Azuro closes $3.5mln seed round to build the base layer for decentralized betting
We’re excited to announce the successful closure of our seed round raising $3.5 million from true value adds on the venture and strategic partner side.
We are proud to be working with Gnosis, Flow Ventures, Polymorphic Capital, who lead the round, and Ethereal Ventures, Arrington XRP Capital, AllianceDAO (a.k.a. DeFi Alliance), Delphi Digital, Meta Cartel Ventures, Merit Circle and Clever Advertising (a top 3 global sports betting media).
Other VCs and Angels who have joined are SevenX, OP Crypto (lead by ex-Huobi David Gan), CitizenX, BR Capital, David Post (Chainlink), Alex Wearn (IDEX founder), Sergei Chan. Having the backing of this group is excellent validation for our efforts so far and makes us even more confident we are on the right path to bring decentralized betting to the world. The partners’ backgrounds range from web3, GameFI, DeFi, blockchain infrastructure, traditional betting infrastructure, sportsbetting lead generation, and bring an immense amount of experience and capability to the project both sector-wise and geographically. The support we’ve got is indicative of our ambitions — to disrupt web2 sports betting with a trustless, permissionless proposition, and to create the new betting layer on top of web3 with totally novel use-cases and functionality.
Skepticism at the outset
When we started speaking to potential partners and investors about Azuro we were often met with skepticism. And that is very rightly so for 2 reasons:
1. Prediction markets have been around for a long time and multiple solutions have not succeeded or have been discontinued, incl. efforts from otherwise extremely successful and capable teams (case in point: Gnosis who are a partner & investor in Azuro now and FluxDAO’s prediction markets arm — Pulse Markets who we’re in talks with to onboard as an Azuro front-end).
2. Betting carries a stigma as a tough-to-enter and tough-to-thrive-in industry being capital & know-how intensive and made very complicated and fragmented by regulations.
But also — the majority of potential partners we spoke to had an appreciation that betting is a solvable problem on-chain, and that if the right approach is taken both technically and from a go-to-market and regulatory perspective — the prize will be absolutely huge (different estimates put the existing online gambling industry in the $200–300bln range a year).
Many people we spoke to have been waiting for years to see a solution which they would get excited about. All in all, in the end — we managed to turn most skeptics around. Especially those who understand the sector in depth coming from backgrounds in betting, poker or similar and who dived deep to fully see the beauty and power of Azuro’s approach, for which we are thankful. Furthermore, we found great backers in web3/GameFi / P2E who saw the immense potential for the native integration of Azuro’s solution into this vast emerging environment (the metaverse).
Why prediction markets failed and the wave of new decentralized betting projects
Prediction markets (Augur, Polymarket and others) are currently the only form of decentralized betting. Many attempts have been made to make them work, but ultimately they have not succeeded in delivering on the fundamentals of sportsbetting in particular (plenty of events, markets, and competitive odds with multiple betting options). The main areas where the current solutions have failed are Liquidity, Product Depth & UX.
Prediction markets’ peer-to-peer model inhibits truly efficient liquidity allocation. Liquidity providers on prediction markets have to start markets manually, set the odds and seed liquidity to each market they create. Then, that liquidity is market-specific, which means the LP carries betting risk connected to that betting market. All of that comes down to a heavy lift expected from LPs and as a result — there’s hardly any liquidity, and therefore — no betting.
Furthermore, prediction markets are inefficient for bets with 3 or more outcomes. Most are bound to stick with YES/NO markets, which is dramatically insufficient especially for sports. Other examples of lack of product depth include one of the most popular types of bets players like to place (and the most popular amongst casual players) — an “accumulator”. Bettors place multiple bets on the same slip and therefore get a much larger potential pay-out if all bets in their slip are won. This is not possible with the peer-to-peer model and multiple other UX issues abound.
Lack of betting understanding and regulatory preparedness
On top of the aforementioned issues, most prediction markets have been set up as platforms that directly interact with users which carries extensive exposure to risk. The CFTC recently issued a fine and had Polymarket close some of the markets on their platform. It is clear that the burden on platforms that have not been set up to navigate the landscape properly will be significant.
