Are gambling and crypto a match made in heaven? Learn more about the emerging "GambleFi" sector and how decentralized gaming platforms work.
TL;DR
- GambleFi refers to decentralized gambling platforms and tokens leveraging blockchain technology and smart contracts
- Innovations in GambleFi include offering rebate systems for players based on turnover and leveraging decentralized protocols and smart contracts to ensure fairness, transparency, and security in the gambling industry.
- While GambleFi seeks to tackle issues like transparency and fairness, it may fall short in solving gambling-related challenges such as variety, staking limits, and customer service, which do not require decentralization for improvement.
- The GambleFi narrative originated on Crypto Twitter, where influencer Gainzy posted high-stakes bets and partnered with Rollbit, leading to controversies surrounding Rollbit's license and questions about Gainzy's source of funds.
Crypto and gambling. A match made in heaven, you would think.
Decentralized casinos and prediction markets have been the latest narrative to bubble on in the space. This crypto narrative has been coined gambling or "GambleFi," attempting to mix cryptocurrency elements with gambling. But prediction markets and decentralized casinos have been tipped before as potential growth sectors.
Let the good times roll!
What Is the GambleFi Crypto Narrative About?
GambleFi refers to the emerging trend of decentralized gambling platforms and tokens leveraging blockchain technology and smart contracts. GambleFi aims to create value and entertainment for crypto users who enjoy gambling. At the same time, it promises to address some of the challenges and limitations of traditional gambling systems.
The GambleFi narrative has risen in popularity in the first months of 2023. Crypto gambling and blockchain-based casinos have existed for years. For example, crypto casinos like Stake are older than DeFi itself. However, the space is drawing new interest in decentralized alternatives.
Which Problems Does GambleFi Solve?
Crypto-based innovation tends to take a proven solution and slap a shiny "decentralized" sticker on it. That is the case for GambleFi as well.
For instance, one of the main innovative features of GambleFi is offering rebate systems for players that generate a certain amount of turnover. Although this is a nice perk for players, similar rakeback and loyalty programs exist for regular casinos as well.
Furthermore, GambleFi leverages decentralized protocols and smart contracts to ensure fairness, transparency, and security. This can be a real problem in the gambling industry. Online casinos can easily go under, taking players' deposits with them. But thus far, the solution to that was regulation, which allowed players to choose between more stringent but "safe" regulated offers and riskier "offshore" casinos. This is not much different from centralized exchanges in crypto, where users take the risk of exchanges going bust in exchange for less regulation.
Decentralized casinos are just as “regulated” as offshore casinos. Therefore, it seems questionable how they can make gambling tangibly more secure, considering there is no oversight.
Challenges For GambleFi
Now casinos and sportsbooks do have real problems. But it may not be the problems GambleFi can solve.
For instance, fairness and transparency is a real issue for players. For example, casinos may ask for unreasonably strict KYC documentation. Sometimes casinos outright refuse to process bigger withdrawal sums under a false pretext. Moreover, the fairness of slot machines and other games can be hard to prove.
Another problem is that casinos, and especially sportsbooks, do not offer the variety players seek. Similar to how centralized exchanges do not offer all altcoins, bookmakers do not offer all sports and leagues a player would like to bet on. Furthermore, players may face staking limits and have their wagers severely limited if they are deemed "winning players."
Finally, some casinos and bookmakers have lackluster customer service. Unresolved problems can be unnerving for players, casting a bad light on the entire industry. Customer service and promotions are a significant part of keeping players loyal, but both do not require casinos to be decentralized.
The gambling space has its fair share of problems. But how many of those can be solved by blockchain technology is questionable. Successfully operating an online casino depends on having good marketing, customer service, and economies of scale. Being licensed is also helpful in gaining players' trust.
The GambleFi Crypto Twitter Controversy
As with all good narratives, the GambleFi narrative was born on Crypto Twitter. More precisely, well-known CT influencer Gainzy was the one that kicked it all off by posting high-stakes bets at Rollbit and sealing a partnership deal:
Over the first two months of 2023, Gainzy has gained quite a bit of notoriety for his "degen sports bets:"
RLB has surged in the months since and other Crypto Twitter thought leaders are taking notice:
And it was all going great...for a while.
Then, the drama kicked off:
As any gambler worth his salt knows, Curacao-licensed bookmakers and casinos are, at best, operating in a "legal grey area." Rollbit officials are, unsurprisingly of a different opinion and maintain that it's all by the book. Also, Gainzy's significant stake sizes are all clean:
This brought out the exposooors on Crypto Twitter:
The TLDR version:
- Gainzy signs with Rollbit as a partner and stakes enormous sizes on bets.
- Flood questions whether Rollbit's license would actually hold up under scrutiny.
- Grizzly starts questioning Gainzy's source of funds.
- Rollbit maintains that its license is good and Gainzy's funds are his own.
- Grizzly and Gainzy (and everyone else watching) can't agree on a $10K escrow to conclusively settle an alleged gap in the source of user funds.
So does he or doesn't he bet with his own funds? According to this thread comparing centralized and decentralized casinos, Gainzy is fully bankrolled by Rollbit, so it is technically "his money" that he funnels back into bets:
In that model, the upside of decentralized casinos is that users can take the other side of punters, which usually only the house can do. Correct risk management allows users to take the winning side since the house is always profitable in the long run.
However, not everyone is sold. Crypto Twitter educator Korpi thinks blockchain technology does not make sense for casinos. Moreover, shitcoins are a casino in themselves, taking out a lot of the appeal of traditional gambling for crypto natives.
Popular GambleFi Projects
Whether GambleFi does indeed take off or not, some researchers on Crypto Twitter are betting on it. Here is a list of projects in this sector by Louis Cooper, an account with a lot of sector-specific knowledge:
User @tumilet compiled a dashboard with analytics from different GambleFi tokens:
The Outlook For GambleFi
Does the GambleFi narrative evolve or fizzle out, as so many others?
As so often, it’s hard to say. From a former sports bettor’s perspective, decentralized casinos and bookmakers still have a long way to go to catch up with their centralized counterparts. Security and decentralization are fine and dandy, but gamblers mostly care about user experience, convenience, a variety of games and sports, and high limits.
That is not to say that decentralized casinos cannot take off. There is a natural overlap between crypto and gambling. With a few improvements, GambleFi could be a sector to keep an eye on.
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