Blockchain in online casino industry
Why are some casinos cheating players?
Gambling brings huge incomes to their organizers. According to American journalist Paul Wilson, 60% of the gambling software market is occupied by three game providers: Playtech, Microgaming and Net Entertainment. Usually online casino owners do not buy software. They rent it for $11,000-$12,000 per month plus royalties up to 45% of earnings.
Legal support of the project is also expensive. An online casino license in Antigua and Barbuda will cost $100,000. In other jurisdictions, the rates are lower, but annual renewals may be required.
Such a business model suits large market participants who are ready to invest several million dollars in the project at the start. For young companies, this is a big cost.
There is a risk that the owners of such projects will go to any lengths to recoup the investment. They do this, as a rule, at the expense of the players.
How do casinos cheat players?
Traditional casinos always have an advantage over the player – the so-called house edge, thanks to which the casino makes money. In fact, house edge is a statistical deviation in favor of the casino. In the long run, the casino wins more than it loses, but the players still have a chance to hit the jackpot. In roulette, house edge is about 3%. In blackjack, poker and other games where the player makes tactical decisions, the statistical advantage of the house is much lower – often less than 0.5%.
Large gambling establishments use legal tricks: free alcohol to dull the attention, involving the player in long games, etc. Outright fraud like a roulette wheel with a magnet, shenanigans with a deck, or weighting the dice is too serious a reputational risk for such a business.
There are many more opportunities for cheating in online casinos, and catching scammers by the hand is much more difficult. Fraud in this area is divided into two groups:
- Impossible to win.
- Impossible to get your winnings.
Let’s consider these approaches in more detail.
Won’t let you win
All operations related to the issuance of cards or the movement of the drum take place on the side of the platform. The player does not see how the roulette wheel spins or the dice roll, he/she only observes the result. And if the algorithms responsible for generating pseudo-random numbers are opaque, the player can only guess how the game provider cheated.
Honest online casinos use certified software that you can trust. Some platforms use their own software that can change the results of the game series. In other words, a vulnerability is created in the algorithm that increases the casino’s chances of winning.
Imagine that you are tossing an ordinary coin. Not counting the edges, the coin can land heads or tails, and the probability of both events is 50%. This does not mean that if you flip a coin 10 times, you will get 5 heads and 5 tails. This means that the more you flip the coin, the closer your results will be to this distribution: 50% heads, 50% tails.
This is how probabilities work.
Now imagine that this is a virtual coin that the casino “tosses” for you. If the algorithm is fair, the distribution will remain the same: 50/50. However, the casino can arbitrarily change the probabilities and make 700 heads and 300 tails out of 1000 tosses. The same principle works with roulette, cards, dice and other games.
Won’t give your money
As soon as the user has transferred money to the gaming platform, they are under the full control of the casino. Unfortunately, online casino owners are not always willing to sacrifice profits for the sake of fairness.
Exit-scam is the easiest tactic to scam players. At first, scammers create an online casino and start accepting bets. This casino is open for a while and sometimes even pays out small winnings to attract more players. The scammers then stop giving money away but continue to accept bets and deposits until their audience becomes suspicious. Having collected enough funds, the casino creators close the site and disappear, leaving players with empty accounts.
An unscrupulous online casino can prevent a player from withdrawing money from the platform without even committing an overtly illegal act. For example, when trying to withdraw a large amount on the side of the casino, fictitious “technical problems” may arise. In addition, the online casino operator can simply put large commissions on withdrawing money. These approaches are designed for the fact that the player will get tired of waiting for the withdrawal of money, he/she will change their mind about taking it and just continue to play.
An example of a more subtle approach to fraud is the non-obvious terms of a public offer that an inexperienced player can violate without knowing it. For example, while the age of majority in most countries is 18 or 21, casinos may have their own age requirements for players. Or an allegedly inappropriate citizenship, the wrong bank, and so on will serve as an obstacle to the withdrawal. In the extreme case, the agreement may say something like “the casino is not obliged to pay out the winnings, thanks for your trust”, anyway, most players will not read the abstruse legal texts.
How can blockchain protect players?
Blockchain makes the entire gameplay and algorithms “under the hood” transparent: transactions and actions of both the player and the casino are displayed in an immutable public ledger.
Won’t let to keep your winnings
The decentralized nature of the blockchain will prevent the casino operator from manipulating players’ money and hiding their financial situation. If funds are stored in a smart contract, payments will be made automatically, and casino owners will not be able to prevent this. In addition, the blockchain will allow any player to check if the casino is able to pay out the jackpot and if other players have received their money.
Most often, casinos do not publish information about the actual state of their accounts. The player does not know if the casino can issue the claimed $100,000 jackpot. In the case of the blockchain, the state of the account from which the casino pays out winnings can be easily checked.
Won’t allow cheating with algorithms
In traditional online casinos, most of the in-game information is hidden from users. Therefore, the results are not immune to manipulation. Online platforms that use blockchain to guarantee fair play are coming up with clear ways to ensure transparency.
For example, TruePlay, a blockchain solutions provider and partner of Fairspin, uses its proprietary Fairy Check technology, with which the user can check if someone has made changes to the algorithm for issuing game results.
In practice, it looks like this:
- The algorithm generates a sequence of pseudo-random numbers. It will determine the outcome of the upcoming game. For example, for roulette this is the sequence of numbers that will appear on the reel, and for dice it is the sequence of values that will appear on the dice.
- The sequence ends up in a temporary storage where the player cannot look.
- A special service generates a hash of the entire sequence and writes it to the blockchain.
- When the game starts, the algorithm retrieves the results from the storage and enters it into the game. The player sees how the ball hits a certain roulette cell or certain cards are dealt.
- At the end of the session, the player can view all the pre-generated results of the series in temporary storage and see if they match his observations.
As a result, the user can make sure that the casino did not interfere with the algorithms and sets of values according to which cards are dealt or a number falls on the dice.
We are confident that more companies will use blockchain technologies, including the TruePlay solution, as the benefits are clear for both players and operators, affiliates, and game providers. Many projects in the online gambling industry are starting to accept cryptocurrency as a deposit. Few people are engaged in the real implementation of blockchain technology in the control over the honesty of games and the operation of the casino.
Independence from state banking systems, regulators and jurisdictions are significant advantages of blockchain solutions for both players and online casino operators. This makes life easier for all parties, but transparency remains a key factor for the online gambling industry. Only an honest casino will be able to work on the blockchain, hiding nothing from players and government departments.
So far, there are few such projects. On the other hand, thanks to the providers of specialized blockchain solutions and the development of technology, their number is growing. These projects serve as confirmation that the casino can operate openly.