Why the Birth of Bitcoin Casinos Triggered a Ticking Time Bomb for Land-Based Casinos
Bitcoin’s emergence on the global scene as an open, permissionless, universal internet money immediately set the death clocks ticking on an untold number of industries and businesses. Not least among them is the online gambling sector, which soon emerged as one of the chief industries which bitcoiners and cryptocurrency developers had chosen as an early guinea-pig on which to test their wares.
The choice was not arbitrary; online gambling serves as the perfect petrie-dish for gauging the efficiency and robustness of many cryptocurrencies – particularly those focused on providing fast, secure, and scalable transactions.
The success of Bodog as one of the first internet betting sites demonstrated how compatible the world of gambling was with the world wide web. The success of not only Bitcoin, but also a whole host of other cryptocurrencies, as practical, independent, economic tools, showed that crypto was compatible with both. And thus the bitcoin casino was born.
The Crypto Casino Floor
Today, hundreds of crypto-based betting applications exist and are in use. Some are built specifically on the blockchain, and use oracles to summon real-time data from a variety of events, ranging from presidential race outcomes, to TV show conclusions, to typical sporting events.
Blockchain-based gambling remains in its nascent stages, however traditional web-based gambling sites have also emerged in recent years that allow users to play casino games using a number of different cryptocurrencies. These sites offer the best of both worlds; they are often regulatory compliant, yet allow the use of permissionless, and even private, cryptocurrencies, as well as bitcoin. As expected, they do require the typical identification verification process.
Just as common, however, are websites that require no personally identifying details at all, and allow users to wage bets using literally dozens of different coins. And it might be this particular point which ends up being the final nail in the coffin for real-world casinos. The ability to leverage the anonymous nature of blockchain technology in a gambling setting, with no signups or ID-verification, is a huge convenience factor that real-world casinos simply cannot offer.
The House Always Wins
Many of the games you’d find in a casino are centuries old, and the concept of supplying a brick and mortar gathering place where people could play those games is equally ancient. Some time in the early 2000s, those brick and mortar gathering places suddenly became less valuable. Why outlay all the typical costs of a night out at the casino when you can just sit on the couch and use your phone?
Just as the smartphone allowed online people to wage bets from the comfort of their own homes, it also allowed the complex world of cryptocurrency to enter the nice, simple viewing window of its 6-inch black screen.
And just as mobile wallets and the growth of decentralized finance applications allowed people to navigate their personal finances without leaving the house – or logging on to their PCs – so too does the growth of mobile betting apps usher in a new generation of gamblers, who suddenly no longer need to hit the casinos.
Dwindling casino attendance was noticed as early as the mid 2000s, just as internet culture began to take hold en masse. However, the arrival of the coronavirus and the subsequent lockdowns that resulted from it have twisted the knife even deeper into the back of an ailing industry. Casinos in the “Las Vegas of Asia,” Macau, China, witnessed a 97% decline in monthly revenue in May 2020, with travel bans amid the lockdown chiefly to blame.
For a city that normally takes in close to $3 billion a month from visiting gamblers from all round the world, the shortfall was nothing short of horrific, and immediately poses the question: where will all of Macau’s and Las Vegas’ customers end up?
The Rise of the dApp
The answer needn’t be a specific website. The rise of decentralized applications, known as dApps, has given birth to a host of gambling apps running on the blockchain, all functioning on the back of automated smart contracts. The complexity of such dApps is still somewhat limited, which often take the form of a higher-lower number game where a randomized number resets at regular intervals.
What they lack in flair they make up for in simplicity and ease-of-use. A user simply sends coins to the smart contract address associated with their higher/lower guess. Payouts are returned automatically. The human element has been completely removed – so much so that even if a financial authority were to close down the website which hosts such a dApp, it wouldn’t affect the status of the game at all, beyond making it harder for people to find it.
Such dApps are almost exclusively a hallmark of smart-contract capable blockchains that emerged in the years following Bitcoin’s creation, starting with Ethereum in 2015. Now, five years on, Ethereum is taking the first steps towards updating its technology as it moves closer to “Eth 2.0”. And as blockchain technology grows more sophisticated, so too will the games people play on them. And those games could one day beat the house.