Introduction to Smart Contract Gambling

The online casino industry has a fundamental requirement – trust. How do players know that their funds are safe, and how do they know that the games they play are fair? Such reputational factors play a big part in a casino’s ability to earn credibility, especially for those located in jurisdictions where regulation is weak or non-existent. Nevertheless, the cryptographic revolution has created an opportunity for the industry to completely alleviate these concerns, by utilizing the features that blockchain smart contract gambling can offer. This article will begin with an easy to understand explanation of what a smart contract actually is, followed by a discussion on the enhanced transparency, flexibility and security that this will allow the online casino industry to offer its players.

What is a Smart Contract?

In a nutshell, smart contracts are the building blocks that allow users to create a pre-defined agreement without requiring a third party to validate the transaction they are attempting to initiate. For example, instead of drafting a real estate document to outline the terms of a rental agreement, a smart contract allows individuals to achieve this aim using cryptographic code. Bitcoin’s framework is limited in the sense that it can only apply these mathematical laws in currency exchange, whereby a blockchain such as Ethereum offers unlimited opportunities. The unique code that users submit to the Ethereum blockchain cannot be altered, and they are self-executed based upon pre-defined rules. Furthermore, everything is publicly available to view on the blockchain, therefore providing stakeholders with full transparency. Moreover, to protect privacy, smart contracts are not linked to a user’s identity, rather parties are identified by set of alphanumeric characters. Still confused? Don’t worry, the following example will illustrate just how a smart contract could be used in everyday life.

Every year, thousands of airline passengers do not claim compensation for delayed or cancelled flights. Why? Well, firstly they are probably not aware that they are entitled to claim, or if they are, they must complete countless amounts of paperwork to get what they are owed. A pre-defined Ethereum smart contract could execute automatic refunds to affected customers by extracting and analysing external flight data based on publically available information. No middleman, no third party, just a trust-less, cryptographic framework that offers complete transparency.

Smart Contract Gambling

Smart Contracts in the Online Casino Industry

So how can you take full advantage of the many benefits smart contract gambling has to offer?

  • Transparency

Blockchain technology offers cryptographic assurances that the online operator are playing by the rules, in other words, providing ‘provably fairness’. For example, imagine spending your hard earned money on an online slot game but not knowing whether or not the casino was trying to cheat you, and having no tools to independently verify this for yourself? Smart contracts gambling could transparently provide stakeholders with the means to verify game-play algorithms, rather than allow casinos to withhold this data internally. Access to such records, or even knowing that they exist, offers players the level of trust required.

  • Peer-to-Peer Gambling

Otherwise known as the betting exchange, internet capabilities currently allow users to bet against one another. For example, party A believes that Calypso Moon will win the Grand National horse race, however party B thinks it will lose. An online betting exchange acts as an intermediary by linking the two players together, however they often charge extortionate fees in the process, as well as operating through vast regulatory barriers. Smart contract gambling could completely alleviate the need for a third party, as players could gamble peer-to-peer, finding one another through pre-defined rules. Not only would the associated fees be next to nothing, but settlement would be near instant.

  • Stake Sizes

Due to the nature of expensive transaction fees when attempting to deposit and withdraw funds with an online casino, those in society who want to enjoy the excitement of gambling with ultra-low stakes are effectively eliminated from the market. The fees that smart contract gambling attract are significantly lower in comparison, and as such, allow players to gamble small amounts without being penalized. By allowing players to take full control of how much they want to wager, they are also not restricted by maximum stake sizes either.

  • Lower House Edge

Traditional casinos, in order to ensure they are sustainable, have a pre-defined house edge on the games they offer. For example, on a standard European roulette table, the odds of successfully predicting the correct number is 37/1. However, the standard pay-out is usually only 36/1, thus, the casino have a 2.7% edge on the player. A smart contract casino has the ability to offer a substantially lower house edge, insofar that the required resources to operate are far below that of a conventional fiat casino. This offers the player a far greater incentive to gamble online, as they have a greater chance of return.

If you like free money, you're gonna love this:

1.5BTC First Deposit Bonus


+250 Free Spins