Blockchain in Casino Industry: On the Verge of Eruption

June 27, 2019

While other industries are already on the road to digital transformation, the casino business is only approaching its threshold. For now, this is neither good nor bad, as the gambling industry is unique in its own right: while the digital economy continues to bite at real-life experiences across industries, land casinos remain popular and online gambling has simply become a new dimension of the classic casino experience.

The business definitely keeps pace with the times — land casinos seen a fair share of enhancements throughout the years while live-streamed online gambling now resembles the real-life experience.

Still, the gambling industry has been lagging behind in adoption of technologies that simplify operations, cut costs, and remove roadblocks in the customer experience. Today, many casinos don’t even use accounting software, moving winnings is highly uncomfortable, all the while online and land casinos are disintegrated. As modern users demand a simpler and faster experience, the casino business will have to face all these issues at once sooner or later. 

From blockchain-based accounting and cash outs in cryptocurrency or tokenized fiat, to enforcing responsible gaming, let’s explore the ways blockchain helps to solve the biggest casino industry challenges and help it evolve in a meaningful way. 

Blockchain Based Casino Accounting, Cash-In/Cash-Out & Casino Cryptocurrency

Accounting is the crux of casino management. Still, many land casinos approach their financial affairs and cash-in/cash-out management in a straightforward and, truth be told, downright obsolete way. 

Here is how the cash-in/cash-out process looks in some gaming houses during tournaments:

  1. A player enters the casino using the established Know Your Customer (KYC) method;
  2. Verifies their identity at the cashier’s desk to cash in/cash out;
  3. If the requested sum exceeds the set limit, the cashier calls the manager;
  4. The manager invites the player to their office;
  5. In a spreadsheet, the manager checks the player’s balance, approves the transaction, and then adds to or subtracts from the total sum;
  6. The manager gives out or accepts the player’s cash. 

Such a first-hand approach may seem reliable when a cash-out of a big sum is in question, but systems like that still lack in flexibility, functionality, and security compared to accounting solutions in other industries. So, six steps in total, two steps of verification, and three employee encounters (count in the casino guard if the house’s KYC includes them) separate the player from their money. 

Some might say: if the system pulled through the times when every business transferred its operations to various software systems and legacy solutions, there must be a reason it still exists, and maybe casino accounting should be left well enough alone?

But let’s look a bit further.

When a casino chain has properties and hosts tournaments across the world, accounting issues become all the more evident.

  • If a person plays in a chain’s property in a different country, transferring money is complicated, slow, and entails transactional fees. There is no simple way one can move big sums of money. 
  • Gambling laws differ from country to country. A player may win a substantial sum in a foreign country, but might not be able to cash out or transfer all of it back to the bank in the home country.
  • The player does not control their own money like they do in their bank’s app.
  • The money is not liquid. If a player gambles in casinos of one chain, but they are located in different countries, they must make calls to verify the money are in one casino to access it in the other. 
  • The player cannot borrow money, and if a player borrows money from another player, the operation cannot be tracked, as it is in cash.  

That’s a big bag of challenges.

How Blockchain Helps

One blockchain solution can help casinos tackle all of the issues above. Let’s look at an example. First, the casino’s financial documents are moved to a blockchain ledger, which can be accessed from anywhere in the world. Second, a custom blockchain-based wallet is developed for players. Finally, a custom casino token is created for the house, allowing players to cash in and cash out the winnings to crypto, which can then be exchanged at a certain rate to the currency or crypto of the player’s choice. So, a blockchain casino is also a cryptocurrency casino.

Tying everything up is an access/permission management system based on a KYC database and working on smart contracts, a set of pre-programmed automated actions that are a part of the blockchain. With smart contracts, employees would get a secured, limited and transparent access to the player’s account to enable their transactions throughout the gaming process. If a player borrows from another player, the process is similarly secured, limited, transparent, and can be carried out in a few clicks in a dedicated mobile app.

