Why blockchain is a game-changer for the igaming industry

3 October 2017

In the first part of a three-part series, Ron Segev, partner at Segev LLP, looks at how blockchain technology provides the perfect underpinning for emerging gaming platforms, benefiting players, operators and regulators.

Talk to anyone bullish on blockchain and they will likely tell you that the technology is going to change the world. Our clients have described blockchain platforms as “the new Internet,” “the true democratiser” and a “central bank killer.” Whether such claims transpire remains to be seen.

What we are seeing today, however, is that blockchain technology is changing the online gaming landscape in real, material ways. We are seeing changes to igaming products and services, the way users will be interacting with those products and services, and the regulatory framework that governs it all.

Companies such as FansUnite.io, FunFair.io and Virtue Poker, among others, are already innovating in game-changing ways.

An igaming understanding of blockchain
Blockchain technology provides the perfect underpinning for emerging gaming platforms. Bitcoin (BTC), Ether (ETH) and other cryptocurrencies are blockchain applications on their respective platforms that only reinforce the utility of the technology.

For the purposes of this article, we will try to keep things simple and describe blockchain technology’s unique features only in terms of what they can do for online gaming technology.

The distributed ledger
The major differentiator that blockchain technology brings to the table is its distributed ledger system. This technology is common to both the blockchain and the Ethereum platform, which is a type of blockchain platform.

Blockchain platforms work by combining multiple independent nodes (computers) all processing the same commands independently of each other. Each node keeps a running ledger of information or commands it has been processing in tandem with the other nodes.

Once a node has completed a process, that process is crystallised in the node’s ledger and then new processes are worked on and entered into the ledger. A transaction that occurred several weeks ago may have several thousand blocks of subsequent transactions ledgered after it; a veritable chain of blocks or blockchain. 

Cryptographic protection
All transactions on the Ethereum network are cryptographically protected and extremely resistant to the type of security breaches common to centralised systems found, for example, in banks or traditional gaming platforms.

Smart contract capabilities – ‘If this, then that’
Blockchains can also be used to program smart contracts that can operate in a secure, verifiable and immutable fashion. A smart contract is essentially a set of instructions to various stakeholders in a transaction. The command can be reduced to the formula “If this, then that”.

Smart contracts work best when the “if” and “that” are beyond controversy. So, they are very well suited to gaming and betting applications.

If I have blackjack and the dealer doesn’t, then I win. If the Seahawks beat the Patriots, then the sportsbook pays me. If the slots spin out three cherries in a row, then the casino pays me. If the ball stops on a black number and I bet on red, then I lose and the casino can take my money.

Smart contract terms reside on the blockchain and are very difficult, if not impossible, to hack. Once they are in place, the outcomes to be expected under their terms are set in digital stone.

Why blockchain is an igaming game-changer
Traditional gaming platforms own or control (whether on the cloud or not) servers that store the game technology, game commands, game-play history logs, player information, deposit information and other sensitive information.

Blockchain gaming platforms do not own or control the network hosting much of the sensitive game-related functionality and information set out above. Instead, the information is stored on the blockchain, meaning it’s stored on a decentralised network of nodes all acting as code processing and information storage ledgers independent of each other. 

Traditional gaming sites have been prone to hacks, attacks, leaks and other issues, all of which were a result of having a central point to be exploited — their servers.

Without this central point to be exploited, igaming platforms are more resilient to hacking. To properly hack a blockchain igaming platform, the hacker would have to hack every node on the blockchain. And that would be only the first challenge. The hacker would then have to find the relevant line of code she is looking to hack, figure out how to dig through all the transactions under which her target code was buried on the node and repeat that for all nodes.

Putting all of this together by examining issues that have historically been problematic for traditional igaming platforms and examining how those issues would be met by blockchain technology shows that the technology should not be ignored.

 

Ron Segev is a partner of Segev LLP, a business, technology and real estate law firm with a leading North American igaming practice group. Ron is a business lawyer specialised in igaming and other technology law. He assists his clients with all facets of their business: commercial, IP, corporate, finance, gaming law, regulation and compliance. Ron is also a general member of the International Masters of Gaming Law, and he loves his work. Email: ron@segev.ca.ron@segev.ca

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