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The gambling industry was among the earliest mainstream uses for bitcoin. Casino players have gained plenty of benefits after switching to crypto casino sites. And for this reason, online casinos and bitcoin have always seemed like a match made in heaven.
However, things have changed considerably since then, and the dynamics seem to be shifting. What does the future hold for bitcoin gambling? Is it just a fad or is it here to stay?
To find out the answer, let’s start at the beginning and gradually work our way up to the current state of the bitcoin gambling industry.
History of Bitcoin Casino Growth
The origins of the bitcoin casino industry are traceable back to what is known as poker’s Black Friday. On this fateful day, April 15, 2011, the US Department of Justice indicted the top three online poker sites in the country. These were Absolute Poker, FullTilt Poker and PokerStars.
Setting the pace for this incident was the Unlawful Internet Gambling Enforcement Act (UIGEA) passed in 2006. This had made most forms of online gambling illicit. While this had not made online gambling completely illegal, it had made it illegal for mainstream financial institutions to process internet gambling transactions.
Some of the then dominant players like PartyPoker closed down, but others, like the three mentioned above, came in their wake. According to the Department of Justice, they would find ways to mask their transactions to launder payments for processing by banks.
On Black Friday, punters logging on to the sites got a rude shock as they were greeted by a message from the Department of Justice. The domains in question had been seized and millions of dollars in players’ funds were stuck in their accounts.
After these events, none of the big players could offer games for real money in the American market. In fact, a number of big players exited the US market altogether and focused their attention elsewhere. For those that remained, it seemed as if the only way to avoid the total collapse of the industry was to turn to black market games.
Pretty soon, however, the tides would turn and lead to a whole new era in internet gambling. In August 2011, mobile poker site Switchpoker became one of the first casinos where players made all payments in bitcoin. Satoshi Dice, a brainchild of popular crypto enthusiast Erik Voorhees, launched shortly thereafter in April 2012.
With time, the use of bitcoin in online casinos became commonplace as it provided a worthwhile way to stay out of the reach of authorities. Fast forward to the present day, bitcoin gambling is now a massive industry.
In view of the above, it comes as no surprise that there are nearly 200 BTC casinos now featured on TheBitcoinStrip. For how long will the king of crypto reign supreme in the online casino sector?
Future Trends for Bitcoin Gambling
Bitcoin has plenty of advantages in every industry where cryptocurrencies play a significant role. By virtue of being first on the scene, it has the level of dominance that only an early riser can enjoy.
However, is there a chance it could lose its hold on the throne? Let us take a look at some worthy contenders to the title who might have what it takes to upend bitcoin’s dominance.
Is Bitcoin Losing Casino Dominance?
From the above peek at the history of bitcoin casinos, it is clear that bitcoin offers numerous benefits to users in the gambling industry. However, it is not without its faults, foremost among these is its wild volatility.
Simply put, bitcoin’s price can fall or rise by a remarkable amount in a short span of time without any prior warning sign. For gamblers, such abrupt moves can mean huge losses when the value of a cryptocurrency plummets right after you make a withdrawal.
That level of instability is highly disconcerting if bitcoin is your cryptocurrency of choice for gambling. In view of this fact, bitcoin is facing some serious competition from a number of worthy contenders.
Ethereum – Smart Contract Gambling
At the onset, bitcoin was the only contender in the race to replace existing payment frameworks. For over half a decade, it was the only cryptocurrency. And the fiat payment systems it sought to replace were slow, expensive and prone to governmental censorship.
But when a second crypto, Ethereum, came into the scene, it upended the status quo in more ways than one. Rather than focusing on a peer-to-peer transaction framework, Ethereum introduced the concept of smart contracts.
Thanks to this concept, Ethereum was far more than just an alternative to fiat casino payments. For starters, smart contract gambling based on Ethereum is ultra-secure. Smart contracts are self-executing, and they give players a higher sense of confidence and transparency when gambling.
