Blockchain And Cryptocurrency: The Future Of Online Gambling? – Technology – United States – Mondaq News Alerts

Blockchain technology is emerging as a game-changer in a widevariety of markets. As we explained in our prior post, Understanding the Intellectual Property Value ofNFTs, blockchain technology is the basis for creatingnon-fungible tokens, or NFTs, which have experienced astoundinggrowth in areas ranging from art to music to video games. Thisarticle discusses how cryptocurrency and blockchain technology arepotentially disruptive technologies for the online gamblingindustry.

In its simplest terms, blockchain is a decentralized, digitalrecord of all the transactions that take place using digitalassets. It is a database that stores encrypted blocks of datachained together to form a single chronological ledger oftransactions. In many cases, the data is distributed to create animmutable record of the asset's history that is accessible tothe public. The overall purpose of blockchain is to "letpeople-in particular, people who don't trust one another-sharevaluable data in a secure, tamperproof way."1

Blockchain set the table for the emergence of cryptocurrencies,which are decentralized digital assets that leverage blockchaintechnology to ensure security and prohibit double-spending. Whilecryptocurrency first emerged years ago, the recent wide-spreadpublic adoption has driven its growth. Many industries havebenefitted from the convenience and access that cryptocurrenciesprovide through user-to-user payment systems. The $60 billiononline gambling industry is particularly well-suited to capitalizeon the trend.2

The gambling industry has already embraced digital paymentmethods.3 Blockchain and cryptocurrencies can greatlyexpand this trend. As we explain, this technology can advancemission-critical objectives of the online gambling industry,including the security, validity, anonymity, and cost-efficiency ofthe industry's core transactions.

Blockchain technology in online gambling provides an added layerof protection for users because the databases record alltransactions and store the information in a decentralized ledger.This technology prevents the prevents the illegal trading ofdigital assets and reduces the risk of both hacking and paymentduplication.

Data privacy is a concern for many online gambling users becausewebsites commonly require them to disclose personal information,which creates hesitation among individuals who worry about how andwhere their data will be stored. Cryptocurrencies provide anopportunity for websites to eschew requests for detailedinformation because transfers of cryptocurrency are immediatelyvalidated by the public blockchain. This protection of userinformation further reduces the risk that personal data will becompromised.4

Relatedly, crypto-accepting gambling websites can provide userswith a streamlined registration process because of their ability tooperate without unnecessary personal information.5 As aresult, these crypto-friendly websites may be better positionedthan their non-crypto-accepting competitors to attract potentialusers, who can begin playing immediately upon providing only anemail address and a username.

Blockchain technology and cryptocurrency in the gamblingindustry also provides efficiency through instantaneous transfers.When online gamblers deposit cryptocurrency into a gamblingplatform, they do not need to wait for a bank or third-partycompany to verify the decentralized transactions, which are notcurrently controlled by a central authority. Instead, theblockchain immediately verifies the transaction and the platformlearns instantly whether it is valid.6

The decentralized nature of cryptocurrencies also makes themmore cost-effective than other sources of payment like credit cardsor bank transfers. Many cryptocurrencies-including Bitcoin-have nohidden transaction fees. Utilizing this form of payment benefitsboth the user and the platform, who avoid incurring costsaccompanied by traditional payment methods.

Overall, while blockchain technology and cryptocurrencies arenot new, the gambling industry is in its infancy in terms of marketadoption and implementation. Market participants will continue todrive the wide-spread adoption of the crypto asset class, which inturn will result in a broader use of blockchain technology anddifferent methods of utilization that can advance the gamblingindustry considerably. Of course, these benefits do not comewithout challenges, both technical and regulatory. Stay tuned forour follow-up article regarding the regulatory challenges theonline gambling industry will face as it inevitably moves towardsblockchain and cryptocurrencies.

Footnotes

1 Mike Orcutt, How Secure is Blockchain Really?,MIT Technology Review (Apr. 25, 2018), available athttps://www.technologyreview.com/2018/04/25/143246/how-secure-is-blockchain-really/.

2 Online Gambling Market Size, Grand ViewResearch (Apr. 2020), available athttps://www.grandviewresearch.com/industry-analysis/online-gambling-market.

3 Emerging companies like Cash2Go, for example,structured their business product behind the thesis that digitalpayment solutions would be a driver in the industry. Furtherinformation on Cash2Go is available athttps://cash2gocard.com/.

4 The Future of Blockchain Technology in the GamblingIndustry, Chipin, available athttps://www.chipin.com/future-blockchain-technology-gambling-industry/.

5 Anonymous Gambling in Bitcoin Casinos,CoinGambling, available athttps://coingambling.info/news/anonymous-gambling-in-bitcoin-casinos/

6 The Future of Cryptocurrency in OnlineGambling, BlockchainNews (June 11, 2021), available athttps://www.the-blockchain.com/2021/06/11/the-future-of-cryptocurrency-in-online-gambling/.

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.

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Blockchain And Cryptocurrency: The Future Of Online Gambling? - Technology - United States - Mondaq News Alerts