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The interview is taken by Anton Kryvko. Anton Kryvko is Blockchain and cryptocurrency journalist who has 5 years experience in this sphere. He works at NGO center UA. He has own telegram channel about technology.
There is a lot of problems for each member of iGaming market and no clear way to solve them.
On March 15, 2018, the market of cryptocurrencies was more than 332 billion dollars. Market analysts predict that the global iGaming market will grow 13% CAGR (Common Annual Growth Rate) by 2026. For a better understanding, the 5-year investment will be roughly doubled in 5 years. SuperData Research study found that mobile iGaming was 75% up year-over-year, and today it accounts for over 25% of all iGaming. It is expected that revenues from the online iGaming market will exceed $68 million by 2026.
Talking about iGaming structure, it differs through online and offline projects. In offline projects, casinos (37%) and lotteries (31%) are most popular. In online projects, 51% of total are sports bets. Casino takes second place with 30%, lottery — third with 13%. The reasons for lower indicators are the users distrust of the program’s algorithms, as well as the legislative and technical difficulties with obtaining the winnings.
Geographically, incomes are distributed unevenly: Europe and Asia generate 85% of iGaming traffic. It’s due to the fact that in many European countries gambling is completely legal or, at least, not prohibited. Malta, a country that is known as a pioneer in iGaming industry, is even planning to legalize the use of Bitcoin and other cryptocurrencies at online casinos, and is currently exploring the best options to do so. Two other homes for iGaming jurisdictions are Gibraltar and Isle of Man.
According to Onlinecasinomarket, number of slots in the US remains modest, but still increases, while the main suppliers are Royal Vegas Casino, Ruby Fortune Casino and Spin Palace Casino. State regulation and interpretation of the Wire Act of 1971 remain the main obstacles to the introduction of iGaming in the United States. In 2006, the Unlawful Internet Gambling Enforcement Act (UIGEA) was passed, which changed things to some extent. It didn’t specifically make online gambling illegal, but it did make it illegal for banks and other financial institutions to process transactions between US residents and iGaming sites. Many sites took this as a clear indication that the US government considered iGaming to be illegal and stopped taking US customers as a result.
We talked about the future of iGaming with an expert in digital and gambling Adam Krejcik, principal at Eilers & Krejcik Gaming, LLC.
What problems do iGaming market participants have and how can they be solved?
“For operators the big issues are rising operating costs and complexity. Increasing regulatory costs, rising tax rates, ever increasing complexity of content and a rising number of suppliers who want a slice of the pie. For customers it’s trust in the game content, in the operator’s ability to treat them fairly and access to fast reliable online payments”, — considers Adam. “Operators need to quickly establish trust with online consumers while offering a stable, entertaining and engaging product and customers need fast, secure payment solutions that never place them at risk of losing their money. The solution to this is transparency from the operators and modern flexible technology platforms that give customers more control of their funds and confidence in their gambling”, — says Krejcik.
A possible solution to the problem of draw transparency can be the use of a Blockchain. Although this concept didn’t become possible by Blockchain technology itself, but rather by cryptography, Blockchain technology and smart contracts have taken it to the next level, allowing for more complex systems. There are no databases from third-party owners. You don’t send your funds to anybody. There are no accounts. Instead, you play directly from your personal cryptocurrency wallet. You always control your funds and don’t need to trust database owners. You send funds directly to a smart contract, on the Ethereum Blockchain. The smart contract processes the bet and returns the win directly to your wallet. The smart contract is public, verified code, that works on the public Ethereum Blockchain, so you can always check the truthfulness of a deal. There are no limitations to the amount or minimal threshold of transactions.
Eddie Travia, CEO of Coinsilium, an investor in Blockchain tech startups mentions that Blockchain creates immutable data records which can help tracking all operations by a client and/or per game. It makes it easier to assess a client’s real contribution to the business, analyze any iGaming patterns, prevent fraud and exploits, reward clients, provide audit reports.
Why do some iGaming operators have more user confidence than others?