To illustrate, when betting on an event using smart contracts, players deposit currency into the contract and wait for the outcome. Before the delivery of payouts, the contract can verify the results from various sources to ensure accurate results. It will then make payouts to players on the basis of preset rules and odds.
Secondly, crypto casinos built on the smart contract concept can operate on a decentralized framework. Unsurprisingly, Ethereum is already home to more than 400 decentralized gambling apps at present.
Stablecoin Gambling – Addressing Crypto Volatility
Another popular alternative to bitcoin gambling is the use of stablecoins. From its name, the outstanding feature of this relatively novel class of digital assets is rather obvious. The idea behind the creation of stablecoins was to address the volatility of cryptocurrencies.
In order to achieve this, stablecoin creators peg their value to stable financial instruments. Some have their pegs tied to major world currencies such as the US dollar or the Japanese yen among others. Others make use of crypto-collateralization while still others use complex algorithms.
Regardless of their form of collateralization, the concept is the same. Each one makes use of some stabilizing mechanism to ensure that the coin maintains its required value. The best part about them is that they offer relative stability as well as all other advantages of crypto gambling.
In view of all this, it is easy to understand the basis for the recent surge in popularity of stablecoin gambling.
Will the Lighting Network Give Bitcoin A Comeback?
In spite of the fact that there are worthy competitors that could turn the tides on bitcoin’s dominance, all is not lost for the king of crypto.
As it stands, all of the casinos that accept crypto payments support bitcoin and other cryptocurrencies. None have gone as far as to replace the number one crypto with any of its competitors; at least not yet. So what does the future hold for the most popular digital asset in the online casino sector?
One possible scenario that could give bitcoin an opportunity to reclaim its dominant position has to do with the Lightning Network. As the next frontier of all things bitcoin, the Lightning Network offers plenty of potential to revolutionize the industry as we know it today.
A Scalable Solution
Primarily, the Lightning Network seeks to address the scaling challenges that cripple the network. Designed with a focus on the fast processing of micropayments, it presents an appealing solution for the gambling sector.
The network supports the processing of small transactions (micropayments) on different channels. These micropayments take place off the main chain thus taking the load off the blockchain. Only the initial and final balances go on the main chain, translating to better performance. What does all of this have to do with gambling?
Faster transaction processing means deposits and withdrawals will be quicker, and in turn, cheaper. Players will no longer need to move coins from their wallets to casino wallets. Instead, they can use Lightning channels and pay lower fees as well as have the transactions reflect almost instantaneously.
Privacy Matters
Another advantage is that the Lightning Network promotes privacy, an important feature for gamblers.
Due to the fact that transactions on the channels do not reflect on the main chain, it will be much more difficult for analytics software to monitor BTC spending. Nobody but the parties to the transaction would be able to view the funds moving through the channel.
Some bitcoin casinos, eager to capitalize on these advantages, have already embraced the use of Lightning Network. Examples of these include BitKong, Satoshi Dice, Bspin, Lady Hammer Casino and Crushbtc.
Despite holding significant advantages in terms of scalability and privacy, the Lightning Network might not pay off in sustaining bitcoin’s dominance. Keep in mind that one of the primary downsides to gambling with this digital asset is volatility. And that is one weakness that this solution does not address.
Furthermore, a lot of people want to HODL and not spend Bitcoin. Therefore, it might only be a matter of time before the online casino sector embraces a different form of payment.
Closing Thoughts
Based on the above discussion on past and current trends in bitcoin gambling, it is clear that bitcoin has a significant role in the online gambling arena. It has significantly revolutionized the online casino experience.
But after setting the pace for a remarkable transformation, it has also created an opportunity for its competitors. Some of these have noteworthy advantages over their predecessor. And with time, who knows, they might take over the dominant role.
Before that time comes, the king of crypto still has a lot to offer. With the increasing adoption of the Lightning Network, it might soon offer a fast and privacy-centric solution to gamblers. Only time will tell whether or not bitcoin will lose its position to a less volatile alternative.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.