Why the World Needs Decentralised Betting
The history of betting can date back as far as over 2,000 years ago when the Greeks started the Olympics and then the Romans followed suit by betting on chariot races. Fast forward many many lifetimes to the 1600s where betting began horse racing popularised by the British. From bookmakers at events and high streets came online sports betting. Online betting started in the late 90s and has certainly grown alongside the internet.
Nowadays sports betting is one of the most popular activities in the world, and with the growth of technology, it has become easier than ever. Today you can place a bet from your phone or computer and from anywhere. But have you ever taken the time to think about how betting companies make their money? Sure, it sounds simple that if you lose a bet, they keep your money, but it could always go the other way, and for all events, there will always be people that win. Bookmakers do their best to make sure that their business remains profitable, but very often this can be at the player’s expense.
“Today betting is broken. It’s lacking fairness and transparency. It’s a system built on negative incentives which put bookmakers and players against each other.”
Paruyr Shahbazyan, Azuro
In betting today, the players and bookmakers are at odds with each other with all the power falling into the hands of the bookmaker.
To give you an example of how players can be treated unfairly, it would be best to first explain what a smart bettor is. A smart bettor, also referred to as sharp bettors, are people who bet professionally, usually placing large wagers on the same markets. As you would assume, as this is their profession, they either win more often than they lose or make more profits than losses. Bookmakers don’t like smart bettors because they can’t make any money from them, and are often known to limit various parts of their betting accounts and their ability to place bets. Smart bettors can have a limit placed on the number of bets they can make or have their accounts completely suspended! The bookmaker can set a wager limit, blocking the player from placing their desired amount of money on a bet. The worst outcome for smart bettors, sadly, is being banned by the site, and or having winnings confiscated, the first of which is industry standard, and the latter — not uncommon.
However, not just professional bettors can be treated unfairly, this can happen to a recreational bettor as well. An extremely common case is betting limits being increased when a player is losing, and after that — decreased if a player starts winning. Or extensive cumbersome KYC procedures required especially when trying to withdraw bigger sums. Then, it is not just limits being placed on bets, or winnings being withheld or delayed, bookmakers are also (albeit much less often) guilty of changing odds to reduce their losses. This can occur if the event featured a heavy favourite and there was not enough money from players to take on the risk. Although this rarely happens, odds can be changed retroactively by bookmakers.
The purpose of this article isn’t just to paint a bad picture of traditional bookmakers, as it may currently seem. It is to point out the fundamental flaws that are currently existing in the industry. Overall, bookmaking is a business, highly profitable, complicated and regulated, which many of us truly enjoy and use every day. But the ultimate goal of profit maximization, paired with full control over the relationship makes bookmakers what they often are today — unfair.
It’s not all smooth sailing for bookmakers, though. Should you first, of course, be accepted by the regulatory agency and granted a license, the industry is extremely crowded and just getting your name out there requires advertising capital. It’s all about the money in betting and not just to carry out the bets, the start-up costs for a new operation are high. The largest concern is liquidity that is needed to back any bets made on their site. If bookmakers want to take bets on multiple markets, then this will increase the amount of liquidity needed to cover the potential bets placed. It is not unheard of for bookmakers to go out of business because they do not have enough liquidity.
The Sports betting industry alone is set to have a market worth $140 Billion by 2028, confirming that it’s certainly here to stay. That being said, the industry has not seen many innovations over the last few decades with the biggest being mobile sports betting. The industry is heavily weighted towards the same markets and many follow the masses trying to lure in new players with new sign up offers such as free bets. This has a positive financial effect on the industry, but there is no potential for growth. Perhaps it is because odds and risk management are very hard for new bookmakers and taking bets for more obscure events could be challenging. Creating similar events to other bookmakers is a lot safer for their business, but does not show us where online betting could reach to.
Here comes Decentralised Betting
We have looked through many of the problems with the traditional betting industry, however successful and profitable it may be, it is seriously flawed and all the control still lies with the bookmakers. To fully understand the benefits of decentralised betting, we should first run through the basics of how blockchain technology is used for it.
Decentralised betting is built on blockchain, specifically blockchains that use smart contracts. Smart contracts are used to create agreements with predetermined actions to be carried out based on triggers without the need for trust. To put this into the context of betting:
The player makes a bet of £10 for Man Utd to beat Real Madrid at 3/1, then this data is stored on the blockchain. It cannot be changed, removed and is there for everyone to see. The smart contract triggers are based on actions. In this case, should Man Utd win, the player would receive £30.
This is a very simple explanation of how blockchain can be used for decentralised betting, but here are the key takeaways. Decentralised betting is transparent for the players and the bookmakers. When a bet is placed, an agreement is made and the only deciding factor is the outcome of the event. A key advantage of this setup is the bookmaker can’t change the odds and the bet cannot be void. Decentralised betting gives the power back to the players and allows them to receive their expected winnings.
Payouts are also all handled by smart contracts. The contracts have the funds and payment information for both the player and bookmaker stored. When the event is finalised the funds will instantly be released to the appropriate party. This is going to be music to smart bettor’s ears, knowing that the bookmaker has no custody of funds and cannot withhold their winnings for any amount of time after the event.
So far I have kept this centred around sports betting, which is what we are all most familiar with. But most probably the true beauty of decentralised betting is the endless possibilities it offers. With the web3 revolution just around the corner and according to Greyscale’s report “The Metaverse” predicting the metaverse to be valued at $400 Billion in 2025, we need to embrace the importance of what is to come. Powerful digital environments where we live, play, laugh, share, meet, explore, earn and so much more are coming and we are in a prominent position to bring decentralised betting into the GameFi space and integrate natively within different ecosystems. With blockchain and web3 being so composable — it’s not impossible to imagine betting being added to gaming dashboards, or even as part of native gameplay. These are possibilities we may see come to reality very soon. But all in all — the new use cases in the space are going to surprise us all. The technology is growing so fast that we can’t even start to imagine all of the new concepts that will live in web3.
Decentralisation is the way for disruption of the betting industry and it will clearly bring transparency, trustlessness and democratise the industry as a whole. Allowing more parties to participate in all aspects of the betting process will break down barriers to entry, make the industry more inclusive, and open up the doors to innovation changing the betting experience dramatically, and for the better. Betting will be transparent, trustless & more fun.
This is only just the beginning of our decentralised movement and we will dive deeper into the protocol and decentralised betting as a whole in our future articles (like for example — Given that decentralized betting is such an obvious improvement why did it never pick up and get adopted by people?)
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