Bitcoin just celebrated its 10th anniversary with a very dramatic price drop! In one day, it lost more than 10% of its value. Similar drops have happened with the other respectable cryptocurrencies like Ethereum, Ripple, Litecoin.
This is not the first dramatic price drop, and obviously, will not be the last. Cryptocurrencies became wildly popular as a dream of enthusiasts wanting to create a new economy free of taxes, states’ control and the grip of financial institutions. But those utopian dreams have now turned into pure gambling; The only value of cryptocurrencies today, is the possibility to speculate. Was this the dream of Nakamoto?
Although they are an outstanding technology breakthrough, cryptocurrencies failed to serve as real money in any part of the world economy. They are too big to be ignored, but too small to play a real role in the money business.
Even with its difficulties, one of the main advantages of cryptocurrencies is the absence of trusted third party resources providing transactions in electronic form. In the good old days, with paper cash, it was the same way. But banks soon became the trusted third party for transactions with checks and then transfers. Since those days, the complexity of financial transactions increased dramatically. Today, the business needs require more and more sophisticated mechanisms like letters of credit, hedges, operations with bonds, shares and so on. All these mechanics are based on a financial infrastructure that works as a black box with no true transparency and not easily understood by the average person.
To it’s advantage, Cryptocurrency offers a unique and trustless mechanical platform based on smart contracts that is called “smart escrow”. The cryptomoney remains yours, but can not be spent, it is frozen with smart contract until the condition of smart contract is fulfilled and then the money is transferred to another person or the smart contract is terminated, and you again may transfer your crypto.
This amazing feature is something that fiat money just cannot offer. There are other solutions in the traditional financial world, but they all require a trusted third party that will hold the money for that period assuring that it is not spent until the contract is fulfilled or broken. This involves higher risk and complexity using the third party.
One of the industries where the smart escrow ability of cryptocurrencies is desperately needed now is online gambling. Instead of giving money to the house for the time of play, a gambler may use cryptocurrencies with smart contracts. In that case there is no need to transfer the money to casino and then wait until the casino will transfer the money to the winner. This significantly reduces the risk of the gambler!
Online gambling is the easiest market to implement and show the advantages and capabilities of cryptocurrencies. To date, this opportunity has not been utilized by anyone in the field.
However, Darin Oliver, former Deputy Director of Licensing AGCC, one of the main licensing bodies in Europe, and currently founder, CEO and President of Blockdraw, is one of the worlds leading authorities in the online gambling industry. He recently explained that due to the high volatility of cryptocurrencies value, the irony of using them for online gambling in USD, is less than ideal because it creates a sort of double gamble, by adding gambling with the cryptocurrency value to the actual gambling itself.
Many gambling companies that claim to be cryptocasinos issue their tokens for gamblers to play with. But the real value of these tokens today, is decreasing significantly, failing to achieve the required level of trust. That is because the gamblers often redeem their winnings immediately to avoid further loss of value.
According to Darin Oliver, there are many regulatory issues that limit legal gambling with cryptocurrencies, which remain unsolved. For example, it is unclear for a regulator if the cryptocurrency has real value or it should be backed by the house with real fiat money.
The stable coin, the one that is pegged to USD or other fiat currency, might be a solution.
Online Gambling is a huge business. Its annual turnover is estimated to be over $2 trillion dollars in 2018. This is a significant source for cryptomarkets to get additional positive cash flow. In fact, there is huge potential to add liquidity to crypto that is so urgently needed to make Nakomoto’s dream come true.
