As a distributed, tamperproof ledger, a well-designed blockchain doesn’t just cut out intermediaries, reduce costs, and increase speed and reach. It also offers greater transparency and traceability for many business processes. Gartner forecasts that blockchain will generate an annual business value of more than USD 3 trillion by 2030. It’s possible to imagine that 10% to 20% of global economic infrastructure will be running on blockchain-based systems by that same year.
The gaming sector is one of the most interesting ones to debate about when it comes to Bitcoin (BTC) and the blockchain world in general. According to many industry analysts, it will be the driving industry responsible for the mass adoption of blockchain technology. Indeed, to date it’s one of the sectors in which this adoption is more developed, considering that for example, the first online casinos have started to use BTC as early as 2013.
Moreover, gambling is increasingly using the blockchain because it is verifiable, traceable and allows very fast transactions. Sometimes, there is a lack of transparency in traditional gambling, not to mention slow and expensive transactions that make deposits and withdrawals of funds bothersome. Using blockchain, on the other hand, allows for better protection of user information, increases inclusiveness and multiplies opportunities.
Furthermore, cryptocurrencies allow players to gamble online without additional controls on their finances. In particular, platforms that use only cryptocurrencies are in fact exempt from most of the laws to which traditional platforms using fiat currencies are subject. This does not mean that they operate illegally without any kind of authorisation, but only that they are required to comply with a smaller amount of regulations.
According to the UK Gambling Commission, trust in gaming and overall public attitudes to gaming are in decline. By delivering transparency and player protection through decentralised, fair technology, the blockchain technology is set to reverse these trends.
Consumer concerns over the fairness of games and integrity of online casinos have existed since the outset of Internet gaming. Although the number of untrustworthy operators is relatively small, high profile cases of cheating, a lack of transparency in game software (run from remote gaming servers) and unreliable cashout processes has fed a growing perception that online gaming is unfair. The ability of players to easily verify that a game has run fairly, without interference and according to its agreed set of rules, is a key component of blockchain-based gaming technology.
All current online casinos (and even “Bitcoin casinos”) require players to deposit funds with them before they can play. In many top tier jurisdictions, player funds are not fully protected if the casino becomes insolvent, nor are casinos required to prove their ability to payout large wins. The risks involved in giving up custody of funds and having faith that casinos will pay out in the event of large wins are not lost on consumers, with 1 in 5 worried about safety of funds in an Australian regulator survey.
This is resolved with the ability to play games using funds directly from a crypto wallet which enables players on the casino platform to retain control over their funds at all times. Player and casino are both required to send funds for each gaming session to a smart contract escrow, eliminating the possibility that a casino misappropriates player funds, leaves a shortfall in the event of insolvency or is unable (or unwilling) to promptly pay out a win of any size.
Currently, it is compulsory for players in many gaming jurisdictions to complete a verification process for each casino they join. Lengthy verification, registration and payment processes are common causes of incomplete registration, failure to convert (deposit funds and play for real money) and single logins (where a player never returns after their initial visit). This could be resolved with blockchain-based gaming technology.
Also, the tightening of global restrictions on online gambling is resulting in higher market shares for cryptocurrency-based platforms compared to platforms that use fiat currencies, and although these two types of platforms are likely to coexist in the future, those that use only cryptocurrencies could attract an increasing number of users. In addition, blockchain-based gambling platforms could in the future offer new innovative games that do not exist on traditional platforms and this could constitute a further incentive.
How blockchain is changing business
There are many indications that blockchain is fundamentally altering the business landscape. Tokenisation is one of them. This is the representation of real or virtual assets on a blockchain, is spreading to raw materials, finished goods, income-producing securities, membership rights and more.
Initial coin offerings (ICOs), in which a company sells a predefined number of digital tokens to the public, are funnelling billions of dollars into blockchain platforms. Increasingly an alternative to classic debt/capital funding as provided today by venture capital and private equity firms and banks, ICOs in only the first half of 2018 raised $13.7 billion.
Enterprise software platforms that are the engine for company operations such as finance, human resources and customer relationship management are beginning to integrate blockchain. For example, Microsoft, Oracle, SAP and Salesforce have all announced blockchain initiatives. In the future, many core business processes will run on — or interoperate with — blockchain-based systems. Using blockchain in concert with enterprise resource planning platforms will enable companies to streamline processes, facilitate data sharing and improve data integrity.
Gartner has found that 82% of reported blockchain use cases were in financial services in 2017, but that sector’s portion dropped to 46% of reported use cases in 2018. A study from PwC explained that it is still perceive financial services to be one of the leaders of blockchain, but also see potential in industrial products, gaming, energy and utilities and healthcare. Moreover, an early centre of gravity in the US and Europe is shifting. The document also described that the US is the most advanced territory in developing blockchain today, but that in three to five years, the leader will be China.
Why it’s hard to trust a blockchain
Blockchain, by its very definition, should engender trust. But in reality, companies confront trust issues at nearly every turn. For one, users must build confidence in the technology itself. As with any emerging technology, challenges and doubts exist around blockchain’s reliability, speed, security and scalability. And there are concerns regarding a lack of standardisation and the potential lack of interoperability with other blockchains.
Also contributing to the blockchain trust gap is a lack of understanding. Even now, according to PwC, many executives are unclear on what blockchain really is and how it is changing all facets of business. Although the public narrative has moved beyond Bitcoin, even the more recent focus and hype around ICOs only hint at the potential impact. Blockchain’s role as a dual-pronged change agent — as a new form of infrastructure and as a new way to digitise assets through tokens, including cryptocurrency — is not easy to explain. Think about other new technologies: users can try on virtual reality goggles or watch a drone take flight. But blockchain is abstract, technical and happening behind the scenes.
Another challenge for blockchain is building trust in the network. It is perhaps ironic that a technology meant to bring consensus hits a stumbling block on the early need to design rules and standards. Take payment systems and mechanisms in banking. Though everyone plays by the rules of existing systems today, they don’t necessarily agree on how an alternative blockchain-based model should be designed and operated.
Likewise, there’s a lack of comfort regarding regulation. The majority of regulators are still coming to terms with blockchain and cryptocurrency. Many territories have begun studying and discussing the issues, particularly as they relate to financial services, but the overall regulatory environment remains unsettled.