The decentralized betting industry is only just taking off with as many as 15 new projects on our radar starting currently and surely more in the conceptual stage. Some have already raised funds from top-tier VCs at valuations above $100mln without MVP, testnet or user traction which speaks to the size of the opportunity smart money sees in the field (especially given that prediction markets & betting are not hyped in crypto, at all).
However incredible for the space it is to have these new attempts, most new projects are just slight improvements (if at all) of the current solutions bearing very similar limitations. The reality is the majority preserve the same core peer-to-peer architecture as in prediction markets, some just rebranded as decentralized betting exchanges. Liquidity issues seem to be combated with plans to use elaborate market making, but scaling prediction markets using market makers is still a rather inefficient approach to liquidity allocation, and carries the same limitations in terms of product depth and UX…
“I’ve seen so many decentralized betting/prediction market solutions and this is the first time I feel like “This is actually going to work!””
Qiao Wang (DeFi Alliance / AllianceDAO)
Azuro’s solution for decentralized betting
Azuro utilizes smart-contracts to build a decentralized betting protocol deploying an innovative solution for liquidity provision and allocation. It replaces traditional bookmakers with a blockchain-based ecosystem of independent front-end operators, data providers, and liquidity providers. Unlike existing and most new projects, Azuro is the first to introduce pooled liquidity to scale prediction markets, similarly to how pooled liquidity scaled lending protocols like Aave or Compound and DEXs like Uniswap. As a result betting becomes transparent and trustless, while depth of betting events, markets and UX remains as good as it gets.
Core liquidity is provided by a common pool instead of using individual pools that are event and market-specific. Liquidity Providers are not required to manually create markets and are not exposed to betting-market-specific risk. Instead, risk is spread across all betting markets on the protocol, and therefore dramatically reduced for the LPs. The process for LPs is on par with general DeFi expectations — no manual effort, and no specific know-how required to provide liquidity. The yield for LPs on Azuro though is totally uncorrelated to the broader state of DeFi or financial markets in general. Yield is generated via the profitability of the Liquidity Pool, which is generated via betting. That in turn means that Azuro delivers a unique proposition for liquidity providers & farmers in DeFi — allowing them to become something which is close to being the “house” in the traditional bookmaking model.
Market Creation & Liquidity Allocation
Betting markets on Azuro are created by importing odds (via oracles) for events using real-world, live betting data. This allows for plentiful sports, events and markets related to them to get started with competitive market odds.
User Experience/Product Depth
Azuro’s architecture allows for the full depth of the betting product available at centralized sportsbooks, plus the UX is classic and similar to what’s emerged as the standard in betting.
Players will be able to place accumulator bets, bet on events with multiple outcomes (instead of the usual YES/NO limitation of most prediction markets) and receive odds they understand and see their potential fixed winnings when placing a bet. Importantly, to allow for this, bets on Azuro are non-fungible which also means there is no longer any need to buy and sell tokens to bet.
Neutral B2B betting DAO. The base layer where all liquidity sits
Azuro sits as the base layer infrastructure where liquidity is, but consumer interactions happen on the front-ends built on top of Azuro. This approach “outsources” much of the direct-to-consumer efforts and relieves Azuro from most of the regulatory, KYC, legal and operational lift. As a result — Azuro is to fuel the boom of decentralized betting, with multiple front-ends (customer facing websites or apps) utilizing the liquidity, odds, risk management and settlement provided by the protocol.
“The repeated failure of peer-to-peer iterations of prediction markets has led to complete skepticism of decentralized betting. Azuro’s peer-to-pool approach represents a true turning point, building off the learnings of DeFi to build a system which challenges the consensus view. Azuro could not come at a better time, just as the P2E economy emerges and Web3 based e-sports begin to take on a life of their own.”
Ninor Mansor (Arrington XRP Capital)
Online Sports Betting — a massive industry at the brink of disruption
Online sports betting began in the 1990s with around 15 websites offering betting in 1996. Nowadays it is one of the most popular activities in the world, and with the growth of technology, it has become easier than ever. Despite increasingly localized regulation the industry has grown massively and is estimated to be >$100bln a year. Huge economies like the US have for a long time prohibited sports betting but in 2018 even the USA decided to rethink their ban. This led to a monumental spike in sports betting revenue there, with the USA alone bringing in $1.5 billion in 2020 — mid pandemic, and with action in just a few states. Now in 2022, many states have passed sports betting legislation. The number of online bookmakers is growing each year, even with tight regulation and a high barrier to entry.
