This article was originally posted on EGR.
The betting exchange has suffered from a lack of attention and innovation in recent years, but blockchain technology could change that, says Toby Lynas from the Peerplays Blockchain Standards Association.
If 2017 was the year of the initial coin offering (ICO), then 2018 will be the year we see whether a number of gaming-related blockchain projects can deliver upon the bold promises they have made.
Several of these projects raised millions of dollars last year promising to decentralise and revolutionise the gaming industry across just about every vertical – from casino and slots to lottery and sportsbook.
Of course, even the most loyal blockchain visionary will concede that it will take some time before these blockchain operators and platforms – most of which are yet to launch – provide a serious challenge to the status quo.
However, there are some niches where they can have an immediate impact in 2018. One is lottery, which continues to struggle to adapt to the demands of the online channel.
And another is the betting exchange, which has suffered from a lack of love and attention in recent years. This has seen the vertical, which was once gaming’s innovation flagbearer, begin to stagnate.
Indeed, much of the product innovation that originated from the exchange – ‘cash out’ being the most obvious example – has now been co-opted by sportsbooks.
Blockchains and betting exchanges make a very natural pairing. From an operational point of view, it is possible to use a blockchain to securely process the huge volumes of transactions an exchange requires.
The blockchain allows this to be a truly P2P experience. Of course, the first betting exchanges launched with the promise to ‘remove the middleman’, but never really did this.
The blockchain allows a betting exchange to be truly automated, and for provably fair and completely transparent transactions to occur directly between two bettors.
A high level of automation in turn allows an exchange to keep commissions low. This helps avoid the problem many successful traders found with Betfair, where increasing commissions created a sense that the operator was punishing winning players.
But perhaps the most compelling case for the blockchain betting exchange is to reach a new type of high value customer who has not previously been engaged by traditional sports betting offerings.
The cryptocurrency community is growing by the day, and is dominated by tech-savvy, young potential customers with disposable income from the stratospheric increase in the value of bitcoin and other coins.
Much of this community is already familiar with the mechanics of an exchange, having used them to trade bitcoin and countless other cryptocurrencies.
These customers also value much of what blockchain brings to the gaming space: anonymity, security, speed and transparency.
Bitcoin and cryptocurrencies present operators and affiliates with a fantastic opportunity to reach out to this demographic, and offer them a product that resonates.
This is the thinking behind Bookie, the world’s first decentralised, truly global betting exchange, which launches later this year.
Blockchain technology presents a unique chance to reinvigorate the betting exchange, and bring new customers to the vertical.
There is no question that the blockchain will help drive the direction of the wider industry over the coming years.
We have already witnessed the growth of bitcoin-denominated sportsbooks and casinos. But in terms of utilising the full power of the technology, the betting exchange provides a logical starting point – not to mention an opportunity to reinvent a vertical that has struggled to innovate for too long.