Pulse

BetDEX: the blockchain stops liquidity fragmentation in sports betting

By William - 2 April 2024

A singular liquidity pool for sports betting. Fee compression forcing operators to compete on product experience. Funds always transparent and publicly available.

Ahead of speaking at SBC Summit North America, Varun Sudhakar, CEO & Co-Founder of BetDEX, discusses the technical capabilities of blockchain for sports betting.

Varun, could you begin by telling us more about your career background?

I started my professional career in tech investment banking, and then worked at FanDuel for a number of years in strategy and finance roles. Though I had been playing daily fantasy sports and betting on a personal level, this was my initial introduction into the gaming world from an operator perspective.

After we sold FanDuel to Paddy Power Betfair (now known as Flutter), I left FanDuel to work at a number of startups in senior operational roles before starting BetDEX in late 2021.

Take us back to the formation of BetDEX. When, how and why did the idea germinate?

The initial spark for BetDEX actually started a few years ago while I was still at FanDuel and saw how massive the market was even though it was rife with poor user experiences. Upwards of 10 per cent fees, counterparty risk (i.e. operators disappearing with your money), and discriminatory practices (i.e. charging extra fees to winners or making it arbitrarily difficult to withdraw your funds if you hit a big win) were not exceptions, but industry norms.

We wanted to create a fair, transparent and even playing field that did not discriminate against smart bettors, and that’s why we started BetDEX.

Where does your interest in blockchain and Web3 stem from?

I was a casual observer and passive participant in the Web3 ecosystem from 2015 onwards, yet my real interest in blockchain arose in 2021.

I had been discussing ideas with my now co-founders about ways to fix the poor user experience in sports betting, but we kept running into the issues of trust and liquidity fragmentation. And we realised that the blockchain can solve these issues.

The underlying reason why operators can act with such impunity is because of the liquidity fragmentation in sports betting. For example, the price on the Mavericks to win tonight will be different on Ladbrokes, Bet365, Bovada, Shuffle, etc.

The amount you can bet at each operator will vary, the fees will vary, and the ability to withdraw any winnings may differ depending on the operator you choose to bet with.

Contrast this with the financial world, a share of Apple costs the same whether you purchase it via Revolut, Robinhood or eToro. The ‘operator’ in this case doesn’t dictate how many shares you can buy – that’s determined by what’s available on the market.

It’s typically dirt-cheap or even free to buy a share. And you won’t have any difficulties in selling your share or withdrawing any proceeds unless you’re a bad actor and laundering money.

Now imagine a world where the sports betting world is similar to the financial world in that there is a singular liquidity pool for sports betting.

There will lead to fee compression forcing operators to compete on product experience, and your funds are always transparent and publicly available. That’s what the blockchain enables.

Whilst companies are putting increasingly more effort into blockchain and Web3, why is most marketing and development time going into Web2?

Web3 is an exciting industry but it is still in its infancy. Marketing and development will continue to go into Web2 as that is the main cash generation engine for many companies until Web3 becomes more mainstream.

You are already starting to see early signs of the latter occurring with venture capital dollars pouring into the Web3 ecosystem, and real and massive web3 businesses such as Coinbase thriving and succeeding.

Who comprises BetDEX’ leadership team?

BetDEX is comprised of many early employees of the traditional sports betting platforms including FanDuel and Betfair. Led by co-founders, Varun Sudhakar, Nigel Eccles, and Stuart Toner, who were all early executives at FanDuel.

BetDEX’s decentralised sportsbook model is unique to the betting industry. But are there similar or comparable models in other tech industries?

Certainly, two other businesses immediately come to mind, both also incidentally built on the Solana blockchain!

Helium: Building a decentralised network for cell phones towers, live in the U.S. Recently launched international roaming this week.

Hivemapper: Building a decentralised global map, a competitor to Google Maps. They have already mapped over 15 per cent of the roads in the world.

What are the limitations of centralised platforms, and how does BetDEX address these?

1. Ability and willingness to arbitrarily discriminate against users

As we are built on an open-sourced protocol which anyone can access, we cannot discriminate against our players. If we did, users would just access the protocol via another operator or even directly.

2. Counterparty risk

Wagers are held on publicly audited, transparent and auditable smart contracts. The money can never just ‘disappear’ even if the operator does.

3. High fees

BetDEX charges all players three per cent of net winnings in a given market, so you only pay if you win. This is in contrast to centralised operators where margins are often above 10 per cent.

As a trailblazer, how important is the education piece to onboard new users? It’s difficult to become a recognised and trusted platform in the betting industry. What is BetDEX’s marketing message?

Education is very important, especially when most sport bettors are not used to or familiar with the blockchain. This is an area that we spend a lot of time in to bring users to our platform.

In terms of our value proposition, if you are a bettor who wants to place a wager at a venue with great odds, which is easy to use, and welcomes winners – come to BetDEX.

Where is BetDEX regulated? Are authorities generally open and amenable to the decentralised model?

BetDEX is currently licensed in multiple jurisdictions including Ireland. While we have had generally positive experiences with regulatory bodies, there is still an element of education that is required for web3 projects when going through the regulatory process.

BetDEX has an open-sourced back-end, the Monaco Protocol, built on the Solana blockchain. What does this mean for users?

The Monaco Protocol is an open-sourced on-chain matching algorithm, orderbook and liquidity pool – which is open to all developers to build on, to provide liquidity to, or to access.

We believe that democratised access will result in new ideas, platforms, and designs that will ultimately benefit all Protocol users.

In contrast to legacy betting platforms, operators (such as BetDEX) don’t need permission to build on the Monaco Protocol. Similarly, they can’t be kicked off the Monaco Protocol like they could if they were built on top of a centralised exchange.

Furthermore, liquidity on the Monaco protocol is pooled, leading to great prices and depth for users.

What’s next in the technical development of BetDEX?

Without giving too much away, in a matter of weeks you will be able to deposit onto BetDEX with a variety of options including USDC (a stablecoin), bank account, credit card, debit card, and more.

Users won’t need to purchase any crypto (SOL) for gas fees, and will be able to bet instantly. The onboarding, deposit and betting experience will be better than it is with traditional operators like Betfair, Matchbook, Pinnacle, etc.

For programmatic traders and institutions, we are greatly improving the documentation and creating new API access points which remove the need to deal with blockchain-specific concepts like ‘RPC nodes’.

In other words, we are abstracting away the complexities of the blockchain while providing users with the benefits. This will greatly expand our reach and ability to onboard a wide variety of users.

What’s the long term vision for BetDEX?

The long term vision is for BetDEX to become the preferred betting platform for users with the best odds, lowest fees and the largest selection of bets on an easy to navigate platform.

We want to be the go-to platform for price sensitive bettors who are looking for a place to bet with great odds that is easy to use and doesn’t discriminate.