The industry is projected to be valued at $140 Billion by 2028. But in its more than 20 years online, major innovations have only been related to broader technological leaps — the introduction of smartphones lead to mobile betting which fueled dramatic growth; few new forms of betting came up, like eSports which has been growing very strong; and some small innovations like bet cashouts and funky bonuses were introduced. But all in all — the industry hasn’t moved much and yet keeps growing. Today, however, with the advancement of blockchain technology (and especially super-fast and cheap transactions) betting is about to see its biggest leap ever. The first ripples on the surface have started appearing with multiple trends converging to suggest big changes are coming…
Betting with cryptocurrency
With more than a few of Azuro’s core contributors coming from different areas of the betting industry (including lead generation, bookmakers & payments), today it is not a secret for anyone in the know that high-roller bettors globally already prefer crypto payments. There has been an exceptional rise in the number of betting sites accepting crypto, and the new crypto-only betting sites, such as one of the market leaders, Stake.com — a case-in-point. Stake covers all major events, has an extensive selection of markets and sponsors some of the biggest athletes. Stake is receiving over 7 million visitors to their site every month (as SimilarWeb data shows).
Overlapping user bases and similar profile
Crypto betting is here, and on a very large scale. In the past 5 years, we have seen an ever increasing overlap of bettors and cryptocurrency users, with both having 18–34-year-old males falling into their key demographics. Azuro’s Paruyr Shahbazyan who is also the founder of “Bookmaker Ratings”, a big online sports betting publication, informs us that crypto exchanges have approached “Bookmaker Ratings” extensively with advertising deals. When asked why?— the crypto-exchanges’ answer is that the customers are “the same”. Naming rights deals & massive sponsorships like that by FTX in Miami, Crypto.com in LA and the UFC — are a further testament to the overlap between sports and crypto. Millions of bettors are not only comfortable using cryptocurrency for betting, but many very much prefer it to bet with already.
Rise of Esports
Esports has come into the mainstream with a wave of games, and an ecosystem of streamers, players, and fanbase of mostly young people all over the world. Nowadays, the most successful players who take part in Esports are revered as genuine celebrities and events are watched by millions of people. Professional players receive full-time wages, sponsorships, training, scholarships and some teams are managed by famous ex-sports players.
Having such a large following and billions of dollars behind it has led to Esports breaking into the betting world and creating a very exciting future for it too (Esports having the ability for thousands of events to be held every week and mass adoption already taking place). More over— Esports natural connection to a younger audience of digitally native users means a much higher propensity for openness and preference towards trustless web3 solutions on the part of Esports bettors.
Drawing in sports bettors from web2
Azuro was born out of appreciation for the disruption that smart-contracts can bring to betting. Without suggesting that it is easy to decentralize sports betting properly, betting is indeed a dream-case for smart contract technology. Multiple trends and proof-points above speak for the tidal wave building up and suggesting a major shift in the coming years. But capturing the full opportunity with regards to sports betting would be impossible without immense knowledge and capability within web2. Attempts to bring players from web2 to web3 by teams without any experience in traditional betting have been mostly naive. Azuro’s core contributors are betting web2 experts/entrepreneurs and blockchain leaders/developers. The partnerships and backing within the traditional betting space with companies like Clever Advertising, Bookmaker Ratings (and other tier-1 global partnerships to be announced shortly) are essential in positioning Azuro to induce and capture the meat of the migration of sports bettors from web2 to web3. Yet, the migration for many will be impossible to grasp over time — with user experiences tailored by the front-end operators — some may take the path of competing in web2 (with UX identical to what players are accustomed to), and others — will create new web3 native experiences for which there are millions (if not tens of millions) ready users, today.
All that is to be powered by the decentralized betting engine of Azuro.
Azuro’s approach to decentralized betting has been long-awaited by the community. Their decision to build a base layer of liquidity will lead to the project having a profound impact on many future related ventures. We are proud to take part and to grow with Azuro.
