It is always fascinating to hear and read what other people think about cryptocurrency and gambling. Multiple perspectives are what make life so interesting. In light of that, Live Bitcoin News published a guest post in early October 2020 discussing the possibility of stablecoins at some point overtaking Bitcoin in the gambling space.
We decided it might be worthwhile to look at those arguments to see if they make sense. Our goal is not to prove or disprove the veracity of the Live Bitcoin News piece. Rather, we want to give our readers some food for thought. If nothing else, there is plenty of room for discussing other cryptocurrency options outside of Bitcoin, Bitcoin Cash, Litecoin and Ethereum.
BTC started it all
We know that Bitcoin (BTC) is the dominant cryptocurrency platform on the commercial market. In fact, it was the first commercially viable cryptocurrency to reach the masses. According to Live Bitcoin News, it was also the first cryptocurrency choice of the first online casino to accept crypto payments. That online casino was Primedice, and it apparently made millions in its first year of operation.
From that first Bitcoin casino came a whole array of additional Bitcoin gambling sites, many of which Live Bitcoin News says were unlicensed. It wasn't until three years later that a slew of licensed operations came on the scene. As BTC gambling grew, game and platform developers began building it into their software.
Evolution Gaming, Pragmatic Play, and iSoftbet are just three of the industry giants that embraced the cryptocurrency movement. Their platforms were ready to accept BTC well before their licensees even thought of it. From all of this it was easy to conclude that BTC would be the token of choice among cryptocurrency gamblers moving forward.
That brings us to today. BTC is still the dominant crypto among gamblers preferring to play with digital currencies. Nearly every online casino that accepts crypto payments accepts BTC. Other popular tokens for gamblers include Bitcoin Cash (BCH), Litecoin (LTC), Ethereum (ETH), and Dash (DASH).
Stablecoins entering the space
Live Bitcoin News reports that stablecoins are now entering the gambling space as well. They report a number of different stablecoin options including USDT, USDC, PAX, and DAI. Perhaps the most well-known among them is USDT (U.S. dollar token) thanks to it being pegged to U.S. currency. USDT is valued at 1 to 1, meaning one USDT equals one U.S. dollar.
We did some digging around in hopes of finding a full stable of online gambling sites accepting stablecoin payments. We found a few, like Bitstarz, but not enough to say that stablecoins are making good headway into the online gambling space. Note that this is not to say stablecoins have no future in gambling, just that the number of casinos accepting stablecoins is still relatively small.
The few we found indicate that stablecoins are starting to enter the gambling arena. Will they continue making headway or die out? That is the question at hand. So now let us look at the arguments put forth by the Live Bitcoin News article to see if they make sense.
Crypto's volatility problem
If you follow cryptocurrency news religiously, you have probably figured out the number one reason a person might prefer stablecoins over BTC for their casino deposits. That reason is volatility. As strong as cryptocurrencies may be in many respects, they have a severe volatility problem that is not going away.
Choose any mainline cryptocurrency and follow its price online. You will see the market going up and down just like any stock market. However, cryptocurrencies are subject to greater price swings than most stocks. Take BTC, for example. It could lose hundreds of dollars in value in just a few hours of trading. Stocks can too, but such drastic price swings are not as commonplace in the stock market.
Why does this matter to gamblers? Because a single day of losses on the crypto market could offset weeks of winning at an online casino. Imagine how you might feel if it took you two weeks of online play to realize a 10% gain only to discover that, at the end of the trading day, the value of your BTC had fallen by 20%.
It is true that you can leave your BTC sitting at the casino until prices go back up. Then you can cash out and go. But cryptocurrencies fluctuate so frequently that you really have to stay ahead of the game to make sure you don't lose. Stablecoins, by their nature, eliminate this sort of thing.
Stable by nature
Perhaps now might be the time to deviate slightly and talk more about stablecoins. They are so named because they are stable by nature. Stablecoins do not suffer from the same volatility because pricing is not subject to speculation. They hold their value because of the assets they are tied to.
USDT is backed by U.S. dollars. Its price is tied directly to the value of the U.S. dollar. As such, it is a very stable currency with a price that fluctuates only in comparison to other fiats and, even at that, very little. The fact that USDT is tied to the U.S. dollar means it will have value as long as the dollar has value.
Some stablecoins are backed exclusively by fiat while others are backed by a combination of fiat and other securities. Remember when Facebook first announced plans for the Libra stablecoin? They planned to back it with a diverse basket of securities and fiat currencies. If they ever get it off the ground, its stability will be linked by the assets backing it.
The kind of stability you get with stablecoins makes them pretty attractive as gambling tokens. A gambler can make a stablecoin deposit and not have to worry about the real value of his bankroll from day to day. He gets the stability of fiat with the benefits of decentralized digital currencies.
Decentralization is important
The next argument put forth by the Live Bitcoin News piece is that BTC gamblers appreciate decentralization. Some of them choose to deposit with cryptocurrency because they want the benefits of a decentralized payment system. The argument makes sense.
Because BTC is decentralized, there is no interference from government or the banking sector. People are free to buy and sell tokens as they see fit. They are free to deposit BTC at an online casino without having to involve a bank. They also leave behind no electronic records that governments can use for tax purposes - or anything else for that matter.
If decentralization holds true in the stablecoin arena, then it would make sense for crypto gamblers to be attracted to stablecoin casinos. But here is where this argument begins to break down: stablecoins are not necessarily fully decentralized.
We go back to Facebook's Libra to illustrate this point. One of the primary criticisms of Libra when the white paper first came out was that Facebook would exercise too much control over it. Facebook proposed creating an independent consortium of partners to govern Libra, but their governance was not set to kick in for at least a few years after Libra launched.
The fear was that, in the interim, Facebook would have nearly exclusive control over Libra. Critics argued that Facebook giving up that control at some point down the road was not very likely. A similar criticism is frequently leveled at stablecoins. Critics say they are not truly decentralized.
The Provably Fair question
One final argument put forth by the Live Bitcoin News piece revolves around the topic of provably fair games. Most online casinos host and license games powered by random number generators (RNGs) - software tools that determine the outcome of play through simulated randomness. Though RNGs have served the industry well for years, it is difficult to prove their fairness.
A casino claiming to offer provably fair RNG games must have its games analyzed by third-party labs who certify their fairness. That's fine, but there is nothing the individual gambler can do to check fairness himself. Build a game on a blockchain platform and you change things entirely.
A blockchain-based game creates a permanent record of every turn of the cards or slot play. Gamblers can download a record of their play and run it through a piece of software or an online verification tool to confirm fairness. This makes blockchain a superior solution to the provably fair dilemma.
The only problem with this argument as one in favor of stablecoins is that it has nothing to do with crypto deposits. Online casinos can use the same blockchain platform to power both payments and the games themselves, but they don't have to. And as far as we know, no stablecoin casinos are powered exclusively by blockchain. Thus, the argument is moot at this point.
In the end, we must conclude that there is not enough evidence to suggest that stablecoins will overtake BTC as the preferred gambling token at any point in the near future. Stablecoins may eventually rise to prominence in the cryptocurrency space, but they still have a long way to go. We do not foresee them having a big influence on gambling anytime soon.