Pulse

The Chain Gang: Crypto iGaming

By Lewis - 9 August 2021

The iGaming market is slowly opening its doors to cryptocurrency as it continues to establish itself as a medium of exchange and a legitimate alternative investment.

Leandro Rossi, Lloyd Purser and Shalva Bukia share their thoughts on the advantages of becoming crypto-friendly, how it can be the differentiator in a congested space and whether blockchain will be the next driver of seismic change in the iGaming industry.

How prominent are crypto-friendly casinos built using blockchain technology?

Lloyd Purser, Chief Operating Officer at FunFair Technologies: First off, it’s key to define the terms “crypto-friendly” and “blockchain technology”.

Many casino operators use crypto as a payment mechanism, by converting bitcoin or another crypto coin into FIAT currencies. Users then play using the casino’s currency of choice (USD, EURO, GBP, etc.). Ultimately, the players never interact with blockchain technology during gameplay within the casino after that initial payment function.

However, actual blockchain casinos run on smart contracts recorded on a blockchain with users betting and winning cryptocurrencies.

Crypto-friendly casinos are very prominent in the industry, with Bitcasino, Fortune Jack, Bitstarz, and many others touting their crypto payment capabilities. True blockchain casinos do exist, in fact we ran three successfully for three years, but the infancy of the network caused it to become a victim of its own success.

This drove costs through the roof, so we shut down our blockchain casinos until a better scaling solution on Ethereum can be found. That will come soon, but blockchain as a mass market proposition is still very early days.

There are also games such as Bustabit, played purely with a cryptocurrency and executed via smart contracts on a blockchain, using popular crypto mechanics like bankroll staking and rewards. Such gaming experiences are popular with younger audiences, with Bustabit alone registering $80bn worth of bitcoin.

Shalva Bukia, Product Director at Spribe: Blockchain and crypto casinos are a captivating story: one might think that crypto-friendly casinos are ones that simply accept Bitcoin and other crypto currencies, but the reality is much more interesting: crypto only casinos emerged not from traditional iGaming, but rather as a mix of video-game driven iGaming and social solutions.

This is a different breed of casino, with its own rules. These games became popular between Millennials and Gen-Z (early adopters of cryptocurrencies) and now are migrating to traditional iGaming with disruptive success. We at Spribe specialise in this kind of games and seeing immersive growth in these so-called “Smart” or “Arcade Games”.

Blockchain casino is a bit of a different story: it solves the issue of trust, since smart contracts are your guarantee of fair and instant payout in the case of a win. There are no waiting times or reviews when you want to withdraw your win money – there is no withdrawal process either, since all transactions are on-chain and instantly attributed to your crypto wallet.

Interestingly enough, one of the first real use cases of Bitcoin and Ethereum Blockchain were in fact crypto gambling apps. As technology matures and new blockchains emerge, we are also seeing emergence of new blockchain casinos. Bitfury is a good example of this: initially started as a Tron-blockchain casino, it is currently quite successfully migrating to traditional iGaming market.

Leandro Rossi, Director at Cloudbet: Let’s look at that in terms of our own growth. The bitcoin price skyrocketed earlier this year and then pulled back, but what’s interesting is that our numbers are still strong, even as bitcoin prices declined. We can take that as a sign that across the landscape of global gaming, crypto or at least the parts that we see, are most certainly growing.

We believe this to be the case with other crypto operators as well. It’s getting to the point globally where players are understanding more and becoming more comfortable transacting with crypto generally.

Crypto adoption in a retail sense hasn’t exploded, but certainly the benefits of crypto, the ease of movement is becoming more embraced by a lot of people. So crypto gambling has grown, and crypto gambling’s prominence or importance as a piece of the whole pie also has grown.

Have we moved beyond a fad or a niche part of the gaming industry? Without a doubt. For us, it’s been just short of eight years that we’ve been in the market and our numbers continue to grow. We can say quite firmly that if this is a fad, it’s got a long way to go still. Crypto will play a role in this industry for some time to come.

Will blockchain be the next driver of seismic change in iGaming? Or is that change already happening?

Shalva: If we are talking about blockchain casinos we need to understand the following: for true blockchain-based casino, you need blockchain-based games. In order to utilise the full potential of blockchain, the game engine should be different.

