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A common question in the Wagerr Discord chat is:
“People use centralized sportsbooks everyday and are comfortable with them, why is it such a big deal to be decentralized when the other blockchain-based sportsbetting competitors (Edgeless, Peerplays, etc.) are not?”
Let’s take a look at the risks involved with centralized sportsbooks to understand why blockchain-based betting solutions that maintain some centralization elements are merely an adaptation of existing sportsbooks. They use the hype of “blockchain” to simply raise money as opposed to fully decentralized projects like Wagerr.
Centralization risks were best articulated by Nick Szabo in his seminal work, “Trusted Third Parties are Security Holes” back in 2001 — go read it now.
1. Regulatory Risk Governments don’t like sportsbetting (unless they run it or get a nice cut). There is a real risk that a government will arrest operators of “unapproved” sportsbooks anywhere in the world. Governments can seize assets, domains, documents, or property of anyone involved.
So, what happens to a semi-decentralized sportsbetting network when this happens? It’s dead. Contracts do not get settled, no more wagering events are created, and the system is finished. Even if the blockchain is decentralized, other elements are not and are easy attack vectors.
What happens to Wagerr when this happens? Almost nothing. Certainly it would be a hardship for the team and people involved but the network will continue: old bets will be settled, new matches created, all good. Basically the same as with Bitcoin — if every bitcoin developer on the planet were arrested simultaneously the bitcoin network would continue to function perfectly.
2. Team Risk Unfortunately many people have been on the bad end of a sportsbook shutting down unexpectedly (BetIslands anyone?), going bust, or just walking away with the money. Simply using a blockchain does not prevent this when a centralized team maintains control. A rogue employee can steal or manipulate balances/contracts or just make a tragic mistake. Even if the team is honest, they are still a target for thieves, hackers, and extortionists. Aside from these, they also could have a tragic boating accident or be otherwise incapacitated — that means users are also at risk.3. Third-party Risk Many projects are planned to run on Ethereum or other blockchains that have centralized elements. That in itself has risks, other than the obvious drawbacks (scalability issues and transaction fees). Those projects are at the mercy of protocol changes dictated to them, as well as contentious hardforks that can impact balances and the ledger. Only by having an open source, decentralized, and dedicated blockchain like Wagerr can this risk be mitigated.4. ID/Privacy risk Some betting projects are trying to “go legit” and become licensed by the regulators of whatever jurisdiction they are operating from. While this may mitigate some of the “Regulatory Risk” above, it introduces a new risk — ID risk. Every regulator requires the gathering and storing of user identification documents, usually under the guise of money laundering and terrorist financing surveillance. These documents have been misused/leaked/sold/stolen/reported to tax authorities in the past and bettors would be at risk.5. Censorship Risk. Due to the ID risk above, sportsbettors have been given restricted betting limits, refused from getting a bet in due to being “sharp” or otherwise raising a red flag to sportsbooks. Sportsbooks have shared this information with other sportsbooks leading to a de-facto blacklist. A semi-centralized sportsbook can also analyze user activity and make user-specific adjustments. A fully decentralized and open source sportsbook allowing for anonymous wagering cannot.
It is impossible to be “mostly decentralized” or “using a decentralized blockchain but maintaining control” just like one cannot be a “little bit pregnant” — any centralized or third-party element is a single point of failure.
A fully open source and decentralized sportsbetting blockchain is a gift to the world. Like bitcoin, it cannot be shut down and there is no single point of failure that can be targeted. Once released, it is like ringing the bell for the end of traditional sportsbetting, which has the risks outlined above. Not even the most powerful government or bad actor can unring a bell.
These numerous “blockchain” betting projects are simply a small evolution from what exists with traditional sportsbooks, while Wagerr is a revolution.
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