Bitcoin in the iGaming Environment
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This document discusses the application of bitcoin in the online gaming environment. It begins with an overview and then discusses how bitcoin payments can provide a competitive advantage for gaming companies. It also covers challenges with payments and customer service in online gaming. The document provides background on bitcoin, how it works, and its growth since being created in 2009. It then analyzes how bitcoin could be applied in the gaming sector for both gamers and operators. This includes discussing identity verification, risk management, and implications for currency exchange rates. The document also reviews regulation of bitcoin and profiles some of the leading bitcoin gaming sites.
Bitcoin in the iGaming Environment
- 1. Bitcoin in the iGaming Environment Jon Matonis Bitcoin Foundation
- 2. Overview Payments As Competitive Advantage Customer Service Challenges in iGaming The Story of Bitcoin Bitcoin Applied in iGaming Environment Regulation of Bitcoin Leading Bitcoin Gambling Sites Questions 2
- 3. Payments As Competitive Advantage Established brands see no reason to change Smaller firms will drive innovation Provide the superior gaming experience Disrupt the status quo Use a global currency with 24x7 marketplace Take global market share from competitors 3
- 4. Payments As Competitive Advantage Bitcoin is the ideal digital casino chip Immediate Irreversible Private Bitcoin has the ideal virtual currency attributes Nonpolitical unit of account Two-way convertibility Independent floating exchange rate 4
- 5. Customer Service Challenges in iGaming Real-time payments in both directions Payment solutions that cover all countries Minimal fees for funds transfer Maintain client privacy beyond gaming environment 5
- 6. The Story of Bitcoin Bitcoin is a decentralised electronic cash system using peer-to-peer networking to enable irreversible payments between parties without relying on intermediaries. Bitcoin is a reaction to 3 separate developments Centralised monetary authority Diminishing financial privacy Dominant legacy infrastructure 6
- 7. The Story of Bitcoin Does the Cashless Society have to mean that we lose all of the privacy attributes of physical cash? Anonymous Untraceable Bearer Nature We have arrived at the historic crossroads! User-defined privacy – or – Identity-based money 7
- 8. The Story of Bitcoin What public key cryptography enables E-Money is not regular payments going online Concept of digital bearer instruments If you can click “forgot password” and have balances restored, then it’s not a digital bearer instrument Centralised issuing mint schemes DigiCash (1990-1998) eCache (1999-2008) Voucher-Safe (2010-present) 8
- 9. The Story of Bitcoin Launched in January 2009 by Satoshi Nakamoto Open source built on cryptographic primitives Elliptic Curve DSA and keypairs RPOW (reusable proof of work) SHA-256 Hash (incorporating distributed block chain) Solved the double spend problem without centralisation Dual role of payment system and unit of account 9
- 10. The Story of Bitcoin 10
- 11. The Story of Bitcoin 11
- 12. The Story of Bitcoin Exchange Rate ~ 106.00 USD Size of Economy $1.2 billion Total Bitcoin Mined 11,271,950 Maximum Potential Bitcoin 21,000,000 Total Block Count 240,877 Average Blocks per Hour 6.0 Network Computational Power >100k Ghash/s 12
- 13. The Story of Bitcoin 13
- 14. Bitcoin Applied in iGaming Environment Identity-based licensing drives decision Gamer identification is technically feasible Gamer identification is not technically feasible Risk management strategy Bitcoin (BTC) only games Bitcoin (BTC) converts to national currencies Implications for managing currency risk 14
- 15. Bitcoin Applied in iGaming Environment (Gamers) Full Client Wallet Installs locally Downloads entire block chain User maintains private keys Lightweight Client Wallet Involves some level of trust in the server Downloads block headers only using Simple Payment Verification User maintains private keys Browser-based Client Wallet Access via the browser Service provider downloads block chain Hosting server may or may not maintain private keys 15
- 16. Bitcoin Applied in iGaming Environment (Operators) Extend acceptance to countries not reached by Visa, MasterCard, and PayPal (60+) Provide payment method for the unbanked No disallowed merchant categories codes (MCCs) Not subject to payments embargo Eliminate chargeback and fraud risk Processing fees approaching zero Near immediacy of settlement Flexible merchant wallet solutions 16
- 17. Bitcoin Applied in iGaming Environment WinPoker Becomes First Major Gambling Operator To Adopt Bitcoin (Forbes, March 2013) Operates on the leading iPoker network Bitcoin is transfer method, not gaming currency 17
- 18. Regulation of Bitcoin Decentralised nature inhibits third party shutdown Exchanges will be a focal point of government scrutiny Pressure on larger merchants Not regulated as legal tender (similar to air guitars) Only four jurisdictions have any official comment USA Australia Norway France ECB 18
- 19. Regulation of Bitcoin United States (trading) Virtual currency exchanges defined by U.S. FinCEN Subject to AML/KYC guidelines Licensed as Money Services Business (federal) Licensed as Money Transmitters (states) United States (gaming) Virtual money gambling vs. real money gambling Definition hinges on closed gaming environment 19
- 20. Leading Bitcoin Gambling Sites Satoshi Dice (now blocks U.S. players) bitZino Seals With Clubs 20
- 21. SatoshiDice 21
- 22. bitZino 22
- 24. Thank You “Digital cash is to legal tender as BitTorrents are to copyrights” 24