This is no small feat: we are talking about completely rewriting and adapting popular games to the blockchain. As in everything, it all comes down to economics: is it worth it?

First let’s ask what problem blockchain actually solves. As I mentioned before, blockchain is a guarantee of transparency and fairness. You are 100% sure, that output is completely random and that you will get your win instantly, no matter the amount of money.

Now, trust is not an issue in the western, regulated markets: most licenses are a guarantee that you are getting your jackpot. This is not always true in grey zones and non-regulated markets, where casinos can halt your withdrawal with no explanation given.

In this regard, I think blockchain casinos will meet their audience and go mainstream, but this will be not a revolution, rather co-existence.

Leandro: It’s been a gradual movement and it’s already happening. Some of the major fiat operators, some of whom have been around a long time, are transacting with crypto. Some are even transacting more with crypto than with fiat currency right now.

There’s been a step-by-step movement there. Most of them are using crypto just for payments and converting ultimately into dollars, euros, pounds, but what’s driving that is customers are becoming more comfortable using crypto.

We can see that becoming a bigger trend and more and more operators becoming more comfortable with crypto as they become more aware of this notion that their customers are becoming more comfortable with crypto.

We wouldn’t be so brazen as to sit here in this small niche against this huge gaming backdrop and say that operators who don’t embrace crypto will be left behind, but the reality is that the payment benefits for the customer are so profound that if you don’t give them the choice, then they may start to lose customers to niche operators like the crypto operators. Are we winning customers away from major operators? We would say firmly, yes.

Lloyd: Currently, blockchain can be clunky to those unfamiliar with how the technology works. But as with most disruptive technologies, there’s much higher adoption among the next generation of users.

The underpinnings of any casino can be improved with blockchain technology by providing more transparent gaming experiences and thus more trusted casinos. But moving casinos away from the major platforms will take time, or for those existing platforms to build in blockchain technology.

The bigger change will come when those social, multiplayer, and engaging blockchain games currently being played within the crypto world make it to traditional casinos.

How do online casinos become ‘crypto friendly’? What are the challenges involved?

Lloyd: Becoming crypto-friendly is simply a case of introducing a new funding mechanism to the operator’s current platform. Like taking payments from MasterCard or Visa, a crypto payment provider will take the current price of any cryptocurrency, sell for that price and then fund the user’s account with a FIAT currency.

Some funding providers continue to offer this service, ensuring that casino operators don’t need to drastically change their back-end setup. Most payment providers also offer a FIAT currency settlement service, so the operators are not subject to crypto volatility and the whims of multi-billionaires on twitter!

However, offering the type of game that crypto users want to play can be much more complex. Traditional slot games are solitary, and players don’t make active choices like the types of games that have proven so popular in the crypto space. To become genuinely crypto-friendly, casinos must offer the payment options and gaming experiences users are looking for.

Leandro: It’s much, much easier now to integrate crypto. There are services out there that will handle all the crypto parts for you as an operator, and you’ll get dollars, euros, pounds in your credit account.

You’ll manage your accounts in dollars, euros, pounds, so you could use crypto the same way you accept any currency from an operator’s perspective. That’s been the case for a while. Those facilities are good, and those barriers are low.

We don’t think it’s a technical barrier to adoption, more so it’s a strategic consideration. Is it strategic for the operator to do it – is there demand for it, and is the operator comfortable with the risk?

The companies processing payments for betting operators are younger firms, they’re start-ups and tech firms that have been around similar to the time that we have, or shorter than us, so are the older operators comfortable dealing with these upstart payment processors as they build track record and transaction history.

Should operators want to start taking, laying bets in crypto, which is now volatile, that’s still quite difficult if you’re an incumbent operator. How do you manage risk? How do you get comfortable with the notion of holding crypto on the balance sheet? How do you manage treasury when the assets are digital, how do you store them safely, how do you transact safely?

It’s a complexity that the larger operators will need some agility to achieve, which is why you’re seeing that the crypto companies are new companies. They’re start-ups, starting only in the last seven to eight years, building from scratch when they have the agility to build those things. The way that some of the incumbents are embracing crypto is without taking the bets in crypto.

