Offshore Gaming Association article on Bitcoin

[fizzwont]

I know we've had a few threads here about Bitcoin - and most dismiss it as a fad, scam, or ponzi, lol...But this article was pretty interesting and raises some good points.

Could Virtual Currency be the Future of Internet Betting?

[Bill Dozer]

Drunkguy, Is that you?

I'm pasting the article here from OSGA. Weve contacted some bitcoin books but they happen to have been of the fly-by-night variety. Bitcoin still interesting as a way to go in and out. Seems most of your topics have been about this BTC book so if you'd like to tell us more about how it works in this thread, feel free. I think if a player can buy in and instantly have the cash in their acct, it would work but if they have to sweat the value of bitcoins while they are betting, it won't.

By Hartley Henderson - Exclusive to OSGA
Jan 13, 2012, 14:45


I recently spoke with someone in the industry who was confident that bitcoins or a variation thereof was the future of internet betting. The man, who works for an offshore sportsbook said that he has tried to convince the owner of the sportsbook to accept bitcoins as a payment option but the owner has balked at the idea claiming he doesn’t understand them.

“If I had any say, all transactions at our book would be done in bitcoins,” the man said. “They are untraceable and totally out of the control of any government. And most importantly they are an investment which someday I’m confident will rival silver prices.”

Hearing that, I decided to do some research of bitcoins to see what the fuss was about. The idea sounded somewhat intriguing although the complexity of how they are made left me somewhat confused. Apparently programmers (known as miners) run an application that allows them to create bitcoins. The code to create the bitcoins is then verified by other miners and once all miners agree that the code is correct that code is stored in a computerized warehouse. The coins themselves are stored in the miner’s digital wallet. There is a maximum of 21 million coins that can be produced but each coin is divisible to 8 digits. So in actuality there are several quadrillion bits of coins that can be used for transactions. A video at weusecoins.com gave a useful explanation but I still wasn’t sure how bitcoins, or possibly another one devised by the industry could ever replace physical currency at a sportsbook, casino or poker room. However, after talking with others it was clear that they are already being used for that purpose. In November, Switchpoker.com based in Costa Rica decided to accept Bitcoins as payment. All poker games at Switchpoker.com are played in Euros so the site converts bitcoins to the current value of Euros to be played in the poker room. Cashouts are sent back to the players in bitcoins. The current exchange rate posted at Mtgox.com is used for the exchange rate. But one site in particular, BTCSportsBet.com operates exclusively using bitcoins. I spoke to the site’s manager who wanted to be referred to as R.C. for this article to explain why he believed this could be the future of the industry.

The first question I asked R.C. is what makes bitcoins a better option than cash for online gambling.

“As you know, money transfer is vital to the sports betting, casino, and online poker industries. Bitcoin is an amazing solution. Through a combination of math and cryptography - it is a completely decentralized currency/commodity. That means no entity is in control, it is managed by all the nodes of the network, collectively. You can think about it like bitorrent, if you are familiar with the file sharing protocol; purely peer to peer with no central management.

Through this cryptography and decentralized design, each node on the network is a 'bookkeeper' of which bitcoin addresses own which coins. You cannot fake or forge a transaction or create coins outside of the system. Each node has a record and will not accept forgeries. So, even though there is a public record of all bitcoin transactions, the key is that nobody knows who owns a particular address and thus those bitcoins. So on the one hand it is completely transparent - all coins and transactions are public, but on the other hand nobody knows who owns those coins/bitcoin addresses. You can see how it could be useful to gamblers.