Ricardo Pinto (Clever Advertising)
Betting in web3
Just like the real world, the digital realm (metaverse) deals with uncertainty in events and outcomes. Betting markets and prediction markets are a way to pursue gains, express views, hedge, insure and make more accurate predictions about the future. Both the physical and the digital world are increasingly being financialized. The digital world is doing so at a much faster pace and has many more interesting ways to do so. An important infrastructure piece that is still lacking are decentralized, liquid, permissionless and easy to use betting markets. These markets will touch on almost every vertical within the digital realm. They not only have the potential to increase the different things we bet on and the ways in which we can bet, but will also change the way we fundamentally interact with betting markets at scale.
“As thesis driven investors in the crypto-native gaming space we view Azuro as being a key money lego for GameFi. We envision a world where Azuro applications and liquidity seamlessly integrate into existing games and create additional hedging, options markets, prediction markets, and leveraging opportunities for players as a functional extension of the game they are playing. Azuro application’s will sit on top of games and will significantly expand the financial toolbox available to gamers.”
Michael Tant (CitizenX)
If we take web3 games, some of which like Axie Infinity have grown to incredible adoption (>3 million daily actives, and >8mln players already), we can already envision clear betting use-cases where an additional layer of value is projected over the game economy. With hundreds of games in the making and incredible gaming talent moving over to building in the web3 space, the growth will be exponential.
Player VS Environment markets
With predictable randomness such markets are a great fit for betting and can enhance gameplay, boosting players ability to grow, win, earn and claim clout.
Let’s imagine a game/world where players are concerned with maximizing their economic output. They want to collect as many resources or make as much $coin as possible. A subset of this category is less concerned with the daily output or quantity but is looking for very rare items. Either to collect them as prestige items or to sell them for more $coins. Betting here could take the form of Hedging / Insuring against adverse environmental outcomes.
Say that randomness is introduced by the game in the form of weather which affects harvest, ability to build, or ability to explore the environment and find items. Players could hedge against adverse outcomes relative to their ability and economic situation in the game. I.e. if a player/team is very ill suited towards a particular scenario (say a rainy day), they could bet on this scenario, which would act as a hedge should it occur. They would win their bet which is a positive, but suffer in the game — i.e. a form of insurance. Such cases are easy to cater to with randomness being predictable, therefore enabling the creation of betting markets with clearly defined probability and therefore odds.
Outcome markets (Player vs Player)
Recently E-sports have won popularity and some of the most prestigious games now have a lot of prize money attached to them. This offering will only increase. With the expansion of gaming and the financialization of games, enabled by blockchain, the offering of markets should also greatly expand. It should meet the needs of this Metaverse-native category of players and bettors. Betting in different assets, betting in yielding assets, betting directly from a web3 wallet, turning your bet into an NFT and many other things web3 could offer over time in terms of composability. The professional competitive gaming markets will have serious “external” value at stake, either in the form of prize money, sponsorships or prestige value. There is economic value beyond the players/teams own prestige or the value they put at stake themselves, which should ensure the average of these games will be driven by external financial incentives that can be trusted by outsiders betting on the markets. This makes these games well-suited for betting markets, just like traditional sports on the highest levels. These markets can benefit from the much deeper liquidity Azuro should deliver, the permissionless nature of blockchain, and from the improved UX of a web3 native betting platform.
Additionally, there is a large competitive landscape that does not have much external value attached to it. This is where the “normal” players compete. Most of the value that can be attached will come from the players themselves. They could put up a financial stake in a certain tournament, where the prize money consists of players also putting up economic stake. Or they could challenge someone for a certain item or amount of money.
Most games do not offer PvP games for money or tournaments. Players that want this will have to manually set it up: Collect the funds, verify the results, take care of collecting and handling payments. All this can be automated and the results can be instantly verified on-chain. An Azuro front-end operator could offer a plug-and-play infrastructure for PvP head to head matches and PvP tournaments for money, that they could tailor onto and layer over any game.
There is no Azuro native liquidity tapped for these markets, as all funds will be put up by the players.
There is a possibility to also open these markets for betting, the players could seed liquidity for AMM PVP markets in addition to the prize money. In this case the risk and trust component lies with the set of players that will organize this, otherwise, external LP’s could be exploited.
