Ethereum 2.0 to reclaim status as prime gambling destination

Published Jun 17, 2020
[2 mins read]
The Ethereum blockchain changed the face of the cryptocurrency space when it went live in 2015. Laying the foundation for dapp usage, it provided the flexibility for projects to provide new solutions for real world use cases, including gambling. We take a look at its current state and whether it's in a strong position to remain as one of the key gambling platforms.
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Ethereum's development, spearheaded by maverick programmer Vitalik Buterin, was a massive turning point for blockchain technology. Prior to its launch, bitcoin was really the only viable cryptocurrency with real world use cases. Even then, these were still pretty limited. As a payment solution it worked fine, but with a lack of scalability, its reputation was taking a hit with high transaction costs and slow speeds.

Developers the world round, inspired by bitcoin's success, saw opportunities for better decentralised tech on separate, more adaptable, faster blockchains. And Ethereum was one of the first to deliver a functioning solution. Combining smart contracts, more efficient transaction fees using its gas mechanism, a comparatively better proof-of-work system and the ability to support other cryptocurrencies on its network, Ethereum was arguably the colour television to its black and white predecessor.

Other blockchains are now catching up with Ethereum's innovative technology, and its popularity has led to it struggling with the same scaling issues that bitcoin has. However, it's hard to argue that it's a been a massive success. It has provided the foundations for decentralised finance (DeFi), allowed for pioneering ‘internet-of-things' technology, and currently acts as the base layer for hundreds, if not thousands, of other cryptocurrencies.

Gambling, however, is potentially its truest use case. Not intended as a platform for gambling at development, there's no question that Ethereum's smart contracts and security protocols mean it's primed for betting and gaming.

Ethereum building a better gambling industry

The traditional igaming sector has faced repeated, and increasing, criticism in recent years about its treatment of players. Several accusations have been fired at the industry as a whole; players have had winnings withheld and are paid out too slowly, remote gaming servers aren't trustworthy, casinos are fixing probabilities, and the list carries on. This didn't have to be the case with Ethereum tech live, and various entrepreneurs had spotted this.

Crypto casinos using the Ethereum blockhain started making a name for themselves. These started small, with the likes of Etheroll offering stripped back dice games. But what separated them from the cash-based casino and a majority of bitcoin casinos was their provably fair technology. Ethereum now delivered the player a transparent, level playing field against the house. Transactions and gaming events could be seen on the immutable blockchain for all to see. Trust was gone, but ‘trustless' was here. No longer did players have to wait on a casino to pay them out as smart contracts would automatically kick in.

As the blockchain's maturity grew, so did the ambition of its projects. FunFair Technologies announced its white paper in 2017, stating its aim for a world of “fair, decentralised gambling.” And it delivered. Three brands are now live on its Ethereum-based platform, including CasinoFair, and they all deliver fairness and transparency in every step of the user journey. Going further than some similar projects, FunFair casinos are required to have the necessary funds to cover the biggest possible win a player might have in any gaming session.

Other casino projects came to the fore at a similar time. Edgeless used smart contracts to guarantee players a fair, but also more profitable gaming experience. With a more efficient blockchain and no payment processors involved, Edgeless does what its name suggests and takes the margin out of its games. It raised a simple, groundbreaking question for players: why play at a casino with the odds stacked against them when you can head to the Ethereum blockchain and get a fair shot?

ETH sports betting and poker success

Verticals such as poker and sports betting have also benefited from Buterin and the Ethereum Foundation's initial vision. Virtue Poker has delivered peace of mind to poker players who continually question the fairness of shuffling in online decks. Using its P2P mechanism, each player adds their own encryption layer to the deck-in-play, meaning hackers would have to successfully hit every player at the table simultaneously to gain an edge, which is virtually impossible.

Ethereum provided the foundation for decentralised sports betting at BETR. Using a token of the same name, sports betting now works without a middle man, and therefore without a margin. In BETR's case, layed bets use smart contracts and are held on the blockchain, providing a liquidity pool for other players to back into. On matching a bet, the funds from both sides are escrowed until the result is known and the correct payment is sent out accordingly. Certainly progressive, and definitely threatening to the status quo.

So as an ecosystem, Ethereum, its ETH token and its supported ERC-20 tokens laid a strong claim to being the blockchain for gambling across most betting verticals. But does this still hold true today?

An ecosystem under threat

Well, as mentioned before, the network has become clogged. Its popularity has meant that transactions are no longer almost instantaneous, and this has been an issue for years, not months. This has left it under attack from those who demand speed, which other blockchains like TRON deliver almost with fail. Playing a casino game and waiting more than fifteen seconds for a result is not a good experience, and some players have voted with their feet and found their kicks elsewhere.

The Ethereum community do not see this as permanent, however. The problem is being dealt with in a few ways, both blockchain-wide, and within projects themselves. A prime example is FunFair once again, who envisaged scaling issues as a barrier to onboarding from its initial white paper. To overcome the challenge it developed layer two scaling technology which it calls ‘Fate Channels'. These take transactions from in-game off the blockchain and into a side chain, and then imprint them back on to it at the end of a session.

Work by the Ethereum Foundation has also been prioritised around scaling. The majority of this work will go live with Ethereum 2.0. Delayed many times already and a great cause of frustration to some, 2.0 promises to mitigate scaling issues by jumping from a proof-of-work to a proof-of-stake blockchain. In short, this swaps out mining and electricity requirements for validators who now stake ETH to commit blocks. Those who do this successfully will be rewarded with ETH as a percentage of how much they staked.

This is being tested as we speak, and there are positive noises coming from the dev community that it works and works well. However, we've already seen many delays to its launch and there still isn't a confirmed time period for 2020 to see it land on Mainnet.

TRON's claim to the throne

This has allowed other blockchain's to catch up as the premier gaming ecosystem, not least, TRON. Justin Sun's army of TRON developers have been slaving away to deliver new products and tools at a speed never seen before in the decentralised era. It's established itself as a key cryptocurrency at world-leading crypto casinos like Bitcasino through integrations like TronLink, and has thousands of active users at native casinos including WINk.

There's been talk of crypto projects across all sectors of the Ethereum network jumping ship to private or faster blockchains too, and there's no doubt that this will have a negative effect on the future success and variety of the ecosystem. It's also a distinct possibility that USDT, or Tether, could jump ETH into its long-held position at number two in market capitalisation.

Ethereum 2.0 fighting back

It may be uncertain times for the Ethereum ecosystem, but from past experience, it's clear that the Foundation, Consenys and its army of probably the most committed devs around have the expertise to deliver. Ethereum 2.0 needs to come fast though, not just to restrict the outflow of gambling projects and the value of its token that comes with it, but also to stay relevant in a dynamic industry that's changing by the week.

Importantly though, projects using Ethereum have been disproportionate in showing what the power of decentralised technology can do. They've assisted in driving adoption to new sectors and everyday use cases, and we're confident they'll do it again, not least in changing the gambling industry for the better.

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