Currently bitcoins are worth about 6$ each, the value fluctuates with supply and demand like any other currency or commodity. Part of the value is in their utility. I can send bitcoins to any user in the world, for essentially no cost. And it is fast. Transactions are verified by the network in minutes, and can be processed automatically. BTCSportsBet.com handles dozens of bitcoin transactions daily, with no human intervention. All deposits and withdrawals are processed automatically. This is incredibly efficient. Players at BTCSportsBet.com can deposit in the morning, bet a game, win, and withdraw right after the game. Deposit again later, bet more games, and then withdraw again. All quickly and with no fees - and most importantly no banks, CC companies, **, PayPal, or any other third parties being involved! What other sportsbook in the world can run that efficiently with processing transactions? And once bitcoins are sent, they cannot be reversed or charged-back like ************. What merchant, vendor or sportsbook would not love non-reversible payments where fraud is not possible? From the user point of view, the user does not need to verify or even give identity to the merchant (unless something is to be shipped), so they would not be subject to identity theft.”

What R.C. didn’t mention is that in no country is peer to peer wagering illegal. There is nothing in the law that stops person A from wagering $20 with person B on the outcome of a game. What makes the transaction illegal in some countries is when an intermediary acts as the bookmaker. That is precisely why BetFair and Matchbook are seen as technically illegal by the U.S. government. Both are peer to peer wagering operations but they also take a commission on the winning bets. BTCSportsBet.com doesn’t do so. They simply have paid members. In fact clubwpt.com (owned by the World Poker Tour) does the same thing. Poker players play tournaments with each other but instead of taking rake, the WPT charges a membership fee and with that membership they are entitled to play in the tournaments to which the WPT offers a prize. And because the bitcoin peer network verifies all transactions when they happen there is no way to cheat or renege as one possibly could on the other sports betting sites.

Another obvious advantage to bitcoins is they don’t fall under the UIGEA because there is no money involved and there is no way the DoJ can effectively intrude. R.C. perhaps explained it best:

“As far as UIGEA, there are no banks or processors involved. Moving bitcoins around is just like moving an image file or other data around. I would expect to see bitcoin-specific legislation before any attempt to apply the UIGEA. But even with legislation, I expect the future of bitcoin to be bright. There is no central authority to shut down. There are laws against file sharing copyrighted works, but due to the distributed nature of bitorrent it cannot be effectively policed.

As far as pressure from the DOJ or other entity (it’s not a viable concern). Bitcoin can be classified as a commodity, or a currency, or nothing at all (it's just data). One can argue that it is like Facebook credits or World of Warcraft Gold. The government is not going after them. Also, the terms and conditions for BTCSportsBet.com states that the player is responsible for determining the legality of playing with bitcoins in his or her jurisdiction. Sign-ups are anonymous and the site does not know the origin of the players. No personal identification is requested; even an email address is optional. A player can sign up, send bitcoins, wager, and withdraw without the site ever knowing who he or she is. The properties of bitcoin allow this to happen. There can be no fraud, identity theft, or reversed transactions. All of those headaches are a massive cost to the industry - so you can see why bitcoin may be a significant factor in the future of online wagering.”

If there is one concern with bitcoins it’s the huge fluctuation in prices. When they first came out they were virtually worthless then went up steadily to about USD$1 until an online news site reported that drug dealers were using bitcoins to peddle illegal narcotics at a torrent site called Silk Road. Drug dealers and other contraband dealers were offering everything from marijuana to LSD and heroin for bitcoins. The products were then shipped in the mail. And since bitcoins are untraceable, the drug dealers likely believe they can’t be identified. At that point the price of bitcoins skyrocketed to $27 each. Of course that article also caught the eye of the U.S. government and the DEA. A senator and DEA investigator sent a letter to Attorney General Eric Holder to investigate bitcoins because of these transactions. Nevertheless the price remained high but plummeted after some hacking attacks occurred which resulted in stolen bitcoins from digital wallets and from the bitcoin trading site Mtgox.com. But the nature of the network allowed most of the stolen coin transactions to be caught and those bitcoins cancelled. It’s also likely that the network will someday try to stop drug deal transactions as well although it could be quite difficult since no one knows who owns the bitcoins or what they are being used for. While many on the network are libertarian they also know that messing with the DEA could spell doom to the currency. And sending drugs through the mail is a crime in almost every country regardless of how the dealers get paid.

