The popularity of bitcoin as the digital currency has enabled a new economy to flourish in parallel to the existing traditional currency based economy. While bitcoin transactions continue to gain popularity, they have also enabled a new arena for gambling, gaming and lotteries through online bitcoin casinos. (See our video: What is Bitcoin?)
What are bitcoin casinos?
A few online casinos transact only in bitcoins, while others offer bitcoin as additional currency of transaction, in addition to transactions in traditional currencies like USD. (Related: What is Bitcoin's Intrinsic Value?)
There are growing numbers of online casinos which offer gambling and money based games in bitcoin currency. Bitcoin casinos operate from all over the globe, though they are supposed to be subject to local laws. Through bitcoin transactions, these casinos offer a wide variety of options for players to bet their bitcoin money on:
- casino games
- gambling games
- sports based betting
- online lotteries
- spread betting
A few popular bitcoin casinos are - Satoshidice, bitzino, satoshibet, swichpoker, StrikeSapphire, bc-casino.com, BtcSpiortsBet, BitLotto, etc.
How bitcoin casinos operate
Software remains at the heart of any online gambling or gaming business and same holds true for bitcoin casinos. Most popular bitcoin casinos with large user bases run their own gaming software, developed on their own. Other smaller players use purchased or rented versions, which may be customized by adding a few unique features to the game.
The software conducts and runs the game, with minimal human intervention. For games needing all human players, the software plays the role of the table dealer (actually conducting the game). Due to the digital nature of their business, bitcoin casinos face the challenge if convincing the users about fairness of their operations. Most bitcoin casinos attempt to establish trust by openly disclosing how their software algorithms work. For the rest, it's more of a peer to peer reference that works, or the uniqueness of their offering in the casino games.
Poker is the most popular game for bitcoin casinos, while a lot of other interesting games, lotteries and other variations of popular games exist (and continue to get invented). (All gamblers beware. Read Gambling Stats: Why Gamblers Rarely Win)
Why bitcoin casinos are gaining popularity
Anonymity remains the biggest advantage for bitcoin casino users (for that matter, for any bitcoin transaction, and even the founder of bitcoin, the pseudonymous Satoshi Nakamoto).
Most bitcoin casino sites offer zero transaction fees with unlimited free daily transactions, whereas traditional currency based casinos have set limits and transaction fees.
The online digital nature of this business enables global access and easy availability of players in large numbers, round the clock.
Since online games are largely beyond the purview and control of authorities, many online games have been customized with tweaks in the rules of the game. Such variations are not allowed legally in traditional currency based online casinos, and this has been a major reason for the popularity of bitcoin casinos.
Why bitcoin casinos are under the microscope
Traditional online casinos transacting in traditional currencies have defined regulations. Payments in traditional currencies enable tracking and identifying individual players, dealers as well as casinos operators. The same is not the case with bitcoin casinos.
Since bitcoin transactions are purely digital, audit and verification becomes a challenge. (See "What is the Future of Cryptocurrencies?) For e.g., in an online card game, what is the guarantee that the cards have been shuffled and distributed fairly? Additionally, if the player's anonymity is maintained because he or she pays anonymously through digital currency, the fair business practices become further questionable.
A lot of bitcoin casinos require minimal user details (quite often limited to only email and login-name), no age verification, no location check or other details.
Gambling is not allowed in lots of countries across the globe, and bitcoin casinos make it further difficult to regulate and control it at global level.
All the above operational methods prove a challenge for authorities, as a new parallel economy is taking shape. Although digital currency based systems may be cited for their advantages, casino based gambling is surely a challenge at multiple levels.
Legal aspects of bitcoin casinos
Due to the nature of bitcoin transactions and challenges listed above, running bitcoin casinos is illegal in the US. Most of the legally known bitcoin casinos are incorporated outside of the US. Interested users from all over the world (including a significant user base from the US) transact on these bitcoin sites anonymously, posing a big challenge for authorities to regularize, control and legalize the transactions. Lack of open information on such anonymity-based business pose a challenge to gathering the type of data that would be needed to enforce rules.
The impact of bitcoin casinos on bitcoin transactions
Due to the lack of publicly available information about bitcoin, it is difficult to assess the details and impact of bitcoin casinos on bitcoin itself. Based on some limited information available, it is understood, as per the linked article, that the "April 2012 launch of gaming site SatoshiDice.com was sufficient to boost the total number of daily bitcoin transactions nearly five-fold ". This indicates how the anonymous world is keen on gambling.
The reality remains that bitcoin casinos are getting more and more transactions with steady growth rate since 2012. This has further fuelled the usage of bitcoins.
The Bottom Line
Casino gambling, whether based on conventional currency transactions or anonymous digital currency transactions, has always been a debated topic on ethical grounds. Add to it the complexity of bitcoin transactions, and the operations of bitcoin casinos become further challenging. While it is always exciting to get carried away with easy money making options, users should keep in mind the legal aspects, challenges and risk areas.