The growth of Crypto-currencies are exposing all sorts of innovative ideas and putting new businesses into motion. Its difficult to keep up with so many new opportunities available for investors. Some crypto-currency investment opportunities are variations on old ideas that have re-emerged because of new technology. This is the case with online gambling banks.
In today’s fiat gambling industries, dealing the game and banking the game are fused together by regulation. At the typical regulated fiat land based casino, the game’s operations and the game’s bankroll are fused together. Imagine a typical blackjack game at your local casino, where the dealer works for the same company who also bankrolls the game itself. The main reason these two businesses are merged is because regulations demand it. There are some conflicts of interest when the dealers and the banks are separated, but this conflict still exists within the dealing operations when employees are involved anyway (since an employee’s interests are separate from their employer).
Without specific regulations prohibiting the fusion of game operations with game bankroll, its likely these two businesses would be separate. Casino games would be dealt by an operator and the bankroll would be provided by investor(s). This would happen because the risks and competitive features of each of these businesses are independent. There is historical as well as black market evidence of how these businesses are separate. Consider California card rooms. Because of the specific wording in California gambling laws, California card rooms are able to offer banked casino card games such as blackjack and baccarat. The card room simply charges a fee to bankers and the games are bankrolled by player syndicates (think of the 5% commission on winning “banker” bets in baccarat). Another example of the separating dealing from banking is found in many black market card games played in back rooms. In many back room card games, the establishment collects a fee from the syndicate who pays the dealers a fee to operate the game, and ultimately the game is bankrolled by the syndicate investors. The gambling bank organizations are more or less complicated by each situation and their investment objectives.
The gambling bank separation has re-emerged online using crypto-currencies. Whether the cypto-currency casino operators were knowledgeable gamblers or they naturally realized they could make their business better by separating the bank from the game operation is unknown. Either way, sites such as Just-Dice.com and BitDice.me have created online casinos where the game operator has a separate interest from the game bankroll. In the case of these sites, the gambling bank is user generated. Users can deposit crypto-currency to the game bank in return for a portion of the bank’s gambling return. The game is operated by the online casino and it takes a fee of winnings distributed to players.
Although crypto-currency gambling banks offer unique advantages to investors, the situation is not entirely trustless. The crypto-currencies operate on public blockchains and the games are provably fair, but the users still need to trust the operator. One element that is missing from the current organizations such as Just-Dice.com is a way to verify user balances and the distribution of banking profits. In other words, a way to verify the operators are provably fair to the investors. The result of the currency situation is a high number of ponzi operators and payout fraud. A way to improve this situation is to apply some crptological processes that could verify user balances by creating a type of hash tree where user balances could be verified without making public the specific user balances. In other words, an attempt to make the bank payouts provably fair.
One interesting side aspect of these new banking games is users can see the rate of return on the bank. One of the first things I noticed confirmed earlier research that the real return on a casino game will always be more than the house edge. If the edge on the game is 1%, the return on the game will actually be more than 1%. At first glance, this seems like a strange phenomenon, it is an area that could use more research to more clearly define why this is the case. It may have something to do with the player’s ability to manage their own bankroll. On Just-Dice.com the return on the bank is about 1.25% even though the game has a fixed house edge of 1%. This phenomenon can also be observed in places like Nevada that publish gambling statistics, even though the house edge on roulette is fixed and constant for all bets at the table, the game returns are much higher than this level.
A possible business model exists where a gambling game can have a house edge that is positive to players and can also be profitably banked. This idea might seem crazy to outsiders, but also consider the ancillary revenue generated by advertising in addition to the features listed above.
