Crypto's Role in GambleFi

By  Noah Washington September 28, 2023

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  • Online casinos have been embracing cryptocurrency and blockchain technology to increase accessibility, transparency, fairness and security
  • "Provably fair" games eliminate concerns over rigged outcomes and boost players' trust in online casinos
  • GambleFi is the fusion of blockchain and gambling, which offers faster transactions, improved security and a transparent gambling experience
  • Encryption algorithms are key to ensuring that games are fair and secure

Casinos are adopting cryptocurrency and decentralized platforms, a positive development that is leading to numerous changes in the gambling world. This shift is good news for players looking for transparency, fairness and security. Blockchain technology is powering this revolution. The blockchain allows casinos to create provably fair systems that work without centralized oversight.

A decentralized gambling finance (GambleFi) model is the next evolution for gambling. Since cryptocurrencies are accessible around the clock, players are able to access funds with little to no barriers. GambleFi relies on the blockchain and smart contracts to offer self-executing agreements. There are no middlemen to manipulate the system. This means players can be confident that bets and payouts will be in line with the programs for unbiased algorithms.

The Trend of GambleFi

GambleFi can improve the overall gambling experience because decentralized apps (dapps) built on the blockchain enable new gaming features and incentives. Provably fair random number generation ensures game outcomes are truly random.

In addition, rewards programs and staking features powered by cryptocurrency tokens promote engagement. As blockchain technology matures, web3 casinos can reshape gambling to be more accountable, accessible and rewarding. The transformation increases the value and number of investment opportunities for those interested in backing online casinos.

Challenges of GambleFi

GambleFi platforms need to overcome numerous challenges to deliver smooth, secure and welcoming experiences. It is important that casinos meet strict Know Your Customer (KYC) requirements and protect player privacy. Casinos must also increase their selection of games.

As of 2023, that selection is limited. In addition, casinos need to work to increase staking limits. These are designed to prevent overexposure. Strict and low limits frustrate players looking to maximize their yields.

GambleFi is attempting to strike a balance between security and ease. It hopes to abide by regulations, which are in flux, as well as adopt recent innovations. The changes will transform online gambling into a more open and rewarding system.

The Massive Gaming Example

Adam Shin, is the Business Development Manager for Massive Gaming, one of South Korea's top web3 casino platforms. He shared some insights into how Massive guarantees provably fair games for players.

"We recognize that fairness and transparency are essential for building trust with gamers in the world of web3. That's why we've gone above and beyond by obtaining official certification for the randomness of our gaming software. Players can verify that each spin, draw and roll are truly random - not manipulated in the house's favor," said Shin.

Shin went on to explain Massive's unique approach to creating a sustainable play-to-earn economy. In previous years, a high number of play-to-earn games struggled with unstable token rewards. These tokens declined in value over time. The problem is that the gaming companies can and often do mint an unlimited number of tokens.

USDC's market capitalization since 2018. Source: CoinGecko

Massive Gaming differs from such companies because it uses USD Coin (USDC), a stablecoin, as its primary reward token. This provides stability and sustainability for players and Massive. The separation of token governance from the company reduces inflation. It also preserves the long-term value of the token. In Shin's view, a focus on fun and engaging gameplay is key to attracting and retaining motivated players.

Risk in GambleFi

Despite the increases in security, many online casinos have been susceptible to hacks. In September 2023, Stake, an Australia-based online gambling platform that accepts cryptocurrency deposits, experienced a hack that resulted in a loss of approximately $41 million. The hack involved a theft of approximately $16 million from Stake's Ethereum accounts and a theft of $25.6 million on Binance Smart Chain (BSC) and Polygon.

On-chain analyst expert ZachXBT confirmed the attack. ZachXBT stated that hackers compromised Stake's hot wallet private keys to drain funds. The hacker quickly converted the stolen funds to ether. Then they transferred the funds to external wallets that Stake did not own.

The Transformation of Online Casinos

Online casinos need to work on advertising to showcase the excitement of their games and the value of their reward tokens. They also need to work on security, to make sure players do not lose their funds and casinos do not lose their reserves. The more losses online casinos experience, the harder it may be for them to find backers for security and expansion.

The transformation of online casinos is about redefining industry standards. Goals include making sure games are fair and accessible. Casinos should explain the new opportunities that the use of cryptocurrencies offer and welcome players from the crypto ecosystem onto virtual floors. As the blockchain continues to drive innovation, players, crypto investors and platforms are watching to see how casinos can step up. The ultimate goal is to create experiences that develop into brands. Casinos could then draw upon the goodwill and name recognition they have built to partner with other brands - and even hold in-person events.