Sports Betting on the Blockchain

Jan. 5, 2021 by SportsBettingQuant

With the blockchain technology on the rise and a slowly increasing adoption of this new technology you might ask yourself what impact it might have on the sports betting industry. When the internet came along decades ago it opened up new opportunities such as online betting markets. The blockchain also has the potential to transform the sports betting industry but rather expect a slow and steady change over the next years.

The blockchain technology opens up many new possibilities for the world of sports betting: The decentralized nature of the blockchain technology could remove the middleman (bookmaker, betting exchange or payment provider), free you from account restrictions and result in lower commissions. However, adoption will take time with challenges ahead both of technical and regulatory nature.

Explanation of the Blockchain Technology

I will try my best here and try to explain the blockchain technology. For more details on how this new technology works I would like to refer you to the wiki article on blockchain.

With the word blockchain I refer to the technology: You have a network of multiple nodes (think of computers) where each node holds a copy of a so called blockchain. It is literally a chain of blocks where every block contains certain information. The blocks are linked through cryptographic hashes meaning that you cannot simply alter the information without invalidating the blockchain. Every node can validate the blockchain and add transactions to the list through solving a cryptographic riddle (this process is called mining). The blockchain cannot simply be turned off as long as the nodes continue to operate. Whatever is written in the code happens, code is law. However, the underlying code behind the blockchain can be changed which is what happens in so called forks.

Cryptocurency vs Blockchain

A blockchain and a cryptocurrency are two different things. Cryptocurrencies use the blockchain technology to create digital assets which means that without the blockchain cryptocurrencies would not exist. Cryptocurrencies are a digital medium that you can exchange with other people. Most popular examples for cryptocurrencies are Bitcoin, Ethereum, Ripple and Co which you can buy and trade.

Please note: There are plenty of betting sites that accept cryptocurrencies as a payment method or show your account balance in a cryptocurrency such as Bitcoin, Ethereum etc. However, they are still centralized and do not make use of the ledger technology that blockchain offers beyond accepting cryptocurrencies.

Traditional vs Blockchain-based Betting Exchanges

When looking at a traditional betting exchange the setup looks like the following:

Here we are dealing with a centralized system. Every participant of the betting market has to go through the bookie or betting exchange that acts as an intermediate and sets the betting rules.

However, for blockchain-based betting exchanges the setup looks slightly different:

In this case we are dealing with a decentralized system which allows peer to peer betting without any centralisation.

Benefits of Blockchain Technology in Sports Betting

When looking at the current state of sports betting you can probably identify a couple of issues with the traditional setup. There are a couple of disadvantages for the user of betting sites such as high commission, getting accounts limited and having little to say in case of dispute. Blockchain technology will certainly not solve all betting issues in favour of the user but it could have a couple of benefits.

Records on the Blockchain are Transparent

One major advantage of the blockchain technology is transparency. The information in the block is typically publicly available - if we leave privacy tokens aside. This really helps with transparency. Of course you cannot know who is behind a wallet address but you can see all the transactions.

When looking at the betting market imagine that all bets are visible to the public. No need to argue whether a bookie or betting exchange lost or omitted your bet, every bet and trade is traceable on the blockchain. This would also open up many new opportunities for the testing of betting strategies on historical data.

Decentralization Breaks Monopoly-like Structure

The problem with centralized systems such as traditional bookies or betting exchanges is that you have to follow their rules and most likely will not be able to challenge their decisions. Bookies and betting exchanges are currently in a very powerful situation. Of course they have to follow certain regulations but if you want to challenge them, good luck! If you think that they broke certain rules or if you don't receive any payout you probably don't have any chance.

With a blockchain-based approach this is different. Payments on the blockchain don't get lost and there is no centralized powerful unit that dictates the rules. Everything happens by consensus of the network. Of course the nodes of a network can also disagree which happened multiple times in the past. Several projects were forked and developed into different directions. Just the same might happen to blockchain-based betting projects.

Sports Betting Without Getting Limited

With a decentralized system there is no incentive to limit successful users. Depending on the liquidity of the market you can bet as much as you want to.

Issues of Sports Betting on Blockchain

However, sports betting on the blockchain also comes with challenges. Blockchain is still a very new technology and under development. Apart from technological issues there is also the problem of regulation and betting specific challenges exist as well.

Bet Settlement

Creating rules for a betting market and settling the market accordingly is already a challenge for traditional bookies and betting exchanges. One example is Betfair's "Next president" market for the US election 2020 where many were surprised that Betfair has settled the market already.

For blockchain-based projects different approaches are possible to decide on the outcome of a market. Popular examples are oracles and data proxies which allow interaction of a blockchain with real world events.

Scalability and Latency

Blockchain technology is still in its early days and shows general issues around scalability. In peak times during 2017/18 Bitcoin transactions took quite some time to get confirmed and were expensive. Ethereum had similar issues when an app called CryptoKitties was slowing down the network.

For sports betting scalability and latency are very important. Especially for trading you need to have transactions confirmed within short time and betting automation might cause a large amount of transactions which the network needs to process in a timely manner.

Legal Regulations

Whilst sports betting is heavily regulated in many countries blockchain-based project are still kind of a new phenomena and jurisdictions around the world try to deal with it. There is no way that a country can stop a blockchain-based project which is probably interesting for many bettors that currently suffer under regulations and cannot participate in the most attractive and profitable betting markets.

However, countries can create laws to make it forbidden to participate in blockchain-based betting projects or punish ownership of betting-related crypto tokens. It will be very interesting to see how countries will adapt and for me this is still a big question mark.

Sport Betting Projects Using Blockchain Technology

There are a couple of projects that actually use the blockchain technology beyond accepting cryptocurrencies as payment method.

Augur

One of the most popular sports betting projects in the crypto space is certainly Augur. The idea behind Augurs is that you can create a prediction markets yourself as a user and collect commission of what is traded in that market. As a user you can also bet and trade certain outcomes via Augur's cryptocurrency called REP.

Wagerr

Wagerr advertises itself as a private, no limit sportsbook. They don't have any regional restrictions, no KYC, you don't even need an email address. If you are interested in the adoption of wagerr have a look at the statistics they published.

The wagerr sportsbook interface looks very much like a typical betting site. I have not yet used it but I imagine that it is pretty much straight forward.

Peerplays' BookiePro

BookiePro is a betting exchange based on the Peerplay blockchain technology. At the moment you can bet with play money. Betting with real money or tokens with some value should become possible in the near future.

If you would like to try out BookiePro then simply download the app (currently available for Windows and Mac), create an account and you can start betting. The interface looks very much like the one that you might be used from traditional betting exchanges. You can place both back and lay bets on various sports betting markets. At the moment you can only bet with the BitFun (BTF) token but not with a currency like Bitcoin that actually has some value. Please also note that you cannot create your own betting markets with BookiePro.

BookiePro also has the goal to support automated betting via bots but this functionality is not available yet. They intend to release an API which should allow you to build betting and trading bots for BookiePro.

Outlook on Blockchain and Sports Betting

Although there are still many issues to be resolved the blockchain technology has the potential to change sports betting in a way that benefits the bettor or trader with the hope that one day fully decentralized betting markets with good liquidity will become a reality.

Please contact us if you know of any other exciting blockchain sports betting project. Also feel free to let us know your thoughts in the comments below.

Do you like our content? Please share with your friends!

Share on Facebook Share on Twitter

Comments

No comments published yet.

Please log in to leave a comment.