Another possible concern is that bitcoin’s founder Satoshi Nakamoto is unknown. It’s fairly clear that Nakomoto was a pseudonym and he hasn’t been in the news at all. It’s hard to imagine why someone that invented a potential internet changing item would not want to be public. One could never imagine Mark Zuckerberg staying on the sidelines after he invented Facebook. Nakamoto could have a very good reason for staying out of the public eye but it certainly raises flags.

Of course not everyone is enthusiastic about the idea. I spoke to a very large sports better who laughed at the idea of using bitcoins to gamble.

“I’m taking the Warren Buffet approach on this,” the gambler said. “If I don’t understand it I’m not buying it.”

But then again he and others like him probably scoffed at the opportunity to buy EBay for 25 cents a share back in the 1990s because it was a concept that made no sense at the time. But those who were willing to take the risk on Ebay or Yahoo then are likely millionaires today.

Of course the great value of bitcoins will come when more merchants accept the currency for physical items. Bitcoins are being accepted for some tech items, alpaca socks and of course the illegal drugs mentioned earlier, but there is hope that at some point places like Amazon.com will also accept the currency. In fact there are numerous vendors on Ebay that are willing to accept bitcoins as payment for goods.

As for BTCSportsBet.com, R.C. says he has hundreds of active customers and for the BCS Championship game there were about 100 wagers at an average wager of about 5 bitcoins. That number is small but the company only opened last year and all online sportsbooks started small.

R.C. is excited at the future of BTCSportsBet and the industry as a whole.

“Where else can someone in the Ukraine, China, Brazil, anywhere globally - open an account with the same trusted sportsbook, not provide any personal information, fund the account in minutes, wager, withdraw directly after the game for no fees? That is the compelling use case for online wagering with bitcoins.”

We’ll continue to monitor the site and bitcoins at OSGA to see if he is indeed correct.

Contact Hartley via email at Hartley[at]osga[dot]com

[fizzwont]

Bill - no idea who drunkguy is. Yes a lot of my posts are about bitcoin because I've been through the USD transfer hell for years and found bitcoin over a year ago and I think it's brilliant.

Yes, bettors have to "sweat" the value of bitcoin that they hold, but you can hedge on one of the bitcoin exchanges and you only need to keep enough to bet with. Fast transfers allow you to withdraw right after the game and convert back to USD at an exchange if you want.

Not sure which bitcoin books you have talked to, but I have had an account at the one mentioned in the article for almost a year and had nothing but good experiences. If you check the other bitcoin-related threads in this forum other users have also had positive reviews...I encourage you to try it out and review them.

Let me know any other questions - would definitely like to see more discussion of it here.

[Bill Dozer]

It's interesting how it is so automated. What happens if a bettor past-posts and gets free money then withdraws it. Does someone at these books have to manually review the transfer request?

[Ian]

Bitcoins? I'll bet the under on their success.

They are highly unlikely to be a successful currency because their main use is for buying drugs online... a process that is highly susceptible to sting operations by law enforcement, and has already received large amounts of highly negative press as well as pressure from both the US and UK governments. Law enforcement can and will confiscate bitcoins, and when they do this will devastate the already massively volatile currency. No one will be interested in a currency that cannot be used anywhere, and this will pretty much be the case once the "Silk Road" drug bazaar gets undermined and bitcoins are confiscated left and right.

For all the problems with bitcoins, I do think it would be smart for books to accept small player deposits in bitcoins with the book then immediately exchanging them for cash. That said, the future for bitcoins is so bleak that any book that keeps a large balance of them is not a place that an intelligent person should keep their money.

Bitcoins appeal to people inside certain, small political niches. For the rest of us, though, it's pretty easy to see bitcoins going the way of the dodo, or more fittingly, going the way of e-gold.

