In October, we reported on the release of a new blockchain-based gambling platform known as Augur and how it represents a potential paradigm shift for the gambling industry.
The technical improvements that will be brought by blockchain technology to gambling markets are not in dispute – above all through its ability to offer both increased trust and transparency for bookmakers’ prices and payouts.
With Augur, centralised management is removed from the equation. It is the platform itself which manages the collection of payments and distributions of earnings.
No humans are involved. Its entire behaviour is dictated by open-source smart contracts which anyone can consult to verify their honesty, and that honesty comes with a certificate of guarantee thanks to the essentially unhackable nature of blockchain technology.
Wisdom of the Crowds
Augur, as it happens, is similar to Betfair. It is not Betfair itself which dictates the prices on offer for its events, it is rather the users who do so via the prices they are willing to commit on certain betting outcomes.
It is, in other words, a free market for gambling outcomes – and the fact that those prices eerily resemble the prices dictated by traditional bookmakers such as William Hill and Ladbrokes is due to a phenomenon known as Wisdom of the Crowds.
Betfair has itself written several pieces on both how and why Wisdom of the Crowds (WoC) works for the markets created on its platform by users. Firstly, WoC requires a large number of users to submit an opinion on the likelihood of a gambling outcome. The second requirement is that those users hail from a diverse set of backgrounds.
Once those conditions are satisfied – and they generally are for a platform as popular as Betfair – then one simply has to look at the median value of the guesses submitted (in this case, the actual values of the bets that have been laid) to gauge the real-life statistical probability of the event itself.
Why Legislators are Failing to Grasp the Implications
Whilst a blockchain alternative to Betfair may not seem like much of a big deal in and of itself – which explains why, perhaps, legilslators have been slow to react to the emergence of blockchain-based gambling markets – the devil is in the detail.
Both Augur and Betfair are Wisdom-of-the-Crowd platforms. However, with Augur, the crowd itself holds the reigns. They determine the markets on offer, and they arbitrate on the outcomes of those markets.
And to make all of this possible, the makers of Augur have ensured that users remain entirely anonymous to each other – otherwise, you introduce the risk of collusion and market manipulation.
But it is this anonymity that represents a game changer for regulators and legislators worldwide. Players can create and participate in markets without any regulatory oversight. And because all winnings are collected in crypto-currency, the taxman will be unlikely to see a share in the winnings.
“Augur may not take off, but there a large number of other projects now entering the blockchain gambling space who are looking to do precisely the same thing. At some stage, one of these will enjoy enough popularity for legislators to take notice. And when that happens, they are going to realize that this situation is going to be a nightmare for them,” states JX, an Augur platform contributor who has asked to remain anonymous.
Whilst Bitcoin is the most popularly known manifestation of blockchain technology, its impact is limited, largely because it is of little functional use to the vast majority of everyday citizens.
What Augur demonstrates, however, is that new blockchain technologies – and the cryptocurrencies that accompany them – are likely to make a real, functional impact in the near-distant future.
And because of Blockchain tech’s capability to offer anonymity, it appears likely that industries such as gambling and pornography may just find themselves at the forefront of blockchain adoption, and set down new obstacles for statutory bodies who are failing to grasp the wider implications for regulatory oversight.