Both online gambling sites and users are lining up to use the popular crypto-currency Bitcoin. Why? Well, there are numerous reasons really. Bitcoin has a lot going for it, not the least of which is its conspicuous distance from any central bank. It’s a digital currency that was created entirely by an algorithm, making it immune to a lot of the drawbacks associated with traditional currencies issued by governments and central banks.
It also has several important advantages specific to the gaming industry.
Bitcoin Has Low Transactional Friction
When you throw money onto the tables, you don’t want a lot of transactional friction. In other words, you don’t want to pay a fee to gamble. But, with traditional payment methods, this is almost inevitable. On the user side, wire transfers can cost more than the first bet, and credit cards have an obvious drawback – interest and other finance-related charges.
Bitcoin is a win-win for everyone. Even though it only accounts for a small fraction of total revenue flowing through live casino online gaming, it’s an important revenue source because it carries a low per-transaction cost.
In many cases, there is no cost, which boosts profits for the casino and allows gamers to play with more money than they otherwise would be able to.
Transactions Are Transparent, Secret, and Yet Traceable
Unlike any other payment option, Bitcoin is both transparent and yet still anonymous. How can this be? Well, the transparency comes from block chain – a ledger where all transactions are recorded. The blockchain is distributed so that all transactions are independently verified. This verification system also prevents double-spending.
At the same time, transactions do not reveal the owner of the Wallet ID used to make transactions. In that sense, all transactions are anonymous. So, users can spend freely at a casino without anyone knowing.
Why would a user want to be able to do this? Is a user doing something he or she isn’t proud of, or is it immoral? No, not at all. Think of it like this: you wouldn’t invite a stranger over to watch you take a shower or go to the bathroom, would you?
Some activities are, and should be, totally private. Some gamers view gambling as a private activity. It’s no one’s business and they don’t want others to know that they are gambling. Bitcoin gives them that anonymity. At the same time, the transaction itself is recorded. So if there is any type of illegal activity going on, like money laundering, it can be monitored and stopped at the casino level.
Using Bitcoin is safe. Because transactions are one-way, there’s little chance that the casino can be ripped off by unscrupulous users. A common tactic used by crooks is the credit card chargeback scam.
In this scam, users deposit money into the casino, then let their deposit sit. Without touching the funds, they initiate a chargeback and then withdraw the funds from the casino.
Sometimes, casinos have rules about withdrawing money, so, a user might try to fulfil those obligations by placing the minimum number of bets before withdrawing money.
The withdrawal is timed to occur after the chargeback. In this way, the user gets to receive his money back plus his credit. So, for example, a user may set up a phony casino account (using a pseudonym) and try to charge a credit card for the deposit. If he deposits £500, and uses a credit card, he will have £500 in the casino, and a £500 charge on his credit card. But, suppose he then called the credit card company and reported fraudulent activity?
He could get his credit back and, if he times the withdrawal from the casino properly, he could get money back from the casino too. He’s up £500 and the casino is scammed out of £500.
With Bitcoin, this scenario is impossible to pull off because the transaction cannot be reversed.
There’s No Inflation
Unlike every fiat currency issued by a government or central bank authority, Bitcoin is immune to inflation. The total number of Bitcoins in existence is limited algorithmically. This means that the number is fixed and cannot be increased.
This gives some kind of assurance to users that, over the long-term, Bitcoins will hold their value. They may not hold their value relative to other currencies though, because those currencies are subject to inflation.
Over time, as the world’s currencies are expanded through central banking policies, Bitcoin is expected to hold its value due to the fact that no more Bitcoins can be mined beyond the predetermined limit set when the currency came into existence.
This kind of stability should only make it easier for both users and casinos to operate, knowing that today’s bet isn’t on the value of their holdings, but rather the outcome of the game.
Kiera Hyde is an avid online poker player and a bitcoin enthusiast. She has been keenly following how the two platforms are merging and she enjoys sharing her research and ideas online.