Have you ever wondered how cryptocurrency casinos are able to offer you a fair and secure iGaming environment?
We can thank blockchain architecture, which is the foundation of crypto casinos and transactions. It also makes the provably fair algorithm possible. Blockchain ecosystems use cryptography to ensure immutable records of game sessions or results are recorded on a ledger, which, depending on the system the casino uses, allows you to verify the integrity of the outcome of your gaming sessions.
On top of this, each cryptocurrency you use to gamble with links to a blockchain ecosystem, giving you the option to deposit and withdraw securely and anonymously. The anonymity of crypto transactions is thanks to a public key tied to every crypto wallet. Unlike traditional bank transfers, where you need to provide a name with the account number you are transferring to, a public key does not reveal your identity in any way. You simply provide your public key only, and you can receive crypto.
In this guide, our goal is to take you on a step-by-step journey covering what blockchain is, how it works, and why it matters in online gambling.
What Is Blockchain?
Blockchain technology is used to build networks that solve problems, such as financial transactions, supply chain tracking, or gaming fairness. The foundation of a blockchain system is the decentralized digital ledger that records transactions securely by storing them in blocks, which are linked together to form a chain.
A point that might surprise some of you is that not all blockchains have a cryptocurrency attached. A good example of a non-crypto-based blockchain is IBM’s fair trade ecosystem. One of its networks uses a food-tracking delivery system for fair trade, such as tracking coffee beans to reduce supply chain corruption and to ensure farmers receive fair payment.
On the other hand, when it comes to crypto casino gaming, the industry requires blockchain ecosystems that provide monetary solutions like Bitcoin, Ethereum, and USDT.
- You transfer a digital asset (cryptocurrency) with a monetary value.
- You use your crypto to gamble, and if you win, you multiply the number of tokens, which means the monetary value of your bankroll increases.
- The most obvious example is the Bitcoin blockchain network. When you deposit and place a winning bet using BTC, you win more BTC.
Here are the four key features of blockchain explained:
Decentralization
No single authority controls a blockchain network. Therefore, when you make a crypto transfer, it is independent of any intermediaries. The network uses nodes, which are devices across the internet that store an entire copy of the blockchain’s decentralized network. As there is no central authority, you can initiate peer-to-peer transactions, which basically means you can send from one wallet directly to another with no intermediary involved.
Transparency
On most blockchain ecosystems, transactions are visible to all users. However, the transactions are not linked to your name. Instead, your wallet’s public key is your blockchain identifier. The same principle applies to the provably fair algorithm. When a bet or online slot session is recorded on the blockchain, unique identifiers allow you and others to access the session information. However, some networks hide transaction details and are not as transparent, such as Zcash and Monero.
Immutability
Once the blockchain records a transaction, the block and chains remain permanently on the network. This data cannot be changed or deleted. Hence, we call blockchain network transactions immutable records.
Security
All blockchain networks use a system known as cryptography, which is what makes the network so secure. All data is fully encrypted using hash confirmations, making the network more resistant to fraud.
How Does Blockchain Work?
The next stage to grasp how blockchain technology works is to understand how these decentralized ecosystems process transactions. For most of you, a transaction is simply a transfer of cryptocurrency from one wallet to another using peer-to-peer transactions.
However, blockchain transactions can also be used for other tasks, for example:
- Data Logging & Proof of Existence: Logging and storing information
- Tokenized Artwork: Storing digital assets like NFTs
- Crypto Casino Provably Fair Algorithm: In the case of cryptocurrency casinos, recording and verifying casino game sessions and results using the provably fair algorithm.
- Smart Contracts: One entity opens conditions for a digital contract. Another entity agrees to partake in the contract. For the smart contract to mark itself as complete, the conditions specified when initiated must be fulfilled. For example, if you purchase a lottery ticket for a draw that will happen in the future, the smart contract will close only once the draw ends. There are two results in this case – it is either a winning ticket or a losing ticket. However, for the purpose of online slot games, smart contacts are still too slow to process a contract for each individual spin.
Blockchain in Gambling
When you deposit or withdraw from a cryptocurrency casino, the process of transferring money from your wallet into your casino bankroll is the same as sending cryptocurrency using a peer-to-peer transaction from one crypto wallet to another.