If a player wants to cash in or cash out at one of the casinos, they would simply need to scan a QR code and verify the transaction with their fingerprint/face on a tablet or mobile app of a casino employee (which would also be a part of the blockchain casino software). All of this will be managed by smart contracts in a matter of seconds and not require any actions from the users involved. All the transactions and user identities will be saved to the blockchain ledger, shared by all the casinos in the chain. 

This brings many benefits to casinos: 

  • Blockchain basically unhackable, so the casino gets the highest level of financial security
  • Fast cross-border transactions without fees in the blockchain network 
  • Players have full ownership of their money, as this information is registered on the blockchain ledger. The data cannot be tampered with in any way
  • Playable money becomes liquid and easier to manage
  • Blockchain enables P2P transactions
  • Biometric security (enabled by a mobile app).
  • Players can be allowed to borrow money from other players. 

Merging Land & Online Casinos Into a Single Blockchain Casino

Many land-based casinos have extended their business online, but the land and online parts are disintegrated. This is an old norm in the gambling world. So, if a person plays Baccarat in a land-based house of one company and wants to continue playing at home after the visit, there will be no data shared between the online and land casino experiences. The player will have different accounts, balances, track records, loyalty points and bonuses, and so on. 

The root of the issue is similar to how accounting is managed in the industry — there is no software in the land casino while the software behind the online part is too old. Here, blockchain provides a solution that’s similar to the accounting process, but with a twist. The processes powering up online and land casinos are transferred to a shared blockchain ledger, users access services on mobile devices and desktop, there may be a cryptocurrency or tokenized currency involved, and access management at different points of user experience is managed by smart contracts. All of this comprises a blockchain casino that connects both the physical and digital gambling worlds. 

So, what’s the twist?

In most casinos, the system behind the online part is too complicated and sensitive to new integrations. Casinos consider only a simple and light integration between online and physical experiences. On top of that, the process is risky: any bug or issue may lead to downtime. No matter how long it takes, any downtime in the gambling industry is extremely expensive to the business.  

Still, online casinos are highly popular, most land casino players heavily use different cryptocurrencies, and casino management themselves acknowledges the need to make the transition and merge both experiences. In a time where businesses try to remove as many hurdles in their customer experiences as possible, merging online and land into seems like a long-delayed move. Like many industries before, the gambling business is just waiting for one major player to make a successful transformation into a blockchain casino, and then follow suit. 

Enforcing Responsible Gambling on Blockchain

Some jurisdictions, for example Macao, impose daily gambling limits on players to prevent excessive gambling. Still, as online and land are disintegrated, the law works only as a sort of half-measure. One can gamble too much in a land casino, and then simply continue playing online.  

Enabling gambling on blockchain solves the issue. After land and online casinos are transferred to one blockchain ledger, a casino can enforce this policy across the chain. The data on time players spend in the casino will be saved to a single blockchain, and If a player exceeded one’s limit online, the doors of the land casino will close for them — and vice versa. 

The doors could close quite literally, as a blockchain casino can be connected to the security system: cameras will recognize those who exceeded their limit and block them access to the entrance. This concept can be extended to a gambling jurisdiction if all of its operators agree to be part of one open blockchain ledger. 

Blockchain gambling can help players limit themselves as well (in some countries, this option is enforced by law). If a player binge-gambled for a certain period of time and spent a lot of money, they can choose to limit themselves for a set term by pressing a single button in the casino’s app. The money will be securely locked by way of smart contracts until the end of the term, according to the law, and inaccessible to no one, including the player. 

Summing it Up: Blockchain in Casino Industry & Gambling 

Blockchain can solve critical challenges of the casino industry in accounting, cash-in/cash-out management, security, regulation, as well as bridge the gap between online and land experiences. Although the risks of replacing obsolete software with blockchain stops casinos from making a step towards meaningful digital transformation, the industry will still need to evolve to become more leaner, more secure, and address the demands of modern customers. The benefits of blockchain technology for gambling are evident, and the industry understands that, so we will definitely see how the blockchain casino concept becomes a reality in the near future. 

Timothy KozakSolution Architect at Intellectsoft Blockchain Lab