The web3 betting experience
A decentralized blockchain based betting protocol offers a myriad of advantages over traditional bookmakers: better depth of liquidity, more markets, more equitable ownership, permissionless and censorship resistance. On top of this, the UI/UX also has the potential to dramatically improve. The web is moving from a web2 of pages to a web3 of places. In a web3 of places, you don’t want to login to every different app, perform KYC/AML for every different site, you don’t want to have siloed wallets with restricted funds, and you certainly don’t want to leave your place to perform different actions. You want to do everything in one place without friction. The place you’ve chosen as your preferred place in the Metaverse should offer a dashboard that meets all your needs. A betting UI could be one of many APIs a player wants in this dashboard. Ideally, this would be tailored to their game/world experience.
For example, if you are watching the livestream of a LoL (League of Legends) match, you want to see the betting markets for that specific game. If you are playing to earn in Axie by mining resources, you want to be able to bet on resource or weather markets to hedge or to enhance earning strategies.
You want to be able to place permissionless bets in your preferred currency and wallet seamlessly from your dashboard.
“Betting will offer the GameFi space an enhanced experience and offer more options to devise play-to-earn strategies. It is a powerful infrastructure that we want to integrate into the Merit Circle Dashboard, a meta-game that will be a gateway to the Metaverse. This dashboard would be incomplete without a tailored betting API. Having extensive experience in the betting domain and with most of the current blockchain attempts to improve betting, we could think of no better fit than Azuro. Merit is committed to supporting Azuro in their mission to bring betting to the Metaverse.”
Tommy Quite (Merit Circle)
Web3 backing & partners
Navigating a space as nascent, vibrant, fast-paced, exciting, but also chaotic and confusing as web3 is extremely tough. The growth of the space is immense, the opportunities are huge, but focus, know-how and ability to execute are not a given.
This is why we’ve decided to ensure backing particularly on the crypto/web3 side very early on and this is what the seed round has been about. We looked only for true, deep value adds, with long term vision & support.
Having Ethereal Ventures and Gnosis on board gives us immense confidence in the support we can get from a blockchain infrastructure and tech perspective.
Delphi Digital are probably the best tokenomics and economics brains out there, while Arrington XRP, Meta Cartel Ventures and AllianceDAO/DeFi Alliance widen our reach in the space immensely and provide precious DAO governance experience.
And then we struck deep partnerships with Flow Ventures & Merit Circle, plus CitizenX around the GameFi and betting in web3 opportunity. Tommy Quite’s experience in both fields has enabled him to form a crazy, yet elaborate thesis on betting in GameFi, which continues to open our eyes to the beauty of web3’s composability day-in and day-out. Leveraging their reach and game partnerships in the space will advance the creation of the betting layer in gaming considerably.
SevenX and OPCrypto lead us in navigating the huge and yet growing Asian markets.
Polymorphic Capital and BR Capital have been guiding us and broadening our reach since the very early days and we would not be making the progress to date without their help.
The feat we are attempting is immense. But each next step makes us feel more capable of succeeding, and having peeked into the know-how, capacity, connections and passion of our new partners — makes us feel we’ve just made a big step in the exact right direction.
Community run Azuro
Оur vision for decentralized betting is not purely technological. It is also economical and social. Many of us, the early core contributors, have witnessed the lack of trust, transparency and fairness in betting close-up for many years. Blockchain technology is an enabler which must lead us to a state of affairs where betting is fairer and way more fun. And that entails not only improving on the experience of the player, but democratizing the industry and its governance.
Azuro breaks the role of traditional bookmakers into smaller roles, much more attainable for smaller participants. Azuro connects these participants in an elaborate dance thus providing players with a better experience in a decentralized way.
And to complete the vision — the last but immensely important step is DAO governance. Azuro is a pure-token project with no equity and no tricky legal attempts to retain or maintain chunks of power. The launch of the DAO will enable everyone interested to get a piece of what we hope is the decentralized betting infrastructure of the future, through the Azuro token.
The DAO will govern development, the economics of the ecosystem, the management of the treasury, dispute resolutions and more. We deeply hope that decentralizing the industry, alongside its governance will result in a fairer environment and take away from the much deserved stigma betting carries. Betting can be trustless, permissionless, fairer and more fun. With your help.
CONSENSYS: Metamask MAU numbers