The State of Cryptocurrency Casinos: Still A Fringe Market

Some blockchain projects did a lot of thinking about what their “killer app” would be, and most decided that gambling is the answer. Even a perfunctory glance will show you that most applications involve some form of gambling or games run on chance. Clearly, blockchain wants a piece of the online gambling business, a sizeable industry worth more than $80 billion that’s set to grow significantly in the coming years. 

Blockchain casinos promised a lot, hyping the potential of the technology to serve as a novel way of reaching players. Some of the promises included anonymity, speed, a level of automatization and fairness based on the blockchain record. But in only two years, it became clear that most of the promises proved to a difficult target for blockchain projects to achieve. 

A blockchain casino doesn’t do anything that a real-money online casino can’t do. Adding a token or keeping an encrypted record are usually touted as revolutionary, but the consumer interface may be cobbled together in a hurry, and the game itself launched only to make a quick buck before disappearing into the ether. 

Traditional online casinos (you can select the full list on the famous Playcasino.com directory), on the other hand, are businesses with a long-term outlook, holding together skilled and dedicated teams to deliver a high-quality product and retain their customer base. Gambling blockchain startups are expected to easily capture a chunk of the large market. But they fell for the fallacy that a large potential market meant a ready-made audience and certain revenues. 

Simply put, gambling users from well-established sites were used to a certain quality and were not eager to take up the newly created games. As a result, the top 10 hottest gambling applications on all blockchains have only around 10,000 users a day, roughly making up 3.65 million potential users per year, not accounting for the slower days. Compare this to the estimate of 1.6 billion people making at least one gamble in online casinos each year. 

Unfortunately, it was difficult to train modern casino users to ditch a smooth and reliable experience for a new service that required a steep learning curve about acquiring and moving crypto assets. Users may need to download one, or many, digital wallets and be careful not to lose their keys or passwords. Some may need to create a blockchain account, a rather involved process requiring the purchase of some tokens from an exchange, and verify their documents for the KYC requirements. The number of blockchains, wallets, and assets to be used can bloat up quickly, each with their own flaws and requirements.

Blockchain casinos are also mostly following the model of traditional gambling sites. Projects started off with their own HTML5 casino platform, but later they added slot games from a third party, through an agreement with the already established Spike Games.

Blockchain-based computation proved to require significant resources and to be rather fickle about a service promising to serve a mass audience. Hence, some single games became minor hits. Fewer projects have a portfolio of several different games, with most are still attempting to add new functionalities.

Anonymity also went out the window, as regulators sniffed out the usage of digital assets. Now, transacting on a blockchain can actually point to casino usage, breaking anonymity. As for being unhackable and unbreakable, alas, there were failures. Blockchain casinos touted the usage of smart contracts, or various forms of coded behaviors, that automated some of the payouts. But the logic of those smart contracts contained holes and sometimes allowed a smart hacker to game the casino, stealing the supposedly protected tokens. 

And then, of course, came the tokens themselves. Casino chips are an intuitive tool, whether online or in real life. Real-money casinos issue their own tokens, which are not blockchain based. In fact, there is no need to base token balances on a blockchain, since tokens can simply be kept in a well-protected, backed-up database. Traditional online casinos immediately promise to pay back the value of those in-house tokens if the user wants to withdraw funds. Issuing non-blockchain tokens also comes with trust and a guarantee of fair prices. 

Suppose you won the jackpot and got a hefty reward of crypto coin X, Y, or Z? It would be your task to transfer that coin safely and then find a way to sell it to willing buyers. Unfortunately, some of the betting tokens are very unpredictable, and very hard to exchange into cash.

In theory, a blockchain can help achieve fairness and track some parameters to ensure that the lottery is not rigged. Supposedly, a game that is run entirely by algorithms, without the human factor, would be quite fair. But computers are dumb and always play by the rules - so they can also be played. 

In the blockchain space, there is a specific form of lottery, known as a FOMO game. FOMO, which stands for “fear of missing out”, is the rule of buying lottery tickets to the game until the winner buys the last ticket. The game’s organizers promise that everyone has a fair chance to buy the last ticket and claim the accrued sum. However, the game’s creators can actually act together to clog up the blockchain, so that nobody can send in their transactions. And what use is a highly protected, anonymous, immutable transaction if it never really happened? 

So there goes the concept of fairness - with enough funds, understanding, or computational power, a bad actor can attack some of the games. 

Various cryptocurrency-based casinos are built on multiple newly launched platforms with very different parameters. It is yet unknown what problems are hiding in the code of gambling apps on TRON, EOS, or Ethereum. Developers are still discovering how to create the best products, while using a complex, unreliable ecosystem and paying steep fees for each computation.

Even the decentralization of blockchain casinos is not quite limitless. Blockchain-based gambling apps found out they had to acquire a gambling license to avoid breaking the law. They also have to use regular Internet infrastructure, and several projects rely heavily on Amazon Web Services or other cloud solutions. For some networks, the production of the blockchain is in the hands of a relatively small minority, making it not much better than regular hosting and computational resources.

For most games, having a blockchain record of the events does indeed ensure fairness. However, if the game’s logic is faulty, or intentionally rigged from the start, the immutable record won’t help much.

The state of modern online casinos is a whole different experience. Blockchain games may be automated and trustless, but having a working product with a customer service team beats trustlessness when it comes to user experience. 

Online casinos went through decades of evolution since their inception in 1994. Modern casino infrastructure has nothing in common with the first games. Now the booming industry makes use of the very latest technology, while complying with complex worldwide regulations. Online casinos are wholly transparent, while remaining confidential enough for their users. Their 24/7 operations include customer support, as well as multiple convenient and highly secure modes of payment. 

Modern online casinos are already cashless, offering secure, responsible handling by established means of payment. Casinos offer global or local forms of payment, including cash deposits or payments through local e-cash systems. Modern online casinos also belong to highly competitive businesses, with enough resources to optimize their casinos for all types of devices.

Online casinos even recruit competitive players to the World Poker Series, securing their status as satellite sites to send players to the prestigious tournament. 

Despite the setbacks, real-money online casinos remain a growing industry with the capacity for constant innovation. Waiting for the blockchain counterparts to deliver might be a fruitless endeavor. If you’re up for a gamble, just choose your favorite out of the market leaders and get on it!