“Reputation is everything in gambling and the online sector is no different. Some iGaming operators have worked hard to establish a deep level of trust with their customers by responding quickly to complaints, always paying out winnings, acting fairly, honestly and transparently and having their games verified by independent third parties. Your reputation is something you have to protect on a daily basis and standards in game security, payments and customer account management need to be consistently high”, — mentions Adam Krejcik.
According to Gamblingstites.com, the most legit iGaming sites are Betway, Jackpot City Casino, Spin Palce, 10Bet and 888Sport. Of these, only the first provides both casino, sports and poker. However, due to their renown, they control a solid part of the market and prevent new players to access it.
What issues do operators have with iGaming licensing?
Licensing in online gambling can be a lengthy and expensive process and licenses in certain markets are limited in number or require alliances with land-based operators. As a result operators may use a master license belonging to a third party such as a software provider to gain access to certain markets or to speed up the time to market.
There is also an old-school monopoly on the market of iGaming software providers. The most famous companies are: Realtime Gaming (150 games in portfolio), NetEnt (250 games in portfolio), Playtech (500 games in portfolio), Microgaming (100 games in portfolio). It’s hard to win a market next to such mastodons. BetSoft made a good attempt — they focused on 3D games.
However, there are a lot of newcomers who tries. Now Adam is an adviser of Blockchain-startup Luckchemy, which is developing a blockchain based platform for iGaming. We asked Adam to tell more about this project.
“Luckchemy is a scalable platform that will implement both its own games and third-party products. Luckchemy’s partners will be provided with an admin panel through which it will be possible to thoroughly monitor the state and analytics, as well as with customization help and branding of games if necessary. Indie-developers will get access to the audience and possibility to compete with industry leaders. Due to the presence of such features, leaders of the online iGaming market have already expressed their desire to cooperate with the startup. Luckchemy customers do not have to plug in their own developments — they will be able to access the platform’s games”, — thinks expert.
“Today (by the way, yes, the guys already have a working MVP), a lottery “6 of 47” is available; free-to-play sweepstakes, slots, bets, dice, etc will be added in the near future. There will be at least 1-2 new games in a quarter.
I’ll tell more details about those games. 99% of the lottery sale proceeds to go to the prize fund. There are no such offers on the market yet.
Let’s talk about pros of other games:
- With real money scratchers user will have a possibility to instantly win prizes including jackpots.
- Sweepstakes are free-to-play, because they are based on ad monetization.
- Holder’s Draw is a unique benefit for Luckchemy’s investors — every month randomly chosen LUK token holders will get prizes”, – explains Krejcik.
What makes Luckchemy better than existing iGaming platforms?
“A modern iGaming platform needs to be able to offer customers the transparency, control and trust that comes with the Blockchain. It needs to give more flexibility to both operators and consumers while building and maintaining trust in security, game management and payments. We’re rapidly moving past the Internet 2.0 age and while the customers of today want the safety and ease of use of a Blockchain gaming platform, the customers of tomorrow will demand it.
One of the most important advantages of the platform is fairly provable games. This means that no winning numbers or lottery tickets can not be falsified. The amount of the prize fund can grow to tens of thousands of ETH. The procedures for distributing the prize pool and paying the winnings are transparent and supported by smart contracts.
Let’s look at daily lottery’s back-end to understand Luckchemy’s transparency. Luckchemy will generate a unique private server seed at the start of each daily lottery. Tickets for the draw cannot be purchased after 9 PM GMT. Luckchemy will then take the first block, that appears after 10 PM that fits the technical requirements. A hash of this block is combined with the server seed in the algorithm to generate the six winning numbers for the draw. Luckchemy will publish the 6 winning numbers and the original server seed that generated the server seed hash, as proof of fairness. Winning 6 numbers are generated by breaking the combined hash into sequences of 4 characters, starting from the tail and transformed into a number using NHEX based 16. This number is than divided by a module of 47 and the remainder generates the number of a ball. The system repeats this iteration 5 times and discards numbers which are already in the set”, – summarizes expert.
So, a short review. The iGaming market is very extensive and promising. It involves three groups of participants each with their own problems: players want transparency and convenience, operators want a simpler licensing system, game developers want new operators for cooperation. Niches have already been divided and it’s almost impossible for new entrants to enter the market, unless they offer a radically new technical solution. Such a decision can become a Blockchain.