[fizzwont]

Bill - I've never been able to past-post, lol. I have had withdrawals processed instantly all the time (you can verify a pending bitcoin transfer to your withdrawal address at different websites that monitor the bitcoin network). Maybe some transfers are held for review, but I haven't seen it.

Ian - you may be right, there is no doubt they are risky - but hey, we're gamblers right? - but you should read a bit more on the math and cryptography used by bitcoins. They can't be 'seized'. A bitcoin wallet is just a data file that can be encrypted. Sure they will runs stings on SilkRoad, but that will only catch a few drug buyers. The network itself is just open-source code distributed globally where all nodes follow the same rules.. It cannot be shut down anymore than Bitorrent (and they have tried) or HTTP for web traffic can be shut down. E-Gold was easy to shut down, it was controlled at a single source - not so with Bitcoin, there is no target to go after!

Given the problems transferring fiat currencies around, the future seems bright to me, but certainly there are massive risks.

[Ian]

Ian - you may be right, there is no doubt they are risky - but hey, we're gamblers right? - but you should read a bit more on the math and cryptography used by bitcoins. They can't be 'seized'. A bitcoin wallet is just a data file that can be encrypted. Sure they will runs stings on SilkRoad, but that will only catch a few drug buyers. The network itself is just open-source code distributed globally where all nodes follow the same rules.. It cannot be shut down anymore than Bitorrent (and they have tried) or HTTP for web traffic can be shut down. E-Gold was easy to shut down, it was controlled at a single source - not so with Bitcoin, there is no target to go after!

Given the problems transferring fiat currencies around, the future seems bright to me, but certainly there are massive risks.

You're misunderstanding my point. When (and it's almost certainly a matter of when, not if) Silk Road gets shut down it will be because the place will be so infiltrated by law enforcement that no one will trust the sellers. It won't, as you point out, be a matter of law enforcement somehow taking Silk Road offline. Silk Road will exist, it will just be useless. Many bitcoins will be sent to law enforcement to be hoarded, but the main problem will be lack of faith in the market. Since Silk Road is the only major thing bitcoins are useful for, there is a very large likelyhood that bitcoins will plummet in value if/when Silk Road becomes useless.

The fact that you use the term "fiat currency" is an indicator of why the future of bitcoins probably seems bright to you. For those of us who don't share the libertarian view of monetary policy (which is the overwhelming majority of both the population and economists) fiat money seems good enough that there's no need to replace it with new (or very old) currencies. I sincerely hope that you don't end up getting burned by your faith in bitcoins, but I'm afraid the "writing is on the wall," so to speak.

[fizzwont]

Ian - you have me wrong, I'm not some techno-libertarian anarchist or goldbug who thinks bitcoin will take over the world.

Bitcoin is a niche currency, and will always be a niche currency. The question is, how big is the niche?

Bitcoin has unique properties that are not just suited for buying drugs or gambling online. Take all the indigent workers - so in the US, there are millions who send money back to Mexico, south america, or Inida. And they pay outrageous fees to W.U. or a bank in wire fees. Bitcoin can be sent with no third party, in minutes, essentially for free. There will be a market building to handle both ends of that payment system that can be way more efficient than the current options.

Merchants in many markets will appreciate bitcoin - no possible chargebacks, being able to accept orders globally, not worried about fraud or bank fees, etc. Services like Bit-pay which will let merchants accept bitcoin without even knowing what it is - they handle any conversion and pay merchants directly in USD or GBP, etc, will help.

I don't think the writing is on the wall for the end of bitcoin, I don't think the wall has even been built yet. But I could well be wrong, we shall see.

[byronbb]

Bitcoin can only really be useful to small books. A 150K order of bitcoins moves the price half a dollar. Its too volatile and small time to actually be a vehicle for robust commerce at the moment. I suspect if bitcoins actually succeed bookmaking itself will become obsolete as users will be able to match each others bets in a p2p manner anyways.

