Bitcoin was born for gaming. Buying bitcoin, ether or any cryptocurrency is a gamble in itself, couple it with a platform to gamble that bitcoin with and you double the speculation. So you would think this is a match made in heaven but the uptake of cryptocurrency in traditional gambling is somewhat slow.
At present, bitcoin and gambling have two separate tracts: bitcoin processing of deposits/withdrawals for traditional operators or crypto startups burgeoning a new self-sustaining future for online gaming built completely on blockchain.
For regulators, there has been some initial reticence about allowing regulated operators to integrate bitcoin as a payment method, in particular this was the case in Malta. That said, the Isle of Man recently have been ironing out a detail in their gambling law to ensure that references to ‘money’ includes money’s worth, thus widening the definition to include cryptocurrency deposits.
Some of the regulatory concerns stemming from the use of bitcoin as a payment method can be associated with the difficult question of bitcoin origination. For example, illegal gambling agents can provide their deposit address with an operator to their customers and the gaming site will struggle to identify that the source of funds is actually from a third party. Further, virtual currency can act as a circumvention tool designed to defeat domestic gaming prohibitions. Therefore, a gaming site embedding bitcoin should consider how to identify/ manage these risks appropriately.
That said, blockchain gaming offers potential unrivalled transparency over the full gaming lifecycle: from the supply chain, customer aquisition (payment to affiliates), service delivery and mitigates (or potentially eliminates) counterparty risk with a gambling house or in P2P wagering.
Also, bitcoin gaming is more receptive to what are known as ‘provably fair’ mechanisms, levelling the playfield, to a certain extent, between heavily and lightly or even unregulated markets.
This notion of provably fair systems involves taking three variables the gaming server encrypted hash, your browser hash and the ‘nonce’, the combination of which produces the random number used in say a dice game. The point being that the player him/herself can go through a process after the roll of the dice to see if the number produced was fair.
This signals a change from trust based gaming, where users differentiate between sites based on reputation and how diligently each may be regulated, to a level playing field where you can test the sites you interact with to assess objectively their level of fairness.
Of course, fairness may not always be a pre-requisite to playing with a particular site, as marketing has an influence over decisions; that said, bitcoin gaming seems to have embraced the notion of provably fair with a number of sites offering this feature (see directory here of sites and links where you can verify the fairness of each site).
The Evolution of the RNG
Regarding RNGs, regulators traditionally require operators to have their random numbers tested. This means going to an approved testing house to assess statistically the fairness of the RNG being used. Once the RNG is certified, then the regulator would have an assurance that, subject to the constituent RNG being used by the operator, the gaming services are fair.
For blockchain gamers, the future of the RNG in gaming is to use the blockchain itself as a source of verifiable randomness, meaning that a public ledger rather than a client side server produces and records naturally the random numbers for the gaming service provided.
This is a turn towards a fully self-sustaining blockchain gaming ecosystem, where every vertical in the gaming supply chain is inevitably recorded, monitored and depends on the same chain.
In addition, to take this concept further, the role of smart contracts can stand to remove the counterparty risk that may occur in playing with the house or even in P2P gaming. A smart contract, in essence, is a piece of code that two parties subscribe to which self-executes. If the smart contract sets out the rules of the game and a reference to an external random number on the blockchain then, in principle, the counterparty risk between the parties is removed from the wager as it is the code that intermediates the transaction.
I think it is important to observe that although some may find it hard to ascribe a social function to gambling in general, experimentation in this area with smart contracts could benefit the build of transparent financial instruments on a blockchain, as a wager contract is a just a simpler depiction of a derivative contract.
In summary, looking at gaming and cryptocurrency is about understanding a new way of levelling the playing field online by the use of provably fair as a mechanism to empower users. Thereafter, we are likely to see self-sustaining blockchain gaming ecosystems emerge where everything from the RNG, to the games, to the punters and bookies are all on the same blockchain, embedding transparency and audit trails into every aspect of this new gaming industry; this will be a radical departure from a somewhat disjointed technology and service ecosystem that exists in online gaming today. In the meantime, bitcoin, as an inherently speculative asset, suits a chance-based industry, so alignment between cryptocurrency and gaming will inevitably start to develop, subject to operators and regulators understanding and managing adequately the associated risks.