Project Description

The gambling sector is a double-edged sword with regard to blockchain technology. Gambling operators have identified Blockchain as an innovative form as a low-hanging fruit for applications due to its technological aspects like cheap transactions, non-reversibility and comparatively good privacy on the internet. Furthermore, blockchain technology provides trust in otherwise untrustworthy situations, which is why the technology holds great promise particularly for the gambling sector.

The applications of Blockchain in gambling already include accepting payments in crypto currencies, paying out winnings in crypto currencies, offering provably fair gambling applications on the Blockchain with centralized ownership, and offering gambling as a smart contract with decentralized ownership. A further step would be a decentralized gambling smart contract without a beneficiary. Such applications could be structured as so-called DAOs (decentralized autonomous organizations) without any operator fees. The full amount of paid-in funds would then be redistributed to users for a 100% payout ratio. Decentralized gambling applications hold great potential for operators and gamblers alike but also come with significant social risk. It will be much harder to enforce the law against illegal gambling and to protect adolescents from underage gambling. Also, the exclusion of users based on their geographical location will no longer be possible. The greater availability of gambling and the increased difficulty of enforcing player protection mechanisms could exacerbate compulsive gambling and raise the associated social costs.

Another, more positive, potential application of Blockchain technology in gambling are Blockchain-based payment systems that provide a controllable and secure option to prevent criminal activities or problematic playing. The regulator can operate the payment system and monitor all transactions of both players and gambling operators. Operators are obliged to use the system if they are to legally offer gambling services in the jurisdiction. This way, problematic gamblers can be excluded from the system and there is no scope for money laundering in the regulated market. Additionally, if such a system were implemented by the regulator as the sole payment system for licensed gambling, payment blocking against illegal gambling operators becomes possible.

Potential research topics:

  • How are blockchain and cryptocurrencies used by gambling operators?
  • How can regulation be applied to decentralized gambling operations?
  • How can blockchain be used to provide a secure and transparent way of payment for licensed gambling operations?
  • How can blockchain be used for player protection systems?

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