With bitcoin spiking at the end of November at above $10,000 per coin, the first time it has reached that level, the cryptocurrency world has never looked so bubbly. Some see bitcoin’s bullish run extending for years, with the price reaching six or seven figures. Other industry pundits expect a sharp crash any time now, with the market cap already very much overinflated.
The truth is that nobody yet knows how bitcoin is going to play out, and there’s even greater uncertainty surrounding the numerous initial coin offers (ICOs) and cryptocurrencies now entering the scene. But there’s no doubt of the appetite today to invest in these new ventures, with many raising eight-figure sums in their ICO sales and pre-sales. The argument has been made that a large proportion of these funds is coming from very early adopter bitcoin multi-millionaires, but that’s largely unproveable.
One of the defining features of almost all cryptocurrencies is the decentralised nature. Such coins and tokens have been digitally created, validated, and traded peer-to-peer largely without a central bank or any other entity overseeing or inferring value upon them. The technical details behind “proof of work” justifying cryptocurrencies’ value and the associated debates are beyond the scope of this piece. Still, a host of issues have clearly been raised concerning regulation, illicit use of funds, and the functioning of a black market for, among other things, tax avoidance.
With decentralisation comes the potential for disruption, and many new ICOs have set out explicitly to disrupt and shorten margins in existing industries. One recent coin by the name of INS has as its stated aim the disruption of the international grocery market (worth some $8-9 billion) with a service to link wholesalers and consumers directly and securely.
What does all this mean for the gambling industry? Like it or not, it seems likely that, given time, some major shake-ups are in the works. For now it’s still relatively easy for a cryptocurrency to set itself up as offering gambling services, provided it is located in a friendly jurisdiction for such efforts, and that it is able to obtain the required licenses and permissions; with time, such services can only grow.
When creators of new currencies withhold a percentage of total coins, to be issued to themselves as the developers, they profit from a rise in their coin’s trading value. If that currency is used in the gambling business, the developers don’t necessarily need large profit margins at the point of play; they stand to make a lot of money if the demand for their coins increases. So these ventures can, in theory, offer games much closer to the breakeven point (or even demonstrably “fair” games at the breakeven point), which traditional casinos either online or live would never dream of offering.
Until recently cryptocurrencies have largely flown under the legislative radar, but regulative bodies are becoming more aware of them, and the crypto world is making increasing efforts to legitimise itself and its undertakings. Let’s take a look at some of the most significant developments within the European gaming industry in recent months. The cryptocurrency stealing the limelight at the moment is without a doubt UNIKRN, which in early October was awarded a gambling license in Malta. UNIKRN offers their UnikoinGold token for e-sports betting, and is expected to expand its real money gaming across much of Europe in the near future.
This is arguably the first fully regulated form of crypto-gambling to be offered in Europe; UNIKRN’s activites were previously limited to the UK and Australia, where it has held gaming licenses. It will continue to offer play using its free-to-play token for users outside of these jurisdictions, in the form of UnikoinSilver. Chief Executive Rahul Sood is said to very much want to work within existing regulative structures, and thereby enhance the reputation and the trustworthiness of his cryptocurrency in the gaming industry.
Competitors of course are not far behind, with Ultraplay’s eGold set to launch its own token sale in December, planning to be active in Europe as well as across numerous parts of the globe.
Malta of course has set the lead in Europe; in September its Prime Minister said that the country’s aim was to be the first to regulate cryptocurrency and the blockchain technology. It remains to be seen how other jurisdictions ultimately respond to the presence of crypto in the world economy. But it seems certain now that these currencies are here to stay, and likely to make significant inroads into most industries, especially those with a pronounced technological presence, such as online gambling.
There may well be a post-bubble crash, at least for bitcoin, but the companies that emerge from the ashes will still present some significant challenges to traditional corporations. We’re also likely to see significant uptake from within the industry, with established brands launching coins of their own.
In the long run I expect that the disruption from crypto ventures will be fairly significant to the current gambling industry. Blockchain verification is something which no human need oversee or confirm to bestow value upon a minted coin (or mined unit of currency) or, as with Ethereum, to sign off on a legally valid “smart contract”. Fair gaming is one thing which crypto gambling efforts are naturally quick to seize upon as something that they can champion, and on which they can offer industry-leading improvements. When coin-based efforts are offering better odds to punters, and taking thinner margins, they may prove very challenging to existing gambling outlets.
On the progressive side of developments, I predict that arising from ventures in the crypto-gaming sphere will be initiatives in social responsibility, redistribution of corporate profits to the community, and problem-gambling awareness. But for all that to become possible and indeed sustainable, the crypto-sphere will need to mature, and take on the fiscal responsibilities bound to accompany the upcoming legal and political scrutiny it is now set to receive. That may all take a while, and in the meantime there will surely be more scams, buggy codes, hacks, and pump-and-dump schemes in what is already a chaotic landscape. We may have to wait for the air to clear, post-bubble, to really see the lay of the land ahead.7