The barrier to entry for an incumbent operator with a lot of existing systems and protocols, to be able to take bets denominated in crypto, is still quite high. But if they invest in it, they could achieve it. As for being able to take payments in crypto and not hold crypto on the balance sheet, that’s much less work and that’s something that they can do very quickly and very easily.

Shalva: On the other hand we are seeing traditional players integrating cryptocurrencies as a form of payment. I believe this trend will only grow, since adoption of crypto is going at full pace: some of the biggest players, like Paypal, Visa, even Apple, if we believe rumours, have announced or have plans to integrate cryptocurrencies.

With more adopters, adding cryptocurrency as a form of payment will be a must. Currently one of main barriers of crypto integration is lack of regulation and uncertainty in KYC process. We are seeing positive developments here as well: SEC representatives already hinted that regulations for crypto are on their way.

How important is having multiplayer crypto games for operators’ portfolios?

Lloyd: Incredibly important. There will always be a place for slot-based entertainment, as it remains a huge revenue driver for most casinos. However, it is also becoming apparent that simply adding a chat feature to an existing game is not the experience that new players are after.

The next generation of gamblers grew up with mobile phones and social media – and they want to share wins with their friends and actively engage with the gameplay. That’s what’s driving interest in the crypto multiplayer gaming we’ve encountered in the blockchain space.

With 27 per cent of men in the UK owning a cryptocurrency, providing a crypto-friendly payment system with a true blockchain gaming experience seems like a no-brainer.

Shalva: Trends are changing at a faster pace than ever, the entertainment industry and iGaming is no exception. Initially video slots and roulette were the most popular genres in the newly emerged online casino industry, simply because players were familiar with them from offline casino world.

Today’s landscape is changing: new users are introduced to betting & iGaming online. They are also coming from different backgrounds: a new generation is growing in the digital world, where online social interactions are the new normal. Multiplayer games are the default entertainment in the ever growing video gaming industry.

Millenials and Gen Z players are looking for something similar in the iGaming world. Newly emerged multiplayer “crash curve” games, like Aviator, are a perfect example of this: emerged just about five years ago, in the crypto casino industry, now they are booming in the traditional iGaming world.

With Aviator, we are experiencing exceptional success in every casino launched: product quickly becomes one of the top performing games, especially within Gen Y players. We believe this trend will only grow in the future, since the newer generation already has certain standards when it comes to online entertainment.

Leandro: There are a couple ways to look at this. First if we consider games like poker or other games that you play against other players. Poker is complicated. You must manage table liquidity. There must be a game available to you at all hours that you want to play at the stakes that you’re comfortable with and the games that you’re comfortable with.

There’s a lot of management to do, and you must enact anti-fraud measures, anti-collusion measures. It’s big, messy stuff and ultimately as the house, you just get the rake. You don’t take positions against a player.

Poker was once profitable but then became difficult, there was collusion and sophistication around it and how good the good players became, such that the recreational players would lose increasingly quickly and the rake the house would take would become increasingly small.

Over time, operators have stopped offering it, there are fewer poker sites now on the Internet than there would have been five years ago. But the operators that do offer it, we suspect do it at break even or at a loss because you don’t want your players going somewhere else.

You want them to stay with you and do everything with you. So, that’s one argument for why you would have this type of multiplayer experience.

A different way of interpreting that multiplayer element is in the types of different casino games that people are now playing. If you consider games like Aviator, which offer a group of players a community-type gaming experience, these are quite interesting and are now among our most popular offerings.

Aviator is where you have a group of players all watching how far this rocket ship goes and holding on to their stake and betting on when the rocket ship will crash. They all want the rocket ship to not crash, and players take different views on when to cash out but they’re not rooting against anybody. This is accompanied by a chat function, so they can interact with each other. They can share in each other’s successes and commiserate over each other’s down moments – that kind of game has become so engaging and so popular.

In the multiplayer sense, that is a key type of game, in that players increasingly seem to want a community gaming experience. They want to be able to share in the wins and losses of others.

There’s nothing that’s specifically crypto about games like Aviator, but they were embraced by crypto communities very early on and they were built as provably fair games. They are popular and certainly showcase that there’s demand from players to have a community experience, not just a private gaming experience. That’s the other way to look at multiplayer gaming.