When Bitcoin first surfaced in 2009, the gambling industry was quick to latch on to it and soon became one of cryptocurrency’s biggest use cases. It allowed players to use Bitcoin as a reliable way to bet on markets with a high degree of anonymity. A high growth in bitcoin gambling in the years to come was, therefore, inevitable.
Soon enough, there was an influx of a high number of crypto gambling sites, which allowed players to bet their money. However, cryptocurrency gambling also faced stiff resistance, particularly by the United States. Not only did the US strictly regulate online gambling, but it also demonstrated a highly hostile attitude towards it. However, just like the prohibition in the 1930s, such outright bans only pushed these operations underground, away from the scrutiny of regulators. Nevertheless, they continued at the same pace.
SatoshiDice was one of the first crypto gambling sites that allowed users to use Bitcoin for gambling. It also implemented the Bitcoin dice game before anybody else, which made it the go-to place for people who wanted to make some quick bucks without attracting the attention of regulators.
It allowed people from anywhere in the world to place bets without having to register themselves. All that they needed was a Bitcoin wallet. This resulted in hundreds and thousands of Bitcoins being wagered between its launch in 2012 to its eventual sale in 2013 for $11.5 million. However, after receiving multiple legal notices, SatoshiDice was forced to block US players in 2013. It was sold a few months later.
Bitcoin’s Entry into Traditional Casinos
The launch of SatoshiDice resulted in the emergence of thousands of casinos. The sudden surge in Bitcoin’s popularity made many operators take notice. While unregulated casinos were already coming up rapidly, there was another wave of regulated casinos, which had listed Bitcoin as a banking option. Although these casinos required a fair degree of KYC, players with low stakes were still allowed to engage with little to no verification. The brisk Bitcoin adoption by traditional casinos was the Magna-Carta of cryptocurrency gambling.
Moving Away from SatoshiDice to Ethereum
The one major flaw in SatoshiDice was its centralized nature, which made it an easy target for regulators. The advent of Ethereum blockchain gave these gamblers an excellent alternative. Although both Bitcoin and Ethereum are more or less the same, Ethereum differs from Bitcoin because of its ability to be used as a distributed software and not just distributed payments.
As Ethereum is decentralized, the operator could inherit this decentralization by running their operations within the Ethereum blockchain. To put it simply, any operator who deployed their casino on the Ethereum blockchain would have their casinos distributed across hundreds and thousands of computers without any central node that can be shut down.
The Latest Paradigm in Cryptocurrency Gambling
Although Ethereum provided casino operators with an excellent alternative, there were transparency and security issues with fully decentralized gambling. However, new technologies like Optimistic Rollups allow transactions to be taken off-chain while retaining all the security guarantees of the chain. While Ethereum-based crypto gambling sites take about 15 seconds for block confirmation, Optimistic Rollups can process thousands of transactions every second.
If developers manage to overcome this last hurdle, it could usher in a new paradigm of online gambling, with enhanced trust and security for both players, as well as, casinos.