Why Blockchain Offers Better Profitability for Casino Gaming Operators

By February 3, 2020Ethereum
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Why Blockchain Offers Better Profitability for Casino Gaming Operators
  • By 2024, the online gambling market will be worth a staggering $94 billion, which is nearly double its value in 2019.
  • Although there are a few major players such as 888 Holdings or William Hill, the vast majority of operators in the online casino business are smaller businesses.

By 2024, the online gambling market will be worth a staggering $94 billion, which is nearly double its value in 2019. Of this, around half is generated by online casinos. Although there are a few major players such as 888 Holdings or William Hill, the vast majority of operators in the online casino business are smaller businesses. The reason for this? Because it’s very easy for anyone to go out and start their own online casino business.

Companies such as Playtech or Net Entertainment offer a full-service platform that enables anyone to lease their games, set them up on their own website, and start drawing in players. With a house edge of up to 25 percent, there’s plenty of opportunities to generate revenues, assuming sufficient marketing efforts.

However, while it’s easy, it isn’t necessarily cheap. The major casino gaming platforms charge a hefty monthly fee for leasing their games, as high as $50,000 per month. They usually also charge a percentage of revenues. Although $50k is the upper end, higher fees mean a bigger variety of games, which is more likely to make the casino stand out from the competition.

Casinos also have other overheads. For example, customer and technical support need to be on hand to ensure that players have an uninterrupted gaming experience, or they’ll find another operator. There are also costs involved with web hosting, and many sites operate an affiliate program, which will further eat into profits.

Playing Fair

Competition for users is fierce in the online casino business. If players think the house edge is too high or that the site isn’t playing fair, they’ll quickly lose trust. In the casino business, user trust can be the difference between success and failure.

A 2018 survey conducted by the UK Gambling Commission found that only 30% of participants said they think gambling is fair. The survey also found that a company reputation for being fair and trustworthy was one of the most important factors for gamers when selecting an operator.

Enter Blockchain

Blockchain offers vast potential to overhaul the online casino sector. Blockchain-based gaming can increase trust, enhancing an operator’s ability to attract users to its casino. Moreover, a blockchain casino operator will have reduced overheads compared to using one of the traditional platforms, further increasing their profitability.

When games are played on the blockchain, every transaction is completely transparent, and the game itself is provably fair. A verifiable smart contract means that the user can see the odds of winning are the same as the operator has advertised. To further enhance trust, smart contracts can hold the funds staked by the user in escrow. The operator doesn’t take custody of the funds until the game is complete, and only if the player loses. The operator also gets an instant payout, in contrast to many of the traditional platforms which pay out monthly.

Funds in the form of tokens flow between users, operators, and game developers, with all transfers handled by the underlying smart contracts. Therefore, a blockchain platform doesn’t have the same overheads as a traditional platform.

All in all, getting set up on a blockchain platform comes with significantly lower risks than with a traditional provider. Operators can take time to build their audiences without incurring heavy monthly fees for keeping the platform running.

A Market First

While many blockchain gaming platforms are still under development or very early on in their life cycle, FunFair was the first to market, having launched in 2018. It already offers 27 games with more in the pipeline. Beyond the broader benefits of being a blockchain-based platform outlined above, FunFair offers a few other interesting features.

For example, one challenge faced by casino operators is onboarding new users. FunFair offers a single-sign-on, so once a user is signed up with one operator, they don’t have to go through the same process with others. With an eye on the overall user experience, all of FunFair’s games are light and can run in a web browser with no need to download memory-heavy apps.

FunFair is built on Ethereum, but the team has come up with an innovative means of ensuring that games on its platform can handle high throughput. It uses a solution known as state channels, so that data is only updated on the Ethereum blockchain once the game is completed. This also reduces the transaction fees charged by the Ethereum network.

Casino gaming appears to be one solid use case for blockchain that offers benefits across the board. Increasing user trust means bigger audiences, token payments appeal to a new generation of crypto-savvy players, and operators have the opportunity to make higher profits. It can only be a matter of time before the traditional gaming platforms start to make the shift.

Although there are a few major […]

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