Building blocks: Matchbook’s CTO on the power of blockchain

If I had a bitcoin for every time I heard someone ask whether our industry was ready for cryptocurrency and blockchain, I’d have enough of them to be worried sick about the downward direction of recent price movements. If you haven’t been watching it, go take a look. Bitcoin is following the classic boom-bust cycle that all speculatively driven markets eventually experience.

The price of bitcoin has gone from $1,000 a coin just 12 months ago, to a high of almost $20,000 in December 2017 and has crashed back down to under $8,000 at the end of March 2018.

With stability being an essential component of any usable currency, bitcoin and its promise of a decentralised and unregulated global currency is in a serious crisis. So rather than asking whether we’re ready for crypto, I think the more appropriate question is whether crypto and its blockchain technology is ready for us.

The truth is that bitcoin appears to be too volatile to be used as a currency right now. Even its greatest supporters are now positioning bitcoin as an asset class rather than a currency. This is making it virtually impossible for even the most adventurous payments companies to use it successfully.

For example, Stripe recently pulled support for bitcoin citing that the price was so volatile that by the time a transaction had been confirmed it was for the “wrong amount”.

Bitcoin is also suffering from other technical challenges: transaction confirmation times are slowing down massively. In some cases, they now take up to 37 hours whereas just a year ago they took 20 minutes. It also has a significant scaling problem with some bitcoin exchanges topping out at just seven transactions per second.

In the betting industry where handling thousands or even tens of thousands of transactions per second is the norm, these kinds of speeds are a big concern. Bitcoin likely has a long way to go before it’s ready for use as a major payments solution in the betting industry.

People power

Moving our attention to the underlying blockchain technology, the story isn’t quite as bleak, but it still has its challenges. In a nutshell, blockchain is a distributed, transparent and immutable database technology that makes bitcoin and other cryptocurrencies possible.

It’s designed to solve the problem of trust between two parties wishing to transact online. Yet despite its undeniably ingenious design, blockchain is becoming known as the solution in search of a problem.

People are starting to question whether the web actually needs a distributed ledger. Can the betting industry unlock blockchain’s true potential? Maybe.

We’re certainly not short on ideas. For instance, there are some potentially very disruptive concepts emerging across the industry whereby blockchain technology could facilitate direct peer-to-peer betting without the need for a trusted third party.

This could, in theory, allow bettors to match each other’s offers directly on their devices rather than on a centralised exchange or sportsbook. Other novel industry concepts for blockchain include a distributed AML initiative, greater transparency on betting market activity, and innovations related to responsible gaming.

All potentially very worthy and important projects. Despite its challenges in the short term, I’m very optimistic about blockchain technology in the long term.

The collapsing bubble we’re seeing in bitcoin today and the challenges in leveraging blockchain technology is similar to what we saw in the early days of the internet and the subsequent dot.com bubble at the turn of the century.

But we eventually figured out how to build successful products for the web and I think we’ll do the same with blockchain, but who knows where the price of bitcoin is headed.

Iarfhlaith Kelly, Matchbook CTO