The sports betting industry works pretty well as is. Many bookmakers serve gamblers on a daily basis with no problem. But there’s always room for improvement in any industry.
Sports gambling is no different. Some believe that blockchain technology is the answer to improvement.
Blockchain is often associated with cryptocurrencies, like Bitcoin and Ethereum.
However, it can also be used in the sports betting world and beyond.
That said, I’m going to cover more on blockchain and how it can be applied to the sports betting industry.
What Is Blockchain Technology?
Blockchain is a relatively new concept to the average person. It was first spawned as a record-keeping method for Bitcoin.
Since then, though, it has found more applications in cryptocurrencies and business. But what is blockchain?
If you look up the literal definition, you’re going to find something like: “A distributed and decentralized public ledger.”
This description means very little to the average person. Luckily, you can get to a more basic meaning by stripping down what it does.
The word “blockchain” comes from the fact that this tech involves a chain of digital blocks. The blocks are the digital information, while the chain is a public database.
Information contained within each block consists of three parts, including the monetary amount, date, and time of purchase.
One advantage to blockchain is that it doesn’t store your name in these blocks.
Therefore, a relevant sportsbook doesn’t need your personal information to accept your wagers and pay wins. Blockchain records all of this info via an anonymous, digital signature (a.k.a. “hash”).
How Does Blockchain Work in Sports Betting? Why Is It Important?
A block is added to a sportsbook’s blockchain when it begins storing new data. But before this happens, there must be four occurrences:
- A transaction — You make a wager at an online sportsbook.
- Transaction is verified — A network of computers verifies that your bet actually happened.
- Transaction is stored — Your bet is stored in a block, along with the amount and digital signature.
- Block receives a hash — The block for your wager is given a unique hash to distinguish it from others.
The block becomes publicly available once it’s added to the blockchain. That said, you or anybody else can verify the authenticity of your bet.
The fact that you and others can authenticate wagers keeps bookmakers honest.
They can’t simply cancel wagers or claim that you didn’t win without exposing themselves.
With the traditional bookmaking business, sportsbooks have private databases that store information. They can hide behind these private databases when an incident arises.
Take, for example, a September 2018 controversy involving an NFL game between the Denver Broncos and Oakland Raiders. A New Jersey man placed a $110 in-game wager late in the contest.
The Broncos were trailing the Raiders 19-17 late in the fourth quarter. The gambler wagered that Denver could come back and win the game.
After placing his bet, the odds momentarily jumped to 750-to-1 in his favor.
This error was the result of a computer glitch and not the bookmaker’s choice.
The man won his bet when Denver kicker Brandon McManus booted a game-winning field goal. But FanDuel refused to pay on account of the glitch.
Their decision might have stood had various media outlets not jumped on the story. But the bettor wouldn’t have had to rely on the media had everything been recorded on blockchain for the world to see.
Pros of Blockchain in Sports Betting
Blockchain isn’t some novelty that sportsbooks are considering just to grab headlines. Instead, it can offer real benefits to both you and bookmakers. Here are the key advantages that this technology brings to the table.
Ensure Fair Betting
As a gambler, you primarily benefit from blockchain’s transparency. You don’t have to rely on a media uproar or place complete faith in the bookmaker.
Blockchain ensures that fair bets take place across the board.
If you feel that there’s a dispute, you can review your wager via the blockchain to ensure that everything occurred fairly.
You can’t expect the same transparency from the traditional bookmaking industry. The average sportsbook runs their operations through private databases.
Everything that I’ve covered so far might seem to favor gamblers. However, sportsbooks also benefit from this technology through an increased trust factor.
Anybody who read the previously described story from 2018 may feel that any bookmaker could rip them off. The same can’t be said of a sportsbook that puts their operation on blockchain.
They fully realize that by using this tech, they can’t cheat bettors or treat them unfairly. Likewise, you can feel more comfortable using blockchain-based sportsbooks.
Prevent Potential Mistakes by the Bookmaker
Not everything that goes wrong in sports betting is the result of a nefarious bookmaker’s decision. Instead, mistakes happen by employees and, more commonly, the technology.
The average sportsbook deals with thousands of wagers every day.
For the most part, they do a great job of handling these bets and ensuring that their operation runs without hiccups.
However, as in the case of the FanDuel incident, mistakes can still occur. Hopefully, other bookmakers handle these gaffes better than FanDuel did.
Preferably, though, these problems can be prevented before they even have a chance of occurring. Blockchain can help stop such mistakes by using a wide network of computers to verify bets, rather than a lone private database.
Blockchain promotes security at sportsbooks through multiple means. First, every new block is stored chronologically at the end of the blockchain.
The hash code that identifies each block contains a string of letters and numbers.
If this info is altered, then the hash will also be changed.
Here’s an example to show how this feature promotes more security at sportsbooks:
- You place a bet.
