The words cryptocurrency and blockchain have been thrown around the last couple of years as the hottest buzzwords in technology. However, they are commonly used interchangeably when they shouldn’t be. This misconception is found frequently throughout the iGaming industry. If you are an iGaming operator looking to provide the latest technology to your bettors, it is important to know the difference between accepting cryptocurrencies as a payment rail, and using blockchain technology in your actual products. To help you understand the differences, we created this brief outline.
Cryptocurrencies operate on a blockchain, or ledger. Some examples of popular cryptocurrencies are Bitcoin, Litecoin, Ethereum, and BSC. Cryptocurrency is denominated in units (for example 1 Bitcoin) and can be broken down into much smaller pieces (for example 0.0005 Bitcoin). Cryptocurrency is generated by a variety of means, such as proof of stake, and proof of work which will be linked to in more detail later in this article.
Commonly, cryptocurrency is interchanged with the word token – which in most cases is appropriate. Cryptocurrency is the native asset for the blockchain it lies on (i.e. ETH on the Ethereum blockchain), tokens are built over an existing blockchain. Ethereum and BSC (Binance Smart Chain) are two of the most common blockchains that token developers use when creating their tokens. Examples of popular tokens built on the Ethereum blockchain are Augur (REP), Uniswap (UNI), and Decentraland (MANA) amongst thousands of others.
While every cryptocurrency has its own quirks such as the number of units in existence or means of production (i.e. proof of stake vs proof of work), cryptocurrencies as a whole are an excellent payment rail for iGaming operators for some of the reasons discussed below.
Broadly, cryptocurrencies are faster and cheaper than traditional payment processing options. Moreover, they provide an added layer of privacy for players (will not get bank or credit card statements saying they deposited at “xyz”), are universally available (do not require local payment processing partners), and remove the possibility of chargebacks. Operators who utilize cryptocurrency as a payment gateway are able to attract customers in markets where there is a dearth of traditional payment rails. Plus, with cryptocurrency wallets being easily accessible via mobile devices, cryptocurrency has become one of the best payment options for the “unbanked.”
As mentioned previously, cryptocurrencies operate on blockchains. Blockchains act as decentralized ledgers where transactions are publicly recorded and immutable, removing the need to rely on a third party to verify the record of data. This data is stored in what is referred to as blocks. Each block has a time stamp and is publicly accessible. For example you can view a block on the Bitcoin blockchain here.
Other uses of blockchain include smart contracts. Smart contracts are self-executing contracts which can be built over blockchains. One of the most popular uses of smart contracts at the moment is for another hot topic known as non-fungible tokens, or NFT’s. The process through which NFT’s are minted is via smart contracts. Since smart contracts are built over blockchains, the terms are publicly viewable (i.e. You send 0.01 Ethereum in exchange for “x” NFT) which creates transparency. They are also irreversible which removes the element of need for trust since there is no chance of chargeback or dispute. But be careful, once a smart contract is deployed it can never be altered except in very rare circumstances.
Payment Processors vs Native Integrations
When choosing to utilize cryptocurrency as a payment rail there are two options available: to use a third party payment processor, or to build a native in-house solution. The majority of iGaming technology providers who offer cryptocurrency as a payment rail integrate a 3rd party to handle the transactions as it quickens the deployment time, minimizes up-front cost and requires less technical expertise. Generally, cryptocurrency payment processors charge much lower fees than traditional cashier systems, with typical costs per transaction under 1%.
While going with a native solution costs more initially, it also eliminates transaction costs as well as the reliance on a 3rd party provider. In order to utilize blockchain technology, such as smart contracts, an operator would also need to use a native solution opposed to one provided by a 3rd party. Contact Lion Gaming to learn about the differences between native integrations and payment processors in more detail.
While the use case for cryptocurrency has already been outlined, blockchain technology itself provides value to iGaming operators. Be wary of iGaming technology providers who claim their solutions utilize blockchain technology, when in reality all they are doing is using cryptocurrency as a payment rail.
Some of the benefits to bettors is that an on-chain casino or sportsbook solution provides reassurances that there is public, tangible proof that their bet was placed, as every wager is recorded in a block on the pertinent blockchain. The use of smart contracts and Provably Fair gaming technology enables players to independently verify the results of the game they played, and provides proof that they won or lost in a fair manner. This all happens without revealing any personal information such as the name of the player. As a result, players do not need to worry about operators arbitrarily cancelling bets, claiming a wager was not placed or of a different size, or claim that a player cheated. For operators, they are able to build trust with their customers and thus boost retention, all while cutting down on transaction costs and eliminating the risk of fraudulent transactions.
Lion Gaming Group is the only iGaming technology provider that offers a blockchain solution to its clients for both its casino and sportsbook products. These features can be toggled on or off depending on the player preference, meaning that a player can utilize an operator’s platform as a traditional casino or sportsbook and still have the option of having their bets logged on the blockchain of their preference if they want.
If you are interested in adding cryptocurrency or blockchain technology to your offerings, contact [email protected] to start the conversation today.