Ever since the first Bitcoin was created in 2010, it has taken the world by storm. Despite the fact that there are other anonymous online payment systems available like prepaid Mastercards, Bitcoin has not only proliferated, but it has taken on a life of its own as a real currency.
What is Bitcoin and Why Should Online Casinos Care?
Bitcoin is an online payment system that works peer to peer, meaning that users trade with it between themselves, not using any kind of intermediary. Unlike other systems such as Paypal, Bitcoin is traded between users, verified by a network of nodes, and recorded by a distributed ledger called a block chain. The unit of measure, instead of the dollar, is the bitcoin once it is decoded and put inside of an e-wallet. It is literally a virtual currency, existing only in complex code.
Bitcoin can be earned as a reward for certain transactions and possess that verify work in the public ledger. It sound more complicated than it is. This is called bitcoin mining and it is done on very powerful computers and graphics cards.
Generally it would take a very long time to mine enough bitcoin to make a dent in a $5 subway sandwich on a normal computer running a mining program, but with enough power, super computers and large networks can get the job done on a large scale. The growing popularity of Bitcoin acting as real money has recently caught the attention of online casinos not only as a form of currency being used, but the entire concept of direct and anonymous funding.
The Next Major Market?
Since the Bitcoin is not currency, it is hard to estimate how much, in meaningful and verifiable terms, what the industry is worth, but many industry experts use $40 billion as an approximate figure in terms of value, with over $3 trillion in USD circulated . More importantly, in terms of the global market, the fact that it is fast and irreversible makes it a promising method of payment that could out do more than a few well establish payment processors.
The truth is that Bitcoin is much like an ordinary form of payment that isn’t cash. Further, it ensures immediacy, privacy, and payment finality. Unlike the typical consumer purchase, bitcoin cannot be taken back, traded, or any of the other options available for use, which makes it especially attractive to casinos. In a casino, even though you might be dissatisfied with the outcome of your “transaction,” that does not justify reimbursement of a gambler’s money.
One disadvantage of the Bitcoin world that has plagued everyone has been the chargebacks and fraud that has taken place in the system. Since there is no intermediary, there is no method of verifying transactions, and as result users sometimes check their Bitcoin balances only to find out that every dime–pardon the pun–has been taken away from them, with virtually no recourse. As a result, there have been payment companies that have popped up all over the Internet as a method of addressing these problems, but their effectiveness remains to be seen.
Gaming and Bitcoin
If it’s any indicator of the growing popularity of Bitcoin it would no doubt be the fact that during the ICE Totally Gaming 2014, the world’s largest and most comprehensive trade event in gambling, there was a half-day seminar on Bitcoin as used in the iGaming section. This is especially meaningful since the conference represents every sector in gambling, from betting to bingo, casinos and lottery, mobile, online, and social gambling sectors.
During the conference, one panel in particular featured a discussion of the evolution and future of Bitcoin as the unit of measure. It is important to note that just as is the case with any new technology, there are still issues that must be ironed out. These include compliance challenges with payment processing, processing applications, currency conversions, transaction costs, finality of payments, customer use rules, management techniques, and much more.
Out of the Computer and Into the Mainstream
Never a group to be left in the dust, casinos and betting establishments on the net have been some of the latest entities to enter the world of Bitcoin. Admittedly, what is being seen now is the second generation of such establishments, the first of which were characterized by such sites as BitZino, Seals with Clubs, and SatochiDice.
It was recently reported that one casino, Vera&John which is registered in Malta a country known for fair gambling regulation, was the first of any major licensed online casino to accept bitcoin deposits. The customer payments are made with bitcoin, which are then processed and converted into euros via Panama-based Coinapult services.
These casinos still only allow gambling with their own national currency, but Bitcoin is used as a payment option. The benefit of this is the elimination of risks with exchange rates for both the operator and the user. Further, if the player uses Bitcoin for deposit, betting, and withdrawal, the exchange rate risk stays with the player rather than the market.
What About Sports?
Just as is the case with other betting sites, sports betting is not to be outdone by anyone, including the prospect of gaining an advantage over users. Some sports betting sites, such as CloudBet, are revolutionizing the online betting industry by creating the most advanced system using Bitcoin seen yet. By using Bitcoin, users can access a highly intuitive site to place bets on any world event–at no cost. This innovative approach seems to be doing well for CloudBet since the site is receiving excellent reviews.
CoinBet, a Costa Rica-registered casino offers poker, sports betting, and casino gaming, all with only an email address and a password has recently been closed. Legitimacy is, according to CoinBet, their first offering to users since the US government cracked down on online gaming in 2011, although Infiniti Poker seems to be the rightful owner of that title.
For a while, at least, Costa Rica seems like it will be the center of attention for operators and players alike for a while since the government is not requiring casino operators to obtain and verify the identity of their players. This includes players from most US states and Canada.
According to one operator, their mission is not to bypass American laws, instead to simply give American gamblers a choice. This especially applies to this case since the object of the gambling is Bitcoin and not a government currency. This is predicated on the use of a test case, which has not happened yet.