Blockchain gambling and oracles
One of the first use cases of cryptocurrencies, even before Ethereum and smart contracts was gambling. The concept of programmable money goes extremely well with the concept of an online casino. There are many blockchain-based casinos, but they all have one thing in common: the need for open-source oracles.
Blockchain gambling landscape
The online gambling industry is growing rapidly. A 2018 report from Ginar estimates that the size of the online gambling industry will reach approximately $55 billion in 2019. It is noteworthy that it is just a bit over 10% of the entire gambling market, which stands at an astonishing $500 billion.
With the development of programmable money, gambling markets are at a crossroads. This is because the nature of any gambling activity is similar to a futures contract. And futures contracts are relatively simple to program in a smart contract. Basically, there is an initial agreement on the size of the wager, and the payoff is dependent on the result of a future event. Depending on the type of the bet it can have different winning conditions, but the nature of the bet follows the same probability. Rolling dice is different from predicting the outcome of a boxing match, but for the person betting, both are based on a calculation on the most likely results of the outcome. For the online casino, they only need to provide the data (the result of the match, or a random dice roll) and offer the logic of the bet in a transparent way through a blockchain solution.
Perhaps the best-known example of blockchain gambling is Erik Vorhees’ SatoshiDice that was sold to an unknown buyer in 2013 for a staggering amount of 126,315 BTC. Back then the amount was around $10 million, but nowadays this sum is much, much higher.
Different data sources
Because the nature of a bet is a futures contract, there are two main sources of data that blockchain gambling providers are dependent on — events and random data. Event data can be anything from the results of a sports event such as a boxing match to the results of the 2020 US presidential elections. The results of that data can only be obtained from a source that is external to the blockchain. The data will be fetched from an API somewhere in a data provider’s server and returned to the smart contract that decides the payoffs for the participants in the bet.
The second source of data is random. If one considers slot machines, card games or dice games, all of them depend on having random data. A dice game is the simplest example, as when the dice is thrown there are 6 possibilities where it will land. Even if the rules and the setting are different from card game to card game, the logic that there is a 1/52 chance of getting a specific card holds true. It is not feasible to gain random data in a deterministic environment itself, such as a smart contract. This is why an external source of data is required. More technical explanation on how the process of creating random numbers can be found in this cool article by my colleague Krzysztof.
The data and blockchain casinos
The blockchain gaming market is highly competitive and fast-paced. The online casinos are in fierce competition with each other. Having a provably fair and transparent oracle can help the casinos significantly in ensuring their customers that their operations are trustworthy and distinguishing themselves from the competition.
The random numbers that the house provides need to be provably fair. When you place a bet in a dice game, for example, the odds that you get 1–3 are usually around 48%. This means that the house is deriving its profits on that 2% reduced chance from reality. After all, on a dice throw obtaining 1–3 has the same probability as obtaining 4–6 if the random number generator has the characteristics of true randomness.
In some games, the player does not play against the house, unlike in the dice games. Poker is an example of that. In poker, the players play against each other and the house ‘just’ deals the cards. In either case, the house has to be able to show that the way it derives the random card from the deck of cards is fair and not biased.
In an event-based betting, Sunday’s Formula 1 GP for example, the house needs to show that the results they determine the outcomes of the bets are not tampered with. When the data is obtained from a data source (Reuters for example), the casino needs to be able to show that no one altered the information since that could influence the result of the bet.
What I just described are some of the problems we solve at Gardener Oracle. We want to give online casinos, among other blockchain platforms, a transparent and fair way of obtaining and processing data so that their users are protected from misconduct and they can have a competitive advantage in the markets.
Stay tuned for our next business related article on Magic: the Gathering and Blockchain Oracles!