[sharpcircle]

fizz,

Its very obvious you have a large position in Bitcoins or at least some kind of a position. you have made similiar pro-bitcoin posts on 2p2 under this user name.

You are a shill. your opinion is worthless

[fizzwont]

lol, of course I have bitcoins, I have never hidden that. I have to have em to play at a bitcoin sportsbook.

But so do a lot of guys on here (see the other bitcoin threads)...I'm not saying they are going to take over the world, I'm saying they are risky but worth a look. Read the article, read the wikipedia entry - or don't bother, I don't care. But look at all these threads about deposit/withdrawal problems - other people may be interested.

[minet123]

If the A+books or SBR had any innovation in their collective boardrooms they would start their own form of bitcoin

[KGambler]

I have used a bitcoin betting exchange. The exchange is set up so that you get the vig-free pinnacle line at the time you accept someone's offer. In other words, you don't offer a spread/price. You offer an amount on a game and the line changes along with Pinnacle's lines. The site is great, but the crash in the bitcoin price killed the traffic. The site is pretty dead now.

A few points...

1. I completely disagree with Ian. The "bitcoin economy" is not reliant on Silk Road. I don't know how he got that idea, but I think it was from reading a certain online article (or the clones of that article).

2. I also believe bitcoins will eventually be a total failure, just for different reasons than Ian.

3. Anyone who has used bitcoins knows that the technology is absolutely amazing and groundbreaking. Bitcoins themselves will probably be a failure, but crypto-currencies will eventually revolutionize e-commerce. Again, I don't believe that "bitcoins" will be that currency, but the technology is groundbreaking and extremely useful. Anyone with any imagination whatsoever should be able to think of many, many uses for such a technology.

You want to send money anywhere in the world, for a tiny fee? You want to be able to make a profit by charging random (think non-registered/non-customer) people 2 cents to read a news article? Wanna sell "virtual items" for pennies at a time? Wanna launder money or sell drugs (yes, the black market usage will be huge, just like with CASH)? This technology solves many existing problems for businesses both legitimate and illegitimate. Eventually it will come to be accepted even by the majority of people, who have very limited imagination. But it will probably have to be jump started by a large corporation, or incubate in black markets for many years. Sheeple are stupid and unimaginative, but eventually they come to accept new, highly useful technology. Unless they are Amish...

[Sdotbold]

Bitcoin can only really be useful to small books. A 150K order of bitcoins moves the price half a dollar. Its too volatile and small time to actually be a vehicle for robust commerce at the moment. I suspect if bitcoins actually succeed bookmaking itself will become obsolete as users will be able to match each others bets in a p2p manner anyways.

Isn't there already a site like that already? I'm am quite intrigued by the whole idea.

[fizzwont]

i believe the p2p bet matching site mentioned by kgambler is btcsportsmatch dot com

Also agree with most of his post. bitcoin may well fail, but the principles (distributed, crypto-secure, blockchain) will definitely continue in one form or another. Bitcoin is just the best (only) one so far. Like he said there are tons of uses - moving money for betting is just one.

[boondoggle]

I posted 6 months ago that bitcoin was the way of the future for sportsgambling. It is unstoppable. I would not be surprised if the recent rise in bitcoin price is due to speculation that serious books are considering the jump to bitcoin.

You do deposits / withdrawals in bitcoins. Silkroad is a VERY successful business that only uses bitcoin.

if bookmaker or 5dimes decided to utilize deposits/withdrawals with bitcoins, they would go to the top immediately and change the sports book landscape. Overnight, every book would utilize it and no one could stop anyone from betting.

[dilwale]

Had no idea what bit coin was until watching the good wife today. Had Cramer on the show as well hahaha.

Bit coin getting prime time coverage.....

[fizzwont]

Didn't see the good wife episode yet, will catch a stream later.