- An online sportsbook offers incorrect odds that benefit you.
- They attempt to edit the incorrect odds.
- The block’s hash changes.
- But the next block in the chain still features the old hash.
- The bookmaker would also need to update this block to pull off their scam.
- Of course, this block’s hash changes as well.
- They’re now caught in an endless loop of altering every block to cover themselves.
At the end of the day, the sportsbook must devote more time and money to scamming you than it’s worth.
Of course, the idea of a sportsbook trying to change odds afterward is extreme and might never happen in the first place. But this thought doesn’t even have to cross your mind when blockchain is involved.
More Banking Options
Again, blockchain is most closely associated with cryptocurrencies. Sportsbooks that use this tech also accept crypto deposits.
Cryptocurrencies offer certain advantages over traditional payment options.
The first is decentralization.
Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and many other cryptocurrencies aren’t controlled by banks or governments. Instead, they allow for peer-to-peer transactions between you and sportsbooks.
A bank or e-wallet can’t cancel your betting deposit. Miners verify your deposit, and they don’t/can’t scrutinize the nature of your transaction.
Cons of Blockchain in Sports Betting
So far, I’ve gone on about the notable ways that blockchain can help the betting industry. However, this tech isn’t without its drawbacks. You can see a few of the main concerns below.
Both you and sportsbooks need to spend time learning a new technology. You might find the betting process to be seamless at these bookmakers.
However, you’ll need to figure out how to deposit with cryptocurrencies.
Assuming you want to verify bets on the blockchain, you’ll also need to spend time learning this as well.
Bookmakers who choose to operate through blockchain must also put effort into implementing this solution. Existing sportsbooks will need to spend extra time moving their operations from a private database to blockchain.
Costs to Implement New Technology
Transitioning from one tech to another isn’t cheap. Besides the time commitment, it also comes with a financial commitment as well.
First off, sportsbooks need to cover the manpower to make such a transition possible. They may have to retrain employees in certain areas to properly use blockchain.
You may see your costs as a sports bettor go up, too.
For the most part, fees associated with cryptocurrency deposits aren’t terrible.
However, the fees can skyrocket during times of high network use (see late 2017). Unlike with traditional banking options, you never know how much you’ll pay for a crypto deposit from one time to the next.
Shady Sports Betting Projects
Blockchain may go a long way toward promoting trust. But the companies that use this technology aren’t always so trustworthy.
Some of the betting-related initial coin offerings (ICOs) that sprang up in 2018 have already been labeled scams.
Such projects are accused of raising funds from outside investors and putting little, if any, effort into their sites.
These scams have affected far more areas of crypto than just sports gambling. However, they’ve given anything related to blockchain a bad name in some eyes.
Fewer Jobs in the Betting Industry
Both online and land-based sportsbooks employ a lot of people. However, blockchain technology has the potential to replace some of these jobs.
Those who have anything to do with operating a sportsbook’s database and/or verifying bets could be out of work.
Of course, the benefit is that it could also lower operating costs for sportsbooks.
Some bookmakers would then push these savings onto customers in the form of lower juice. But a portion of those who rely on sports gambling for employment would lose their jobs as a result.
As you can see, blockchain isn’t a magical solution to a perfect sports betting industry. However, it definitely offers some advantages that can help the betting world.
For starters, blockchain promises a trustless environment where you can place bets without worry.
Sportsbooks can’t screw you over without consequences, because everything is available on a public chain.
You don’t have to rely on news outlets picking up your story to save you from being cheated. Instead, you can point to public data as proof. You can also look forward to more overall security. A solid blockchain thwarts everybody from hackers to crooked sportsbooks.
The latter isn’t a rampant problem within the industry. However, you don’t have to worry about it at all with blockchain due to the convoluted procedure of trying to change hashes.
Another advantage to this technology is more deposit methods. If you’re from the US, for example, you’ll have an easier time depositing at offshore sportsbooks thanks to decentralized cryptocurrencies.
The sportsbooks themselves also benefit from this tech. They can promote more trust in their operations and cut down on mistakes.
However, not everything is as rosy as it seems with blockchain.
Both you and the sportsbook need to deal with a learning curve when using anything involving this technology.
Sportsbooks need to think about the costs associated with implementing blockchain. They need both the manpower and time to transition everything over.
Bookmakers may also have to fight off a bad reputation once they do switch over. After all, blockchain-related businesses have received a bad name from ICO scams.
Weighing the pros and cons, blockchain still seems like it can help sports gambling. However, it’s difficult to say if every sportsbook will feel that the benefits are worth pursuing.
A lot of work goes into making the transition. Established bookmakers that have always run through private databases may just stick to their ways.
But it’ll be interesting to see if the blockchain advantages cause a widespread transition towards this technology anyway. If sportsbooks begin seeing their competitors gain a huge edge, they’ll be tempted to switch over.