In the early days of Bitcoin, about 50% of its transactions were wagering by gamblers and win payments by online casinos. To the majority of those who bet over the internet, the cryptocurrency was the best thing ever to happen to online gambling.
That is since InterCasino and GamingClub, the two forerunners in online betting, opened in the middle of the 1990s. Indeed, there are many reasons why Bitcoin and online gambling is the perfect match. And all of them point to the fact that the former was built for the internet and fiat currency was not.
It is true that fiat money for many years served the brick and mortar casinos well. When the blackjack, craps or roulette on the internet came along, it continued to provide the same service, but this time round it was through credit cards and other online payment methods such as PayPal and Skrill.
Limitations of fiat currency
However, a few things had to change and the following shortcomings arose as a result:
- Use of the new methods of payment required the players to share critical personal information with both the credit card company and the online casino. This left them vulnerable to authorities, rogue elements in the casinos and even third party scammers.
- On their side, the casinos had to deal with the infamous chargeback feature. Players using their cards to wage and then turning round to disown the transactions has remained as one of the most common forms of cheating in online gambling.
- Due to lack of anonymity, players from jurisdictions that do not approve of gambling could not move money for such purposes. For instance, while it is not illegal to bet online in the United States, the Wire Act of 1961 prohibits financial institutions from facilitating transmission of money as payments for such purposes.
- Credit cards and other fiat online payment methods make the cost of online gambling high. This is because the money has to go through a channel with numerous players, with each of them needing to make a cut. Moreover, these fiat online payment methods do not facilitate micropayments, a feature that works well with online gambling.
The Bitcoin technology, by its nature, takes care of each of these issues and gives the online casinos all the qualities of the brick and mortar casino. But, what is Bitcoin?
The Bitcoin Technology
Bitcoin is a decentralized digital currency that a peer-to-peer network generates through a process known as mining. It is, therefore, not issued by a central bank, like the Dollar, Pound Sterling or Euro. The same P2P network is also responsible for facilitating all the transactions involving Bitcoin. These transactions are recorded on a public ledger known as the Blockchain, which is secured by cryptography.
In November 2008, a person or a group of people going by the name of Satoshi Nakamoto published a whitepaper online outlining the basic concepts of Bitcoin. The paper explained how cryptography, Proof of Work and the Blockchain could create a currency that was perfect for the internet. Satoshi went ahead to release the first Bitcoin client in January 2009 and mined the first fifty bitcoins, which are referred to as the Genesis Block. Since the Bitcoin client software is open source, many other developers have joined the project ever since.
In 2011 Satoshi left the project. Even though the identity of this person remains a mystery, the technology s/he or they left behind has convinced almost everyone who has taken the time to study it that it is viable and secure. Indeed, what makes Bitcoin valuable is the cryptography that secures it and the hashing power required to mine new bitcoins.
The term Bitcoin, with capital B, is used to describe the system and bitcoin, with a small b the coin units.
Sending and receiving bitcoins is similar in many ways to email. In fact, to start using it, you need to sign up for an online wallet on wallet service providers such as Coinbase and Blockchain.info, just like you do with Gmail or Yahoo.
However, you can also download and install a wallet app on your desktop or smartphone. For even better security, you could generate your own wallet, which does not rely on any centralized service provider, using sites like Bitaddress.org.
Your wallet contains your Bitcoin public addresses and the corresponding private keys. Think of the private keys as the password that you will use to authorize the movement of funds from your wallet.
Why use bitcoin
The reasons why Bitcoin is worth trying include the following:
- Fast – It is incredibly fast to send money to any part of the world in the form of Bitcoin. It usually takes below ten minutes for the recipient to get the money. This is regardless of the distance between you and the recipient.
- Cheap – In spite of this speed, bitcoin transactions are significantly cheap. It cost almost nothing to send any amount of many to any part of the world. This is because the network that facilitates the movement of the money is compensated through the new bitcoins that are mined.
- Secure – The Bitcoin network is secure through the cryptography. It is only possible to tamper with the system if you control more than 51% of the machines on the network, which is not feasible.
- No chargebacks – There is no way one can call back a payment that has been made. This characteristic saves online casinos from unwarranted canceling of payments.
- Private and confidential – Bitcoin is pseudonymous. That means the addresses sending and receiving money can be seen, but the people behind them can choose to remain anonymous. As a gambler, you can pay without disclosing any personal information to the online casino or any third party.
Provably fair technology
A fast, secure and cheap mode of payment is not the only thing that Bitcoin offers online gambling. It is also the source of a technology that has brought transparency to online gambling by making the cutting deck practice possible there too.
This technique is referred to as Provably Fair Technology (you can read more about it here). The players use the Bitcoin hashing technology to prove that the operator did not cheat. The player is given hash of the secret and a client seed. At the end of the game, the player can use this information to confirm its fairness. See our Provably Fair Infographics to grasp the basics of this exciting technology.
Bitcoin and online gambling is indeed a perfect match. This is because the former has not only made the latter anonymous, just like in the physical casino, but also afforded it transparency through the Provable Fair technology.
- Provably Fair: a Bitcoin feature that makes online gambling transparent
- 5 Critical Ways Bitcoin Makes Gambling Online Better
- Is it legal to gamble with bitcoins?
- How to withdraw bitcoins from online casinos
- How to deposit bitcoins to an online gambling site
- Introduction to Bitcoin and online Gambling