment of $1,000, only to see this decrease in value to $500 immediately after the deposit and then increase to $2,000 immediately after they process the withdrawal.
What Needs to Change
One of two things needs to happen before we see cryptocurrencies accepted as a universal payment method:
- cryptocurrencies need to become very stable or casinos need to realise that if they don’t accept
- cryptocurrencies they will lose a lot of their business.
As far as the first option is concerned, there is something known as a StableCoin that could provide the answer. This coin is backed by US Dollars, making it considerably more stable than cryptocurrencies because there is some tangible value in it.
This solution harks back to the days before fiat currencies, when currencies were backed by gold or silver as opposed to now, when their value is set by the government. It means that the answer to stabilising an ultra-modern currency could be to introduce some lessons learned from the past.
As for the second issue, this will happen whether we move to stable currencies or not. A study by Cambridge University in the summer of 2018 suggested that there were as many as 6 million Bitcoin users, while reports from 2016 show that over $100 million worth of this currency was being traded every day.
Those numbers are impressive and what’s more impressive is that both have climbed and will likely continue to climb in the near future. But there is still a long way to go. Even if Bitcoin trading increased one-hundred fold, it would still be 5x smaller than the South African Rand, which is the twentieth highest traded currency in the world.
Of course currency trading is different to payment methods on online casinos, but the former has direct implications for the latter. What’s more, if we focus on actual transactions, PayPal was said to have generated 193 per second in 2016, while Bitcoin maxed out at just 2 or 3.
Cryptocurrencies vs Web Wallets
These currencies have changed the way some people gamble online, and in the future it will be an option open to many more. It may also force casinos and payment methods to change.
After all, if Bitcoin is allowing these payments for free, then how can services like PayPal, credit cards and bank transfers expect to compete when they are charging between two-percent and seven-percent?
Whatever happens, it will be exciting and will make life easier for players, but it likely won’t be as quick or as big as some are expecting.