Boondoggle - traditional bookmakers just don't get it and ironically don't like taking risks. But until they do, we have a couple decent bitcoin outs.

[Kindred]

A better article to read involving bitcoin is " The Underground Website Where You Can Buy Any Drug Imaginable "

Yes it works and more fun than placing a bet with bitcoins lol. My only advice is to read the forums don't just dive into the site and buy. You'll find out who the best sellers are by reading the forums.
Dumb people can't handle drugs, and this site is perfect because you need a semi functional brain in order to get there and use it. So no dummies will find it and get strung out. It's like the libertarian utopia with no government oppression totally self regulated..or at least a move in that direction.

That site, "silk road" is the reason for bitcoins fast rise in value around the same time that article came out, think it was last April. So you anti drug nazis can see the benefit of the black market in supporting bitcoin value for more legit uses.
If bitcoin's value ever stabilizes it would be great to use it for gambling. It's useful right now if a site would accept deposits in bitcoin and convert to dollars in the gambling account at the current bitcoin exchange rate. This would eliminate the bitcoin price fluctuation risk to the player. The site operator can hedge or just dump the bitcoins on the exchange as soon as they get a deposit. When cashing a player out do the reverse, convert the dollars in his account to bitcoins based on the current exchange rate and the player is free to use the bitcoins somewhere else or convert them to dollars. It would be safer than p2p money transfers we do now..

[elgreco]

Everyone needs to stop arguing and start buying bitcoins while they're hot. I need to pay off my miner.

[qubit]

You're misunderstanding my point. When (and it's almost certainly a matter of when, not if) Silk Road gets shut down it will be because the place will be so infiltrated by law enforcement that no one will trust the sellers. It won't, as you point out, be a matter of law enforcement somehow taking Silk Road offline. Silk Road will exist, it will just be useless. Many bitcoins will be sent to law enforcement to be hoarded, but the main problem will be lack of faith in the market. Since Silk Road is the only major thing bitcoins are useful for, there is a very large likelyhood that bitcoins will plummet in value if/when Silk Road becomes useless.

The fact that you use the term "fiat currency" is an indicator of why the future of bitcoins probably seems bright to you. For those of us who don't share the libertarian view of monetary policy (which is the overwhelming majority of both the population and economists) fiat money seems good enough that there's no need to replace it with new (or very old) currencies. I sincerely hope that you don't end up getting burned by your faith in bitcoins, but I'm afraid the "writing is on the wall," so to speak.

Bitcoin has very little to do with Silk Road. The media ties Bitcoin to them for sensationalism.

Bitcoins are up around 1400% in the past year alone making it a vastly superior investment to anything i know of even gold. Ponzi's don't bounce and it has rebounded from a low of $2 to $6.20 currently and has stabilzed btwn $6 and $7. I liken it to digital gold with a set issuance of 21 million ever. they are functioning as a great store of value and will appreciate to parity with the gold price. Currently they are a bargain.

[5mike5]

considering u use bitcoins on silk road, then id say YES they have something to do with each other, since thats only currency used there

[qubit]

i'm sure only a small % are used for Silk Road. the most are used for a store of value (speculative purposes) and the rest for the emerging economy.

[taxer]

What a crock of sh-it , I want real dollars not some Matrix currency.

So let me get this straight when i buy Bitcoins they can take my real $$ but how do i know i will ever get them back ?

Fuk this

[elgreco]

Give it time Taxer, IF it succeeds, it will be just as real as the dollar in your pocket.

And you're not buying Bitcoins from a distributor, you are buying them from people, just like silver or gold or other commodities. The only reason gold is worth something is because people say it is. Maybe one day the bitcoin market will mature and be a legitimate option.

Bitcoins have a lot of positives (and negatives), time will tell if this succeeds or not.

[Inkwell77]

Damn, not a good week it looks like.
Price dropped 25% because of Tradehill closing.

I want Bitcoin to be a success. It makes a lot of sense.