Bitcoin

Why gaming firms still struggle with Bitcoin

Bitcoin has once again been on a tear, confounding critics and trouncing traditional trading assets. At the time of writing, it has gained $5,000 from its price at the start of 2019, trading at over $9,000 as of the 18th June. Yet, as most are aware, it could all come crashing down, just like it did in the back end of 2017.

Whether you ‘believe’ in crypto or not, it’s hard to deny that it poses a particular problem for retailers, even those who are keen to adopt a digital currency. The gaming industry, in particular, will face challenges with Bitcoin for reasons other than those sharp rises and falls in its value.

That volatility, however, does pose a unique problem for online casinos. It’s often fashionable to talk about casinos in that sense of the “the house always wins”. While that’s true, it overlooks the fact that those margins are extremely tight. A typical blackjack game at an online casino will have a (built-in) house edge of around 0.5%, roulette somewhere in the region of 3%. Even with volatile slots the figure is around 5%.

Marketing strategy would have to adapt

You must remember that those figures refer to house edge, not to profit margins, so you can appreciate that it will be a challenge if players are placing wagers using Bitcoin. It’s perfectly possible that the value of a winning bet would change markedly by the time lapsed between placing it and, say, a roulette wheel has finished season.

Indeed, perhaps overlooked is the structure of marketing employed by online casinos. You will have seen adverts for casino bonuses, but there is also a system of patronage of high rollers. A good example of this would be Casino.com VIP, which has a cash back and loyalty scheme, among other expensive perks, for big spending players. The sums we are talking about can be large, so if you can’t factor in volatility there is a chance these schemes could disappear.

Long term bets would have double exposure

The same goes for sports betting, of course. And, that could be even more problematic as many bets are made long-term. Consider these sums: Liverpool were approximately 10/1 to win the Champions League at the start of 2019. If you had bet 1 Bitcoin on that, the approximate value at the time would have been somewhere in the region of $40,000, i.e. 10 Bitcoins. However, the price of Bitcoin more than doubled between the start of the year and the night of Liverpool’s victory, so 10 Bitcoins for a winning bet would have been worth about $80,000.

Casinos and betting companies also face challenges with the transaction and storing of coins. Many players will ‘store’ money in accounts, perhaps even leaving it idle for months on end. Betting companies will also have to address transaction times, or things like live in-play betting – where speed and real time updates are paramount – would suffer.

There is also the question of oversight. Casinos and betting companies are heavily scrutinised, and they have implemented measures of oversight at the behest of national governments into how money flows into them in an effort to stop money laundering. Is that truly compatible with crypto payments founded on the idea of decentralisation?

It’s a good bet that major gaming companies will widely accept cryptocurrency one day. Moreover, blockchain technology and things like smart contracts could also help the industry become more dynamic. Yet, it feels like it will take time before it is feasible, and any casino that adopts a cryptocurrency before these issues are addressed will be doing what a casino business dislikes the most – gambling on an unknown outcome.

Photograph by Typography Images