Blockchain in iGaming: Balancing Fair Play, Trust, and Risks

The iGaming world has always faced tough questions about fairness and transparency. Are games rigged? Are payouts really fair? Enter blockchain - a technology that’s changing the game by making things more open and trustworthy.

Platforms like FunFair Technologies utilize blockchain to allow players to verify the randomness of game outcomes. This technology ensures that neither the operator nor the player can manipulate results, building trust. When rolling dice in a blockchain-powered casino game, the smart contract generates a cryptographic hash before the roll. Players can verify the roll's fairness post-game using this hash.

All transactions - bets, wins, and payouts - are recorded on an immutable blockchain ledger. This eliminates disputes over payouts, as all data is transparent and tamper-proof.

Blockchain-based platforms like Wagerr use their native tokens for betting, with all outcomes publicly verified on the blockchain.

Blockchain-Based iGaming Platforms

FunFair (UK-based) uses Ethereum-based smart contracts to power casino games. These smart contracts automate game outcomes, eliminate intermediaries, and reduce operating costs for operators. Operating under UK gambling laws, FunFair ensures compliance with both blockchain and gaming regulations.

If the UK Gambling Commission updates its requirements to include blockchain-specific provisions (e.g., mandatory disclosure of smart contract code), FunFair might need to overhaul its infrastructure, increasing costs and operational delays. Non-compliance could lead to fines, loss of licenses, or exclusion from key markets

While smart contracts automate processes and ensure fairness, they are not immune to bugs or exploitation. A single flaw in the smart contract code could result in unintended outcomes, such as unfair payouts or system crashes. In 2021, a blockchain project unrelated to FunFair experienced a smart contract bug that allowed a hacker to siphon off user funds. A similar incident in FunFair's system could compromise user trust and financial stability. Exploitation of vulnerabilities could lead to financial losses, damage to the platform’s reputation, and potential legal liability.

FunFair likely deals in cryptocurrencies. The volatile nature of cryptocurrencies can affect the value of funds deposited and withdrawn by players. If a player deposits EUR 1,000 worth of Ethereum, but the value drops by 20% during gameplay, the player may experience dissatisfaction, even if the platform operates fairly. Cryptocurrency volatility could discourage players from using the platform and create operational challenges for payouts. Challenge: Blockchain’s transparency ensures fairness, but it also records transaction data publicly. Even pseudonymous transactions might be traced back to users, raising privacy concerns. A user’s betting activity recorded on the Ethereum blockchain could be exposed, potentially leading to unwanted attention or data misuse. Privacy concerns may deter users who value confidentiality, particularly in jurisdictions with restrictive gambling norms.

The Regulatory Landscape

Blockchain's integration into iGaming poses unique regulatory challenges. Many jurisdictions are grappling with how to regulate these platforms, balancing innovation with consumer protection.

European Union (EU):

Under the EU’s MiCA (Markets in Crypto-Assets Regulation), blockchain iGaming operators must comply with crypto-specific rules like transparency in token issuance and adherence to AML directives. Platforms offering tokens for gaming (like FunFair’s FUN tokens) need to disclose their mechanisms clearly in whitepapers and comply with EU-wide anti-money laundering regulations.

Georgia (country):

Georgia’s 2023 crypto regulations, focused on Virtual Asset Service Providers (VASPs), provide opportunities for blockchain iGaming platforms. Operators must register with the National Bank of Georgia (NBG) and comply with AML/KYC standards. While Georgia's leniency fosters innovation, its lack of detailed iGaming-specific blockchain rules leaves operators in a gray area.

United States:

The US has a fragmented regulatory approach. States like New Jersey allow online gambling but require all platforms to comply with local gambling laws. Blockchain platforms often find compliance costly due to overlapping state and federal rules.

Hurdles in Blockchain iGaming

Regulatory Ambiguity:

While blockchain-based platforms promise transparency, inconsistent regulations create uncertainty. In countries with strict gambling laws, blockchain iGaming faces bans or high compliance costs. Players accustomed to traditional casinos may find blockchain platforms overly technical. For example, using wallets and cryptocurrency for betting can deter less tech-savvy users.

Not all blockchain iGaming platforms are trustworthy. Some exploit the anonymity of blockchain to operate scams, undermining the reputation of legitimate operators.

Future Prospects for Blockchain in iGaming

Despite challenges, blockchain's potential to reshape iGaming is undeniable. Countries like Malta, with its Gaming Authority (MGA), have already created blockchain-friendly frameworks, encouraging operators to innovate responsibly. Other jurisdictions, including Georgia, could follow this lead by integrating blockchain-specific rules into existing gaming legislation.

If the UK Gambling Commission updates its requirements to include blockchain-specific provisions (e.g., mandatory disclosure of smart contract code), FunFair might need to overhaul its infrastructure, increasing costs and operational delays.

Blockchain is more than a technological buzzword for iGaming - it is a transformative force addressing transparency, fairness, and security issues. For operators, investors, and players, understanding blockchain's role is no longer optional - it’s essential for staying ahead in the rapidly evolving world of iGaming.

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