We find blockchain almost everywhere. When you pull up a game on your phone, blockchain allows you to purchase items or buy special levels. Farmers track their products with blockchain. Even energy companies experiment with blockchain to update power consumption in real time. At this point, it only makes sense for the gambling industry to try the new technology. Will it help the industry grow? The jury’s still out on that. Some claim it provides transparency and trust, while others argue it will drive people away from casinos.
Do we need blockchain?
Everyone seems to want transparency. In any type of business transaction, you want to know what’s coming in return for the money or services provided. No fine print, no grey areas, just a simple proposal that you get X in return for Y. That goes for investors as well as random gamblers. Right now, there’s an argument that transparency is lacking in the gambling world, especially when it comes to online sites. Gamblers question if their money and personal data are secure. Investors meanwhile question if the rate of return matches what was originally promised. In theory, blockchain could solve both problems.
There’s good reason for the questions about protection. We’ve already seen the personal data of 7.8 million Paysafe customers exposed in a 2015 hack. Before that in 2012, some 2,000 sites that used the Apache service also exposed system status information that could be used to access anyone’s information. Customers who don’t feel safe tend not to return and if fewer people return to a product, that operation can only go so long before their revenue starts to decrease. Considering that online gaming provides 25 percent of total gambling revenue in the U.S. each year, that’s not a revenue source you want to turn away from.
How do you solve the problem?
That’s where blockchain comes in. The technology involves a list of records or blocks linked together. Each block has a timestamp and is hard to modify or erase. In the gaming world, this could be used to give all gamblers, website owners and investors a permanent, trusted record of every transaction. That solves the dual problems of transparency and security. Also, sites that use blockchain accept cryptocurrency payments from gamblers. That benefits the website owners as it removes the need for banks. As a result, sites offer much lower deposit and withdrawal fees. All of that not only helps re-establish trust in the system, but potentially brings back some of those customers who had concerns about security.
“A lot of the abuses we see with online casinos would be wiped away,” said Craig Depken from UNC Charlotte’s Belk School of Business. “Costs can be reduced with blockchain. And the system doesn’t just reduce transaction costs, but has the potential to increase winnings.”
Concerns from the industry and government
While blockchain alters some things in positive ways, it also raises concerns in the industry. Dr. Depken, who is an expert in sports and gaming economics, pointed out the technology could draw people away from casinos. If websites offer higher rewards and none of the issues associated with traveling to a casino, why leave home? Why drive to a physical casino when you can stay online and potentially get a higher payout? That’s been a concern for casino owners, who see blockchain’s benefits and also its potential to hurt their business.
As a result, casino owners now have to focus on making gambling just part of the operation, rather than the focus.
“Look at Encore in Boston,” said Dr. Richard McGowan with Boston College’s Carroll School of Management. “ Gambling is part of the entertainment, but not the total thing. The goal now is to get people to say this is a place we want to go.”
Time to focus on entertainment
McGowan, who’s written three books about the gambling industry, said as blockchain grows in popularity, casino owners need to add entertainment and focus on profitable games. He also sees a time in the not-too-distant future where brick and mortar casinos grow their online presence in order to target millenials.
“(Millenials) gamble online, they don’t want to drive to a casino,” McGowan said. “So [the casinos] will get the state governments to allow them to offer all the games online so they can get the millenials that way.”
Still, both experts agree this concept is months, if not years away from happening.
“While people are trying to figure out the technology, you’re a long ways away from challenging the brick and mortar casinos,” Depken said. “Setting this up before it becomes majorly popular could either be really smart or really risky [for investors]. They could be winners, but the guys who set it up first aren’t typically the winners.”
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