In many ways bitcoin is the perfect solution for online gaming. It is limitlessly divisible, transparent, anonymous, liquid, and has proven that it can store value effectively. One can easily use their bitcoin wallet to send and receive as much or as little as they like, and expect it to arrive at its destination safely, quickly, and inexpensively. People have called it the currency of the future, but its high rate of adoption in gaming and other online industries largely makes it a currency of today – and one of the more successful ones. This year alone, bitcoin has gained over 500%.
The characteristics of cryptocurrencies described above apply to any online bitcoin transaction, whether it be for eCommerce, lending, crowdfunding, or trading. It has an astonishing number of applications, and adds more to the roster with each passing day. At a time when bitcoin’s popularity has reached a consistent exponential growth, there are few threats to its success. It’s been shown that one of them is regulation by governments, and the addition of gaming to the equation complicates things a bit.
Build on Bitcoin, Not with Bitcoin
One of the important things that many bitcoin enthusiasts understand is that the cryptocurrency, despite its popularity, is not the ultimate solution. Its abilities pale in comparison to many alternative cryptocurrencies (referred to as altcoins) and Ethereum, which can create smart contracts that provide infrastructure for complicated transactions.
As it happens with products that have first mover advantage, bitcoin was used as the currency for many of the gaming sites that emerged after it became popular. Its traits suited gaming well, but better alternatives have since been introduced. Bitcoin has proved to be slow compared to other cryptocurrencies, with an average transaction taking anywhere from 10 minutes to an hour. There are also currencies that are more anonymous, and those that suffer from less volatility. Imagine winning a huge hand in poker, and then losing half of the winnings to an enormous price swing. The risk alone makes bitcoin less viable.
While it’s certainly easy to create a gaming platform that uses bitcoin, it’s not feasible in the long term. The problem is one of acceptance. Currently, cryptocurrencies’ value is still mostly speculative. While some have shown proof of concept, and surely bitcoin has become more widely accepted, it remains far from the mainstream. While some e-commerce services and other retailers have begun using it, cryptocurrency remains a novel technology, and one that yet has little broad practical application. For gaming, this spells trouble as a wide portion of the audience does not use or own bitcoin or other altcoins. (See also: Alibaba to Invest 1B Yuan in Gaming Platform)
Past Attempts at Regulation
Regulatory bodies have successfully managed to influence the price of bitcoin before, but these were regulations aimed at the coin itself. One such example came just a few weeks ago, when China announced that it would ban participation in ICOs (initial coin offerings). While not specifically bitcoin-related, the ICO ban was crippling for the burgeoning cryptocurrency community, and was a sign that regulators feel threatened. Since the ban, the cryptocurrency market has largely been turned bearish.
Should the coming regulations target bitcoin specifically, it could be another negative sign for the market. However, some believe that bitcoin has something to gain from increased gaming regulation in Europe and elsewhere.
Even as bitcoin is starting to see some heat from regulators across Europe and the world, other payment methods have started to take over the place of traditional payment methods. While credit cards are still popular, they are not as secure as direct transfers
New companies that focus on digital payments and eliminate payment processors from the equation have gained in popularity. A payment platform such as Trustly, which offers customers the ability to pay for a wide range of services directly from their bank account is an apt solution for the current regulatory climate. Such companies are already regulation-compliant with most of the countries they operate in, as they must work with banking institutions and companies in the gaming industry.
More importantly, these direct bank payments are already widely accepted. According to Trustly CEO Oscar Berglund, “Bank payments will go from being an alternative payment method to a mainstream option and already today the preference for bank payments is higher than for card payments in some European countries.”
Should bitcoin and its contemporaries embrace this single payment model, offering wallets that are compliant with a wide range of regulations, it could simplify the process of acceptance, and make cryptocurrencies a more popular option for gaming. (See also: Why Tech Startups are Taking Sweden by Storm)
The Changing Landscape for Gaming in Europe
Countries within and without the European Union are changing how gaming companies must operate. Some examples include Germany, which reduced the number of these services on German soil to a maximum of 20, which they plan to enforce by limiting the supply of licenses available. Poland illustrates this trend as well, a country that recently increased taxes for gaming companies to 12% of total revenue – a somewhat exorbitant tax that has caused many to leave the space.
The Czech Republic is even stricter, imposing a 35% tax on companies who run games that use the “random winner” model, and that’s added to an unheard-of 19% corporate tax. As far as unregulated companies go, those who use bitcoin may experience an influx of customers due to these newest regulations. Given a shortage of ways to play with fiat, customers will likely switch to bitcoin to play their favorite games. This is possible because bitcoin regulations are almost impossible to enforce, due to the anonymity and decentralized nature of the blockchain.
Though the relationship between bitcoin and its slew of gaming sites is not a strong one, there is a better chance that increased gaming regulation will drive more people into the cryptocurrency than away from it. The fear that industry tightening will make people run from bitcoin assumes that gamblers only play on regulated platforms, whereas bitcoin was built, and will remain, and unregulated solution.