Decentralised tech is gaining ground, and betting might be next. With on-chain systems offering transparency, fairness, and new infrastructure models, the gambling industry could be in for a shift. But making the leap comes with serious questions, which The Unit’s Chief Technology Officer Alan Bruce addresses by exploring what the shift could mean for operators and the future of gambling technology.
The Case for Change in Gambling Infrastructure
Although the gambling industry has been innovative in recent years, it’s mostly been smaller pieces of functionality, technology and software rather than big leaps in the mindset of sportsbooks.
One of the biggest changes in the industry recently is the move to Web3 and having bet placement no longer happening in a centralised location like a database or transaction server, but on-chain. With large blockchains like Ethereum and Solana now capable of running decentralised applications (dApps), including DeFi, NFTs, and blockchain games, a whole new world opens up for the sports betting market.
What Is Decentralisation and Why Does It Matter?
Decentralisation is basically distributing power from one source into smaller lower-level sources and taking away the central authority.
For example, transactions on a normal Web2 sportsbook will be stored in one place such as a database, essentially the source of truth for all bets, and they can be checked, viewed, audited etc from the centralised storage.
With a decentralised system, the transactions (and other data) are stored on-chain which means transactions happen in a completely decentralised way (peer-to-peer model) with no real authority on the transaction. This matters because no single entity controls that element of data, so transactions are settled in a fair and clearly transparent way.
Benefits of a Decentralised Gambling Ecosystem
But what are the benefits of putting transactions on-chain? One main benefit is fairness. If a bet is placed into a smart contract on-chain, it cannot be changed, tampered with or withheld. It is either a winner or a loser and is paid as such, putting more control in the hands of the user and preventing a bookmaker from withholding funds, rejecting returns or any kind of unsavoury behaviour. A smart contract on-chain in this case is boolean and paid straight to the user’s wallet on settlement.
Storage is also decentralised, meaning a failure in a data store facility for a Web2 bookmaker could cause downtime issues where bets can’t be placed or settled, but on-chain they are on a network of computers across the globe so it’s harder to lose the data.
With decentralisation also comes the removal of the need for intermediaries such as banks, payment merchant providers and player account management systems. Simply having an on-chain wallet linked to your betting account can automatically log in the user and place bets using existing funds, which are automatically returned to your account on settlement. This saves fees from intermediaries, thereby reducing the overhead on the bookmaker and (hopefully) passing along those cost savings to the customer in the form of fairer margins or fewer fees.
Risks and Challenges: Regulatory, Technical, and Ethical
Although this all sounds great, there are obstacles and nuances which need to be overcome before blockchain can be fully embraced.
The whole idea behind decentralisation means that the lack of a central authority can give way to fraudulent activity, scammers and security concerns. Most regulators across the world in many jurisdictions require anti-money laundering policies and KYC rules to protect the customers and to also be fully compliant with problem gambling and other issues.
The fact that the customer can simply have a wallet linked in some Web3 sportsbooks that are fully decentralised means there are no details taken from the customer. Not only can this put the bookmaker at risk for syndicate betting and professionals or arbitrage players but it can also let problematic customers place bets, including those who want to clean dirty funds to move it on elsewhere. On-chain can be perfect for this as it can prove difficult to trace and follow transactions and the trail of money.
The lack of regulation means that decentralised sportsbooks are illegal in many countries. The UK gambling laws prohibit cryptocurrency transactions for betting through any licensed venue but it’s largely the Wild West here and outside the reach of UK consumer protection.
Case Studies: Decentralised Platforms in Action
BetDEX is a betting exchange based on the Solana network and is regulated in many jurisdictions. Users bet against each other on the platform and both transactions are placed into a smart wallet. Once the bet is settled, the customer with the winning bet is sent the returns (minus a small commission).
There are many exchanges and books like this, although BetDEX is one of the few who are regulated. Many more exist in grey areas of Web3 and are unregulated by any authority.
There is a trade-off here between regulated and unregulated providers. With a regulated provider, it’s likely there will be a form of KYC and a registration process asking for your name and address, and it’s also likely that this will be stored centrally (making them a semi-decentralised bookmaker).
With a truly decentralised provider, it’s likely that few or no details are needed, no KYC is done and you can simply spin up a wallet or connect an existing wallet to start making bets. This obviously then leaves you open, as without consumer protection, on-chain can be a murky world.
Look at real-world examples like BetDEX, Polymarket, or Peerplays, and what they reveal about viability and adoption.
Conclusion: A Gamble Worth Taking?
It’s still very much in its infancy, with some sportsbooks and casinos doing very well (Rollbit and Stake for example). But gas fees and fees for fiat on- and off-ramps (used for turning your hard-earned currency into crypto) can be high, with some bookmakers using people’s lack of knowledge of blockchain to charge exorbitant fees.
There is also the network congestion on some chains, with Ethereum and Solana facing congestion at peak times causing massive issues with transactions. This means in-play betting is just not feasible at certain times due to the latency of placing a bet on-chain in real time.
Our advice: it’s exciting to see what’s going to happen and we’re very much in the mix at The Unit to help you with your Web3 needs.
