Harnessing blockchain technology to improve trust in the online gambling industry

Whatever your personal belief on the utility of Web3-related innovations like blockchain technology, cryptocurrencies, self sovereign identity models, or the metaverse, as well as the role they will play in the digital economy over the next century, one thing is certain: they seem to be powerfully disruptive in their application within several industries, and they will only continue to be so.

In this context, a somewhat underexplored concept is the notion that blockchain technology could be used to improve trust in the online gambling industry, from security and transparency to fairness, efficiency and automation. Let’s take a look at how that could come into fruition.

The global online gambling space is a billion-dollar industry and one of the fastest growing ones. Its market size was valued at $57.54bn in 2021, but predicted to rise to $94.4bn by 2024. With such a fast and spectacular rise comes intense and demanding challenges, commonly known to include underage gambling, problem gambling, money laundering, international financial crime and identity fraud.

In order to address these concerns, online gambling institutions must ensure the player goes through an identity verification process known as “Know Your Customer” (KYC), which anti-money laundering regulators consider one of the most practical and compelling ways to minimise risk. Online casinos need to verify that a person is an adult and allowed to gamble before they can be granted access to games, so identity verification processes are not strictly limited to anti-money laundering legislation, but also help check that a customer is actually an adult.

This system is vitally important, but its traditional iteration calls for high costs and long wait times. Blockchain technology, which is inherently secure and transparent, can help protect both casinos and players against fraudulent activity in a timely and efficient manner.

Additionally, a faster and smoother online identity check process on the basis of Web3 ID/self-sovereign identity architecture could come in handy in the fight to curb problem gambling. Ludomania is a disorder of addictive nature, a real and very common condition that, when it meets certain specific criteria, may even be diagnosed as a mental disorder. Many countries implement measures to prevent ludomania from destroying people’s lives, such as having players register for programmes for a certain period of time, and once again, an online ID check is required for this to work well and protect everyone involved.

Fraud risk

Casinos also need protection from fraudsters: malicious actors are known to open multiple accounts to claim sign-up and no-deposit bonuses, then disappear with the gains. Whereas in the physical world these kinds of scams can cause some limited damage, in the digital world a single person is able to open thousands of accounts in an instant, and steal ridiculous amounts of money. The threat is serious and real, which is why a validated identity may help minimise the risk of casinos being abused and online spaces losing legitimacy.

Of course, not only sign-ups but also withdrawals have their unique problems, as they are often much slower than deposits. This can be a real issue if it leads to players becoming sceptical of the spaces they operate in, and it could once again be solved with blockchain technology. A smart contract can automatically ensure a player is paid as soon as they win, which helps execute more transactions per minute and drastically reduces the probability of human error.

Trust is important in every industry and it needs to be encouraged in every way. As blockchain technology helps make every aspect of our digital lives more efficient, secure and transparent, we cannot forget how beneficial it could prove for the online gambling space.

Kåre Kjelstrøm holds an MS in Computer Science from the University of Aarhus and joins Concordium from a hyper growth American pre-IPO startup where he managed the core infrastructure group. He built the organisation across 15 time zones, created high performance teams and launched offices in Denmark and Lithuania. He was previously a manager at Uber; running core storage building highly scalable distributed ledger and storage solutions, initially from Denmark and later on from Toronto, Canada.