Blockchain Gambling: Why Crypto Betting Sites Are Not Always Transparent

Blockchain-based betting platforms are eager to bask in the reflected glory of blockchain technology’s inherent transparency. More often than not, however, they are no more transparent than traditional betting platforms. We explain below.

Security, transparency and trust – these are the three stand-out benefits of Blockchain technology.

As a result, any industry lacking in any one of these three areas has the potential to improve thanks to blockchain technology. And that is why, in the case of gambling, the industry has been described as apt for major disruption from the same technology which brought us Bitcoin.

The problem, however, is that a number of blockchain-based gambling start-ups have marketed themselves as “provably fair” when, in practice, they are far from transparent.

The Definition of True Transparency, Please Stand Up

To understand why, it helps to take a look at Augur, arguably the world’s first example of a truly transparent betting platform.

Firstly, Augur is open-source – every single line of code which governs its behaviour is available to the public for scrutiny. Furthermore, it is hosted on a public blockchain that you yourself can download and run on your own computer. Granted, this all requires technical know-how that not everyone has – but the price of true transparency is a high entry barrier.

On the other hand, this is not the case for any web-based gambling platform – including those which leverage blockchain technology.

One example is Satoshi Dice – the world’s first blockchain-based gambling application. The Satoshi Dice website is hosted on a private server and runs code which is not transparent to users. You have no idea, in other words, of how Satoshi Dice is behaving under the hood.

However, Satoshi Dice can offer transparency of sorts – we could get our hands on its Bitcoin contribution addresses and audit their incoming transactions vs. outgoing transactions in order to determine if the platform is respecting its published house edge.

In practice, however, none of us are going to put the work into doing something like this. A third party is needed – and this is where services like the Crypto Gambling Fondation come in. It serves as a third-party auditor for web-hosted gambling platforms to ensure that their internal algorithms are distributing gains to users in a provably fair way.

This is why online crypto betting platforms like Slate and BitInvest are able to claim they are transparent. They have the auditor’s stamp of approval.

Unfortunately, not all web-based crypto betting platforms do this – and as long as they refuse to do so, users should never be afraid to point out that they cannot claim the blockchain’s inherent qualities of security, trust and transparency as their own.