Written by Christian Lenz

Betting is big business, massive in fact, with online gambling predicted to hit $80 billion by 2020. And new bookmakers are popping up every day. Why? Because as a bookmaker there’s a lot of money to be made, and with 98% of gamblers losing their money, it goes into the pockets of the bookmakers.

We’ve all heard the saying, the house always wins, and yet we continue to gamble. But what if there was no house? If there was no house, you’d enjoy more winnings because the house is not taking their cut. In the traditional online betting model, all bets placed go through a bookie. In addition, traditional online bookmakers face many problems, including lack of trust, lack of transparency, strict regulations, and high operational costs resulting in high margin odds in favor of the bookmaker.

Now for bookmakers, odds are key; they are the prices bettors pay and can be the difference between a win or a lose. So a bettor needs to get the best possible odds to ensure a higher chance of winning. Consider now, in sports betting the online bookmaker takes a margin anywhere between 5% – 15% on the odds – and whilst they are taking some of the risk, it’s also a lot considering the bookmaker is just a middleman.

So how do bookmakers make their money on odds? Here, betting experts give a simple example of $100 bet on a coin toss. You have a 50/50 chance of heads or tails, with one person betting heads, the other tails, meaning whatever the outcome (using true odds) the bookie has to pay out $100 leaving nothing left over. That means they make no money and that will not do.

True odds:

2.00 in decimal odds +100 in moneyline odds 1/1 in fractional odds

The bookmakers then reduce the prize money offered to $90 (odds of 1.90) instead of the fair $100 (odds of 2.00) so after payout, they keep $10 as profit, also known as the bookie margin. Consequently, professional bettors are constantly trying to “beat the bookie” meaning long-term betting success is only achieved by beating the bookmaker margin.

Blockchain-based peer-to-peer betting exchange is changing the game

One of the most promising concepts, with the ability to revolutionize the whole industry is the combination of the concept of a betting exchange with usage of blockchain technologies. The centralized betting models will become quickly outdated, as people begin to understand the significant advantages of this decentralized model. Creating a betting exchange that is running fully decentralized and gives users the full control of their actions and funds at all times will be a game changer. One of the key distinctive features is that every user can place bets without a middleman. In fact, every betting transaction is user against user, without any central bookmaker in place.

Peer-to-peer bet matching in this way takes betting back to its roots, as a competitive activity between equals rather than an interaction with a monolithic enterprise driven by profit. The fee is significantly lower than the margin of traditional bookmakers.

The technology, which builds the basis for this is Smart contracts. These are coded contracts deployed on the blockchain. Once they are deployed, they are self-executing and are immutable against human interaction or manipulation. This is used to facilitate real peer-to-peer betting by removing the need for a middleman. If there’s no middleman that means much more money for the winner.

That’s what makes these digitally-enforceable agreements perfect to handle betting transactions, offering complete transparency and leaving no room for ambiguity. In addition, the smart contract also acts as a wallet: when a bet is made money is paid into the smart contract wallet and automatically paid out once the conditions of the contract are met.

So why do betters continue to bet with online bookmakers, when they are at their mercy? They continue to bet with them because there’s no alternative other than illegal black market gambling, which is even worse.

Blockchain technology using smart contracts means the middlemen can be removed, leaving more winnings on the table for the players. Not only that but security is improved, the cost of transactions are reduced, and the speed of transaction increased; Blockchain is the future of online gambling.

Christian Lenz is a tech and blockchain enthusiast with over 7 years of experience leading IT projects in the telco industry. He first connected with cryptocurrencies in 2010 through researching cryptography. This led to a fascination of the idea behind Bitcoin, and an ongoing journey of discovery in this technological field. He is a strong believer that blockchain technologies will have a lasting effect on the world. He is the co-founder and blockchain, and project management expert behind BX.BET.


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