Gambling on the Blockchain: Beginner’s Guide to Cryptocurrency Gambling

One of the best aspects of blockchain technology is transparency. This means that a business that uses a public blockchain can make everything they do completely open to the public. In that way, anyone can audit their records and make sure that they are doing what they promised. One interesting potential application for this kind of forced honesty is online gambling and casinos.

Today, online gaming has grown significantly and in countries where it is legal, are billion dollar businesses. The problem is that no one knows how fair (or unfair) these platforms are. We all assume there is a house advantage, but does a player ever really stand a fair chance of winning big?

That’s the idea behind blockchain gambling platforms. Since everything is powered by smart contracts that can be audited, anyone can verify what is going on behind the scenes. This could potentially allow for a much more honest and open gambling and casino experience. Secondly, being able to use cryptocurrency instead of fiat currency could potentially open up this industry to thousands of new players each year.

So in this article, we’re going to review two of the most popular up and coming blockchain based casino projects, Edgeless and FunFair. They each have their own unique advantages, business model, and offerings, so read on as we dig into how these projects work.

Edgeless

Edgeless is an Ethereum powered blockchain project that says it is “legally compliant”, transparent, and offers a unique feature called “bankroll staking”. Edgeless recently acquired its own casino license, and offers blackjack and dice games, with poker and sports betting coming later this year

The casino license was issued by Curacao, a Caribbean island nation which is a sovereign state that belongs to the Kingdom of the Netherlands. The island has some degree of legalized gambling as it has its own casino which opened back in 2009.

This license allows them to get access to banking services, and the site claims to soon have its own functioning fiat currency gateway. This gateway, they claim, will allow them to offer “a similar experience to traditional online casinos”. They estimate it will be ready sometime this quarter.

Edgeless is not available in all countries, however, and engages in IP-based region blocking. Americans, for example, cannot use the Edgeless casino. When attempting to open the page, they will be met with an error message telling them they can not participate.

Bankroll staking

Bankroll staking is a feature designed to make the casino always has sufficient liquidity to facilitate and pay out winning bets. It seems that holders of the Edgeless token can deposit their tokens in a smart contract which can then be used to fund casino operations. This means paying for bets that are won, and collecting from bets that are lost by players

After staking in a contract for one week, if a surplus has been gained, then winnings are distributed and those that took part can earn a profit. However, it seems likely that if the supply is negative, then payout would need to wait until it becomes positive again. The website didn’t offer an explanation of what would happen in the event of a loss after 7 days had passed. It’s safe to assume that there is naturally some risk involved.

The bankroll staking feature does not appear to be working yet, but it is a planned feature, currently in an “early testing phase” according to the official site.

Edgeless tokens

Currently, Edgeless tokens (EDG) are trading for around $0.56 each, with a total market cap of $46.5 million. Since it entered the market on April 1st of last year, prices have seen a steady rise from around three cents to where it stands today. During the December price explosion, the currency hit an all-time high of just around $2.50 each.

There is a total supply of just over 130 million EDG tokens.

FunFair

Another competing project, FunFair offers a number of similar features to Edgeless, but is running an an entirely different business model. The project is highly focused on producing smooth and graphically attractive experiences that will be easy for non-technical gamers to use.

FunFair is not going to operate its own casino, however, and instead their technology and business model is designed to allow other people to use their technology to create their own online games and casinos. In their own words, their technology “will let anyone run a casino”.

FunFair has a few technological advantages, including using a technique called Fate Channels that allow for “gaming on demand with no delays”. This technology also lowers the network costs so that their games “require 10% of the costs of other blockchain casinos”.

If someone wants to use the FunFair technology, they need to pay a license fee using FUN tokens. Those tokens are then paid in part to FunFair itself, and to independent game developers. For example, an independent development house could create a slot machine game and earn a profit by licensing it to online casino services that use it.

Keeping their Hands Clean

FunFair itself aims to be only a technology company, and so it is the responsibility of casino operators to have a legal casino license, or otherwise be authorized to run such a business independently of FunFair itself.

FunFair does not appear to be operating in the real world just yet. However, users that have Meta Mask installed on their browsers can play several graphically rich online games either off chain or on the Ethereum test net. The games appear to be fully operational, and highly engaging.

FunFair was recently removed from the popular instant cryptocurrency exchange, ShapeShift, as well as from other popular exchanges such as Bittrex. There does not seem to be a clear indication as to why this happened. It was also demoted in the popular Exodus wallet from a primary asset to a secondary class Ethereum asset.

FunFair tokens

Today, FunFair tokens (FUN) are trading for about $0.03 each. The currency has a total market cap of $144 million, with close to 5 billion tokens in current circulation. The token entered exchanges in mid-2017 for just under $0.02 and so it has seen a rise of about 50%. At its peak in early January, the tokens were trading for $0.18 each, which put the total market cap at over three quarters of a billion dollars.

Impact on Gambling at Large

It’s difficult to estimate what sort of impact blockchain-based projects will have on the traditional gambling worlds that you might find in Las Vegas or Macau. These types of gambling destinations are attractive to tourists not only for the gambling itself, but also the experience and the environment.

However, the potential impact on online gambling which is growing at a steady rate and seeing an increase in the number of territories where it is legal, is huge. While the need to purchase cryptocurrency may be a stumbling block, it will likely not be a complete make-or-break situation.

Much like when you go to a casino today, you can purchase casino chips, or put money onto an electronic card for use in slot machines. These cryptocurrency casinos of the future will likely follow the example set by Edgeless in offering a direct fiat to token gateway.

What’s yet to be seen, however, is if non-casino gamers will be able to make use of these gateways. For example, it may prove to be more expedient for cryptocurrency investors to sell their assets for a gambling token and then cash out those tokens at an online casino that has a fiat gateway. This could potentially pose a problem, or it might even be a boon to the valuation of these tokens.

Region Locking a Potential PProblem

Another issue facing these projects is global restrictions. For instance, if you want to use Edgeless, you have to live in one of the territories where it is allowed. We were not able to find a list of allowed countries, but we confirm that the USA is blocked. It may be possible to bypass these global restrictions using a VPN service, but these casinos may be required to perform identity verification which may require proof of citizenship or just proof of address in a supported country or territory.

Finally, the business model taken by Edgeless and FunFair is significantly different. Edgeless wants to operate its own casino, and offers its interesting yet perhaps somewhat risky staking mechanism. FunFair, on the other hand, wants to remain purely as a technology company that makes profit through licensing, and is not in any way operating their own gambling or casino ventures.

Given the rate of online gambling growth in recent years, as well as the steady growth in cryptocurrency usage and understanding, it is conceivable that online gambling could be one of the major use cases that brings cryptocurrency even more into the spotlight than it already is today.

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