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12 May, 2022

The Difference Between On-Chain Betting and Crypto as a Payment Rail

In the iGaming space, there are many casino operators who brand themselves as a crypto casino because they have a payment rail for one or more cryptocurrencies. However there is a drastic difference between accepting cryptocurrency as a payment rail and using blockchain technology in your iGaming platform. This difference allows operators like you to utilise groundbreaking on-chain betting technology.

Simply accepting cryptocurrency is no longer an innovative feature of online casino software. This is made evident by how common it is for online casinos to now accept at least one or more cryptocurrencies. If you currently do not support cryptocurrency transactions, you should read this article that outlines the reason why you should accept cryptocurrency in your online casino.

In this article we will cover the differences between accepting cryptocurrency as a payment rail, and utilizing on-chain betting technology. On-chain betting is a truly revolutionary innovation in iGaming, and is an available feature in our Fer0x Crypto Casino and Fer0x Crypto Sportsbook solutions.

Basics of a cryptocurrency payment rail

When an online casino or online sportsbook accepts cryptocurrency, their customers are able to deposit and fund their accounts using assets such as Bitcoin. Some operators immediately convert these deposits into fiat currencies, for instance crediting an account with $100 USD after a player deposits the corresponding amount of Bitcoin. Other operators keep the player’s balance in the original format. For example, if the player has 0.0035 BTC and loses 0.001 BTC they now have 0.0025 BTC in their account balance.

In the first example mentioned above, the online casino or sportsbook may or may not allow withdrawals in cryptocurrency. Many of the operators in this situation will only allow withdrawals in Bitcoin as a cryptocurrency option if they allow crypto withdrawals at all. In this instance, the operator is providing a poor user experience while also incurring unnecessary costs. For starters, the customer may have now incurred a capital gains event by having their cryptocurrency turned into fiat depending on their jurisdiction. If the player wins their wagers, it is plausible that they receive less on withdrawal than what they initially deposited depending on Bitcoin’s exchange rate. From the operator’s perspective, they are now paying exchange fees in addition to 3rd party transaction fees.

In the second example listed, users have a more pleasant experience because they are able to wager in their preferred currency, while operators in many cases enjoy lower transaction fees than they would through fiat payment rails. This also allows them to potentially mitigate the risk of fraudulent chargebacks.

On-chain betting

For a blockchain casino or sportsbook, the entire user experience takes place on-chain. This means that when a player places their wager, whether it be on a game of roulette or on a sports match, the bet executes a smart contract and is logged on its applicable blockchain (i.e. ETH on Ethereum). For a more in-depth look at on-chain betting, and why it is important for iGaming operators to transition from legacy technology to blockchain-based solutions, you can read our article that explains on-chain betting in more detail. Due to the use of smart contracts to execute wagers, it is only possible for an operator to offer on-chain betting if they have a native wallet solution for the blockchain they wish to operate on.

The difference

For the payment rail examples, neither of the instances provided is a case of an operator using on-chain betting technology. This is because the customer experience takes place entirely off-chain. Even if the operator is using a native wallet solution and not using a 3rd party payment processor, each change in account balance from wagers is taking place off-chain,. Conversely, when using on-chain technology, every aspect of the customer action, from deposit to bets to withdrawal, is logged on-chain.

Essentially, the playing experience is no different than playing with fiat currency like dollars or euros when you use crypto as a payment rail.

Why the difference matters

It has long been common for casino directories and rating sites to categorize casinos based on various deposit methods such as Skrill, credit card and so on, but rarely (if ever) does the actual casino brand itself as a “credit card casino”, So, why do online casinos brand themselves as crypto casinos? The candid answer is that they are trying to capitalize on buzzwords by associating themselves as being on the bleeding edge of technology.

Even though cryptocurrency and blockchain are not interchangeable words from a technical point of view, they are commonly used interchangeably and are treated as such by the public.

On-chain betting capabilities will quickly become an impactful differentiator for online casinos and sportsbooks wanting to attract the next generation of bettors. Players who are familiar with blockchain technology will choose to play with operators who provide blockchain functionality in their offerings rather than merely accepting crypto as a payment rail. It creates new player acquisition avenues and new player experiences that help you stand out among the competition.

Ten years ago, accepting cryptocurrency was a major differentiator for an online casino. Today, it is expected that a casino accepts crypto. The benefits of using blockchain technology in your platform are massive for both players and operators. For more information on why that is the case, we encourage you to read this article that breaks down on-chain betting further

Conclusion

At Lion Gaming, we are proud to offer the world’s first fully licensed on-chain casino and on-chain sportsbook software solutions in a white label or turnkey package. Our offerings are blockchain-agnostic and can work with a variety of blockchains,. This includes more recently launched blockchains such as Avalanche and Moonbeam. Our offerings do not require the use of blockchain or cryptocurrencies; customers are able to toggle on-chain betting on or off depending on their preference, and can still play with fiat as they would on any other iGaming platform.

For a free consultation on transitioning to the next generation of gambling technology, contact us or drop us a line at hello@liongaming.io today!

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VP of Operations
c.lewis@liongaming.io

Christine Lewis

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