- Transaction Initiated: You enter the amount of crypto and the public address of your crypto casino wallet and confirm the order. The transaction is anonymous because you are not using your name. You are simply providing the wallet’s public address you want to transfer to, in this case your crypto casino wallet.
- Verification: Once you confirm the transfer of crypto funds, the transaction is verified by a network of computers, which are the nodes that store a complete copy or only relevant transaction data of the blockchain’s ecosystem.
- Validation: Once validated, your crypto transaction is added to a block. At this point, the block is linked to the previous one in a continuous chain. Once the block is part of the chain, the crypto arrives in your casino bankroll either instantly or within a few minutes, depending on the crypto you use. Also, the transaction is now permanently recorded on the blockchain ecosystem. Furthermore, for most cryptocurrencies, the transaction is now publicly verifiable.
Why Blockchain Matters for Crypto Casinos
Crypto casinos pride themselves on security and safety. Yet, another key point to remember is that crypto transactions use public keys, which gives gamblers a certain amount of anonymity when sending and receiving cryptocurrency. These are just two reasons why blockchain in gambling matters.
To give you a more rounded overview of the reasons why crypto casino technology matters to players and casinos in the industry, we have provided six key points below.
- Transparency
If a casino game uses the provably fair algorithm, their game or session results are stored as an immutable record on the blockchain ecosystem of the cryptocurrency used to place bets. This record cannot be altered or deleted. As a result, players can use either software built-in into the casino to verify results from their session are fair or a third-party tool.
- Security
Blockchain cryptography is a complex set of hashes and keys that helps to prevent fraud, tampering, and hacking. Security also ties in with pseudonymity. As you will use public keys for peer-to-peer transactions, which do not require you to provide any personal details, using cryptocurrencies for online gambling reduces the risk of identity theft.
- Fast Transactions
Most cryptos offer fast transaction speeds, but not all. One of the fastest cryptocurrencies to complete transactions is XRP, which takes just seconds. TRC-20 and LTC can take 1 to 4 minutes from the point of sending or withdrawing. Other cryptos, such as BTC, DOGE, and BCH, can take up to 10 minutes. BTC is the slowest, as its block times are slow.
- Lower Fees
As there is no middleman, borderless crypto transactions from one country to another come with lower fees than transferring money using fiat currency. The fees when depositing or withdrawing from a crypto casino are barely noticeable for most cryptocurrencies.
- Anonymity
Blockchain allows for private gaming experiences. There are several ways anonymity applies to you if you play at a crypto online casino.
- Banking: Some players prefer not to have bank statements showing gambling transactions. On your crypto wallet, the only information provided is the wallet address of the casino showing deposits and withdrawals. There are no names associated with the transaction.
- No Email or Banking Information: You do not have to store banking information, card details, or e-wallet emails on the casino when using crypto transactions.
- Trustworthiness
Most crypto casinos record player transaction history under their profile. Players can track their deposits, withdrawals, sessions, and winning and losing bets. Furthermore, returning to the topic of the provably fair algorithm, some crypto experts use results from crypto casinos and games recorded on the blockchain to check games and casinos’ overall RTPs have fair payout ratios.
Crypto casino technology is continuously advancing. We are seeing cryptocurrency casinos continually adding new digital currencies, thus giving crypto-only players a wider choice of deposit and withdrawal options. Ripple’s XRP is rising in popularity as crypto players demand faster deposit and withdrawal transaction processing times. XRP offers players a transaction processing time that is less than 5 seconds.
We may also see other cryptos more widely adopted by crypto casinos based on their transaction processing speeds—for example, Solana (SOL) and Stellar (XLM). Also, according to reports by SOFTSWISS, a casino gaming aggregator, Bitcoin is losing its dominance as stablecoins like USDT and USDC are becoming more popular. This could be another trend to look out for in the future.
We have also seen that smart contract processing times are becoming faster. However, the future of smart contracts for individual gaming results, like per spin on slots, is still in process to speed up how quickly smart contracts can deliver results on games that produce fast results.
The next big step expected in crypto gaming is virtual reality slots and table games inside Metaverse casinos. However, although Metaverse gaming is growing, it is still in its early stages. Some bottlenecks preventing mainstream adoption at the moment are GPU processing power and cloud computing. However, AI advancements will contribute to solving the current issues holding back VR and Metaverse crypto gaming.
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