GREO BRIEF:

BLOCKCHAIN, CRYPTOCURRENCY

AND GAMBLING

TRAVIS SZTAINERT, PHD, KNOWLEDGE BROKER

Blockchain is an increasingly popular technological innovation that underlies cryptocurrencies

software, contracts), but is most commonly used for virtual currency (i.e., cryptocurrency).

Blockchain automatically and securely (using cryptography) keeps a historical record, or

ledger, of all transactions.

New transactions are saved in a “block” and added to the existing chain (hence the term

blockchain). Importantly, this record has a number of encryptions and redundancies which

ensure it cannot be changed, falsified or altered. As such, the blockchain remains unbroken,

and free of error or tampering. The unbroken record is shared and distributed among

everyone who uses blockchain. This means that everyone has a record, which can then be

compared across individuals to ensure there are no anomalies. When a new transaction is

added to the record, it is time-stamped and verified by all those who are using the blockchain.

accepts the money, this too is automatically (and securely) recorded in the blockchain and

distributed globally. Everyone can now see that Sue has accepted the payment. Neither party

can claim that the transaction didn’t take place, or the value was a different amount than was

actually sent.

Note that Joe did not have to send money to a bank first, and Sue didn’t have to go to the

bank to deposit her money – it all happened without the use of an ‘intermediary’.

Intermediaries are useful in transactions, as they act as a trusted, neural ‘third party’ to ensure

(and record) that a transaction takes place. With blockchain, there is no need to use an

intermediary, as all transactions are secure and transparent. Thus, blockchain technology may

Digital currencies were one of the first applications of blockchain. There are many types of

cryptocurrencies such as Litecoin (LTE), Zcash, (ZEC), Ripple, Dogecoin, PPcoin, Quark, and

many more. One of the first and most successful of all cryptocurrencies is Bitcoin. Bitcoin, like

other cryptocurrencies, is not issued by a bank, or protected by government rules; therefore, it

is considered ‘decentralized’. Due to the technological innovations of blockchain, payments

with cryptocurrencies are popular because:

• transactions have low fees (some cryptocurrencies don’t have any transaction fees);

• payments are confirmed in a short period of time;

• there is a low risk of payment fraud, considering that the transactions are

irreversible; and,

amending this information to the end of the ‘chain’. Then, before the new owner can transfer to

the next, the process repeats itself. Hence, there is an unbroken chain of digital signatures

and verifications tracing the transactions of the cryptocurrency. Any payee can follow the

signatures to verify the chain of ownership, and this feature helps to eliminate any fraud.

Simply put, cryptocurrency includes built-in validation and authentication mechanisms, which

removes the need for intermediary financial institutions.

Cryptocurrency is becoming increasingly accepted as a legitimate source of funds. Some

major vendors include Subway, Microsoft, Dell, Steam and WordPress. However, there are

vendors that accept cryptocurrency and then use an intermediary to first convert the

cryptocurrency into a standard currency before accepting payment. Importantly, casinos are

now accepting cryptocurrency as payment, and there are even casinos that are built

Gambling accounts for approximately half of all transactions with Bitcoin.

Examples of

The main benefits to using cryptocurrencies for gambling are summarized by Gainsbury

and Blaszczynski:

• Transactions occur rapidly (near-instant), including immediate and automatic withdrawal

and/or deposits.

• Transactions are non-reversible (no charge-backs), meaning fraud and non-payment are

eliminated.

• Transactions tend to have few overhead fees (no deposit and withdrawal fees), which

allow casinos using bitcoin to have a very low house edge.

• Players can retain their anonymity, which allows users to avoid regulations (such as

betting in jurisdictions where gambling is prohibited).

In addition, gambles that use blockchain are open to verification, so gamblers can ensure

cheat, or interfere with outcome or payments. This is referred to as “provably fair”, and you will

From a regulatory perspective, cryptocurrency may be problematic because it is difficult to

prohibit this type of online gambling since sites that use blockchain are censorship resistant

The anonymity of cryptocurrency may also pose problems. Transactions that use blockchain

are tied to wallets and not individuals, allowing for a layer of anonymity while still ensuring

cryptocurrency wallets can help prevent money laundering and match fixing. In addition,

reputable wallets require identification for anti-money-laundering and know-your-customer

purposes.

People who use and gamble with cryptocurrency offer a potential new customer base.

Cryptocurrencies can be used to gamble by anyone with an internet connection, and there is

no need to have access to traditional banking services (as is the case in less developed

nations). In addition, new cryptocurrencies are being invented specifically for gambling

contracts are based on simple ‘if-then statements’. For example, Joe and Sue may bet on the

outcome of the next role of virtual dice. Joe bets the number will be 1-3 and Sue 4-6. This bet

could then be specified in a ‘smart contract’ that Joe and Sue each agree to. Then, when the

dice is rolled, either Joe or Sue is automatically paid based on the stipulation of the contract

and outcome of the dice. In this way, there is no chance of manipulation; the contract is

transparent and automatic. In this way, Ethereum allows for safe and secure peer-to-peer

betting (not just against an operator).

Implications for Responsible Gambling

Since cryptocurrency use can be anonymous and doesn’t require a player account, current

representation of currency, and players may not readily associate the value of their

cryptocurrency as “real money”.

who don’t directly gamble may be indirectly gambling through currency speculation. Indeed,

there is a large exchange market in which speculators buy, sell and hold cryptocurrencies in

1. Deepika EP, Kaur ER. Cryptocurrency: Trends, Perspectives and Challenges.

International Journal of Trend in Research and Development. 2017;4(4):4-6.

2. Gainsbury SM, Blaszczynski A. How blockchain and cryptocurrency technology could

revolutionize online gambling. Gaming Law Rev Econ. 2017;21(7):482-92.