There is a lot more to love about cryptocurrency than just bitcoin gambling. One of the things we most appreciate about it is the fact that crypto is always evolving.
There is always something new on the horizon, something that has the potential to either completely disrupt the crypto space or fall completely flat and fade away into oblivion. Peer-to-peer crypto trading is one of those things.
The idea behind peer-to-peer crypto exchanges is one of local control that takes the concept of true decentralization to its only logical conclusion. If it is a concept that eventually takes off, a brand-new Norwegian startup may be able to lay claim to being one of the early pioneers. The startup, billing itself as Bitruption, is seeking to distinguish itself as a company that combines the best of traditional exchanges with local exchanges. Basically copying the Localbitcoins.com model.
We suspect that the peer-to-peer model - once there's a lot more of peer-to-peer transactions - could have an impact on bitcoin gambling at some point down the road. It is a concept that is definitely worth exploring, at least just to see if Bitruption can really make it viable in local markets. We will be keeping an eye on it.
The peer-to-peer concept
Peer-to-peer data transactions are nothing new. They have been around for as long as computer networking has existed. If you are familiar with torrents, you are probably also aware that they rely on peer-to-peer connections for transferring data between users. The same principle that makes torrent downloads possible can be put to use in a cryptocurrency exchange.
The whole idea behind peer-to-peer is to connect multiple computers on a single network without having to involve a server. For purposes of data transfer, a server acts merely as an intermediary capable of moving data across multiple locations. But an intermediary is not necessary if all the computers on the network are speaking the same language, so to speak.
In a torrent situation, you have both host computers and recipients. The host computers contain the content that recipients wish to download. Once a download begins, all the host computers begin sending bits and pieces of the desired files to the recipient computers via a direct connection. The recipient computer reseeds (sends out) the files at the same time, thus becoming a host computer simultaneously.
Peer-to-peer and cryptocurrency
Adapting the peer-to-peer concept to cryptocurrency seems like a reasonable idea. A crypto exchange is nothing more than a server and its associated applications for buying and selling Bitcoin etc. The exchange is a server that facilitates transactions much the same way a bank server would facilitate the transfer of funds in fiat currency.
A peer-to-peer network would allow senders and recipients to connect directly. For example, John might have $1,000 worth of bitcoin he is willing to exchange for dollars. He puts that information out there and waits for a buyer. John and his eventual buyer connect directly through the peer-to-peer network to make the exchange.
For such an exchange to truly be profitable, it would have to include fiat currency capabilities as well. People would have to be able to use fiat currency to purchase their crypto. That obviously means building in support for some sort of electronic payment system, like PayPal or Neteller.
4 ways it could impact bitcoin gambling
Peer-to-peer crypto trading could become reality in the very near future. If it does, peer-to-peer exchanges would likely be limited to local regions only. Otherwise, it quickly becomes a burdensome entity that offers no real benefits over traditional exchanges.
So, let's say it happens. Let's say Bitruption truly does disrupt the market by developing an extremely popular peer-to-peer exchange that can be adapted for multiple local markets. What then? How could such a network impact bitcoin gambling? We can think of a few ways.
1. Casinos could become exchanges
As it currently stands, cryptocurrency exchanges are individual entities very similar to fiat currency exchanges that you might find at the airport. They are in the business of exchanging currencies, both crypto and fiat. They make their money by charging for each exchange they make. In a peer-to-peer format, online casinos could theoretically do the same thing.
Gambling with bitcoin at most casinos requires that you purchase your crypto before you make your deposit. Some casinos let you buy bitcoin directly from them. But imagine an online casino that also offered crypto exchange services. Players could make all their trades by way of their casino accounts without ever having to use an external exchange.
Whether this would be good or bad is a matter of debate. The point is that casinos could increase their own business by offering exchange services alongside gambling. They could even offer currency exchange for free, knowing that any minor losses would be more than made up for once a player started gambling.
2. More cryptocurrencies would be accepted
The strength of a peer-to-peer exchange is that it allows for transferring all different kinds of cryptocurrencies between users. For example, Bitruption intends to start only with BTC and BCH for now. But they intend to expand their platform to eventually allow trading of virtually any crypto.
The end result of this might be online casinos accepting more cryptocurrencies. The big three for online gambling right now are BTC, BCH and LTC. That's all well and good, but what about gamblers who prefer to use another cryptocurrency? There are thousands of bitcoin alternatives out there, so it's to a casino's advantage to accept as many of them as possible.
It is not likely that peer-to-peer trading would result in more than a few dozen new options available for online gambling. But even expanding the current choices to include the top 10 tokens would certainly make it easier for people to gamble online. It is hard to imagine that being a bad thing.
3. It could encourage more local gambling
Peer-to-peer cryptocurrency exchange is ideally suited to local areas. It represents a very efficient and clean way for people in the same city to trade crypto and fiat currencies without having to get involved with global networks. Likewise, it could also encourage more local gambling by keeping crypto tokens in a local area.
Whether or not this would encourage more local online casinos to open isn't clear. Knowing what we know about online gambling on the world's most popular jackpot slot MegaMoolah.com, we assume that a local-only operation wouldn't generate enough revenue to make it worthwhile. But that does not mean our assumption is correct. A local enterprise could do very well by limiting itself to members of a local peer-to-peer exchange.
4. Money-laundering could be a bigger problem
Not every impact on bitcoin gambling is good. It is possible that peer-to-peer trading could open the door for more money-laundering in the online casino industry. That is something both government officials and cryptocurrency enthusiasts desperately want to avoid. Money-laundering via crypto networks only gives a black eye to the entire cryptocurrency community.
Bitruption will have to register with the Norwegian government in order to establish their exchange. Like so many other countries, Norway is beginning to crack down on cryptocurrency users and exchanges in order to prevent money laundering. It is a necessary evil that the crypto community is going to have to accept moving forward.
Tighter control over cryptocurrency exchanges could put a big dent in casino money-laundering. It is not a perfect solution, but at least it could make money laundering a bit more difficult. And of course, the money-laundering issue is not limited to just online gambling. There are plenty of ways to use cryptocurrency to launder money.
Peer-To-Peer is a nice benefit
We can speculate all day long about how a peer-to-peer crypto exchange would impact online gambling. And quite frankly, it is entertaining to do so. But at the end of the day, bitcoin gambling will succeed or fail on its own merits. A peer-to-peer exchange would certainly be a nice benefit, but it is not one that will truly revolutionize bitcoin gambling.
This is not to say that the idea is not worth exploring. Peer-to-peer exchanges would be a major disruption to the way people now buy and sell their favorite cryptocurrencies. It would further decentralize cryptocurrency by making the organizations behind those currencies less important. Is that a good or bad thing? It depends on who you ask.
Bitcoin is decentralized to the degree that no government entity or central bank has any control over it. But decentralization only goes so far. Someone has to control bitcoin's distributed ledger, and that control rests in the hands of a small number of privileged miners. Disagreement among them sometimes leads to certain changes. That's where BCH came from.
It will be fascinating to see what happens with Bitruption and its peer-to-peer exchange concept. There are apparently a couple of other startups working on the same kind of thing. We will see if any of them can actually make the idea work. Here's hoping they do. If nothing else, peer-to-peer exchanges would give crypto users yet another option to buy and sell.