Crypto corner: Blockchain’s foray into egaming

The online gaming industry is one of the many Holy Grail use cases for blockchain technology. The use case is so apparent that it could be fair to say the industry will be dominated by blockchain technology in the not too distant future.

Having previously worked in the online gaming industry for two companies and now the blockchain industry via my own business, Digital Asset Management (DAM), my perspective and vision for online gambling in the future is clear and bullish.

I must confess, I am left slightly disheartened by the lack of enthusiasm and perspective the ‘grey hairs’ in the upper echelons of the online gambling industry possess with regards to blockchain technology. The positive is that this is simply an education problem, one which is simple enough to solve, if the will is there.

The phrase and sentiment “if it ain’t broke, why fix it?” has been common in conversations that my wider network and I have had with top executives – but to this I say: “nobody plans to fail, they fail to plan”, and if blockchain is not in your business’ development plans or risk matrix, well, you are failing to plan.

High-risk cross-border payments and banking friction

We specialise in the buying and selling of these digital assets, their safe storage and all-round crypto treasury management.

Throughout 2019 we have seen a sharp increase in appetite for cryptocurrencies in the small to medium sized casino, sportsbook and games of chance brands, as well as corporate service providers such as PR firms, igaming software providers, datacentres and others which offer their services to gambling companies.

Why? Two reasons:

–  These firms are dipping their toe into accepting or issuing payments in crypto (and rightly so) or;

– The business is invoicing its corporate clients in bitcoin or other assets in order to remove banking friction. Banking friction which occurs because the online gaming industry is too high-risk to service properly, even if the companies are licensed and audited firms in EU jurisdictions.

So, what is the problem exactly? Let’s focus on the second point which will answer both. Without naming names, if you are a ‘blue chip’ online gambling business with wide brand recognition, chances are payments and everything that comes with banking is not a pain-point for you.

But if you are an SME online gambling business, chances are payments and banking are a daily headache for your finance team. You would have thought that having a licence to operate in Europe would be sufficient, but it’s not, at all.

Worryingly, gambling businesses often incur steep processing fees, compliance hurdles or complete impasses by either their bank or more commonly their bank’s intermediary.

Typically, the intermediary bank’s compliance will take the view that transactions from online gaming businesses are too high-risk for processing, leaving these small and medium sized businesses unable to pay office rent, their lawyers, software providers, datacentres, contractors and other corporate service providers and forcing them to use high-risk payment providers which take exuberant fees.

The solution, of course, is crypto. By invoicing clients in bitcoin or another digital asset, these businesses and corporate service providers are now able to request value and accept that value via digital assets.

And if they are onboarded with a digital asset broker, these assets can then be converted into GBP, EUR and others. This is something we are seeing grow month-on-month.

The crypto gambling market

Unbeknown to most, the crypto gambling market is gaining momentum month-on-month as well. As I alluded to earlier, gambling is a primary use case for blockchain, with almost half of the top 100 decentralised apps (dapps) betting-related.

Blockchains EOS and TRON have also solidified themselves as competitors to Ethereum. Together, they make up 74% of the top 100 dapps ranked by daily user count.

While most of the top dapps run on EOS and TRON, a majority of those platforms are online casinos that offer blackjack, roulette, and other games of chance powered by cryptocurrency.

Did you know the TRON network facilitated $1.6bn in gambling activity in the first quarter of 2019? This is only one blockchain which is celebrating its second birthday this month and gained independence from Ethereum in June 2018.

While some in my industry would say running the blockchain is the easy bit, adoption is certainly the hard bit. For this effort projects like FunFair.io and the HERO Network should be applauded.

FunFair-powered online casinos have enjoyed a massive upsurge in activity in Q3, with over 100 million Fun tokens – around $285,000 – wagered in a 72-hour period in July. Similarly, forging its way into adoption is the HERO network, an esports platform which is based in Vienna and has the goal of bringing back the social element to betting.

Its decentralised technology is initially going to be integrated into herosphere.gg, an existing platform specialising in esports prediction and fantasy that has already amassed more than 200,000 registered users.

While it is certainly still early days, it can be said that the marriage between blockchain and gambling is here to stay. While the divorce between traditional finance and gambling has only just begun, who will be the bird to catch these early worms?

Thomas Johnson brings a strong B2C, B2B and blockchain foundation to the DAM team. His experience with blockchain started in mining cryptocurrencies. With this entry into market it allowed him to explore the world of blockchain and digital assets further. He started to trade on exchanges and educate other people of the possibilities and risks of digital assets.