Smart Contract Betting. The way of the future.
Experienced gamblers know only to too well the perils of traditional online casinos. Slow pay-outs, cancelled bets and account closures, to name a few. However, the fundamental requirement for any online casino is that they are legitimate and fair. Unfortunately, history shows time and time again that casinos cannot always be trusted. How do you know that the slot game you are playing represents the fixed-odds that the casino displays? Or that the spin of a roulette wheel is truly random?
Unfortunately, as traditional casinos keep all of their gaming data behind closed doors, there is no way for the general public to verify this information. That was until the introduction of smart contracts. This article will briefly explain how a smart contract works, and how its underlying technology has the potential to completely revolutionize the online casino industry.
What is a smart contract?
Smart contracts are a result of the Ethereum project. Created in 2015, the second generation blockchain expanded on the potentialities of the Bitcoin client, by allowing users to utilize decentralization far beyond just financial transactions. In a nut shell, smart contracts allow two or more people to enter into an immutable agreement, based upon pre-defined if/when conditions. To illustrate the technology in a real-world example, think about placing a bet on the outcome of the weather.
John thinks that it will rain tomorrow, but Jane thinks differently. As a result, both individual’s enter in to a smart contract agreement and deposit funds on to the blockchain. The “IF” condition is if it rains, the funds are released to John, and if it doesn’t rain the funds are released to Jane. The “WHEN” condition is tomorrow. The cool thing about the smart contract is that oracle technology installed within the protocol has the ability to scan thousands of external websites, to determine the outcome of the bet automatically. This is an example of a simple smart contract. Most importantly, once the contract is executed, it cannot be amended, altered or changed, and will remain on the blockchain indefinitely.
How does smart contract betting work?
If you are reading this article, there is a good chance that you want to bet on something a bit more interesting than just the weather! So how can casinos implement smart contract betting into their platform? Essentially, as displayed in the previous example, the agreement is between two people. However, this time, the agreement is formed between the player and the casino.
Think about the mechanisms of a roulette table. To remain true and fair, each and every spin of the wheel should be random, however there is no way to verify this if the casino keeps their gaming data private. As smart contracts operate through the transparent ledger of the Ethereum blockchain, each gaming outcome can be independently verified.
All the player needs to do is deposit funds in to the smart contract, choose the amount they want to stake, and the if/when condition will do the rest. If the player wins, the funds are automatically sent back to their wallet, or if the player loses, the funds are instead sent to the casino. Pretty cool, right? Well these technological capabilities can be applied to just about any casino game that you have ever played.
What other gambling products could smart contract betting be used for?
Smart contract betting is not just reserved for traditional online casino games. It could also be used for sports betting. One of the long-term issues described by experienced players is that they have their winning bets cancelled, either during or after the outcome of the event. It is scandalous that online sportsbook are allowed to get away with this, however such actions are all stated within the highly complex terms and conditions that you agreed to when registering.
Nevertheless, as smart contract betting is immutable, the bet cannot be amended once the agreement has been executed. Nor is there any way for casinos to get out of paying, as the pre-defined if/when conditions are programed to release the funds as soon as the sporting event is finished.
There is also the opportunity for peer-to-peer gambling to thrive on smart contract technology. Similar to the services offered by market leader Betfair, users would be able to wager with each other directly. However, they would be able to avoid the excessive fees charged, by cutting out the middleman. Both parties would not need to trust each other, as the smart contract would freeze the funds until the outcome of the event is determined, and then automatically release them to the winning player.
There is no longer a requirement to trust online casinos, due to the innovation of smart contract technology. Players now have the protection of verifiable game fairness through the transparent blockchain, guaranteeing that each and every outcome is randomly generated. Furthermore, no longer can casinos and sportsbooks refuse to pay a winning player, as smart contract betting automatically releases the funds based upon the pre-defined if/when conditions. The future of online gambling really does look bright.