Internet sportsbooks have traditionally run the online betting industry. They set odds, collect wagers from gamblers, and pay winners.
Online bookmakers continue to dominate the betting world. Given the industry’s success, the status quo should continue into the foreseeable future.
However, decentralized betting brings a new challenger into the ring. It presents sports gambling in a new light that doesn’t involve traditional bookmakers. Instead, bettors essentially control the industry.
This new betting industry model sounds great in theory. After all, what gambler wouldn’t mind cutting out the bookmakers and their high vig!?
However, there are both pros and cons to consider with decentralized betting. The following guide discusses both sides of the matter.
What Is Decentralized Betting?
Decentralized betting features open-source code and operates on blockchain technology. The open-source code allows any developer to work on and improve the platform.
Blockchain is key to the decentralized aspect. It allows a sports gambling platform to run without the need for central operators (e.g. sportsbook management).
Three types of decentralized betting platforms exist:
- Those that offer sports and esports betting
- Platforms that are specifically made for developers to build on
- Those that feature prediction markets, where gamblers can bet on virtually anything (e.g. Oscars, the weather)
All of these types of platforms have one thing in common: they offer betting without the need for a third party.
Gamblers create their own markets, much like a betting exchange. Other gamblers can then place wagers on the available odds, or even create new markets if they don’t like what’s available.
Advantages of Decentralized Betting
Decentralized sports wagering has come about for a reason or rather, several reasons. Here are the main benefits to this type of gambling.
No Centralized Authority
Anybody can place bets with their friends without the need for a third party. For example, you could make a $25 wager with your friend on the Super Bowl winner.
Ideally, this is how all sports gambling would be conducted. It would involve people placing bets amongst each other with no vig (a.k.a. juice) taken out.
Liquidity is the key problem here, though. Either you or your friends will eventually get tired of placing bets. Or somebody amongst your party will want either higher or lower stakes.
The available betting pool is low when you gamble with buddies. Online sportsbooks serve a purpose by connecting gamblers across a larger region.
Of course, the problem here is that betting sites also have a great deal of control over the industry. They collectively determine the odds and take vig out of each wager.
You may not like the odds and/or the markets offered in your region. Nevertheless, you simply have to take what the available bookmakers provide.
Decentralized betting differs in this manner. Again, you and other sports gamblers determine the odds and markets covered.
Low Fees (Vig)
Most bookmakers do their best to avoid gouging gamblers on the juice. After all, they have competition that could easily steal customers by offering lower vig.
Nevertheless, sportsbooks collect around 5% juice (10% from the losing side) on average from the sum of wagers. This extra 5% cuts into a bettor’s profit margin.
Gamblers would prefer to reduce the bookie’s 5% commission. However, it’s rather standard for sportsbooks to earn around a nickel on every dollar wagered.
Decentralized gambling platforms, on the other hand, take out much smaller fees. They generally only collect around 1% or less from the sum of all bets.
This 1% doesn’t go towards lining the founders’ pockets. Instead, it serves as a network fee that covers the developers’ work and any potential master nodes.
No Restricted Countries
Due to laws in the jurisdictions where they operate, betting sites must restrict certain countries and territories. For example, a bookmaker that only operates with a license from the UK Gambling Commission must ban everybody outside of the UK.
It’s perfectly reasonable for internet sportsbooks to follow laws in their place of operation. Regardless, you probably don’t enjoy being barred from many markets.
Decentralized platforms don’t come with the same restrictions. Given that they don’t have central operators, they also avoid banning any countries.
The online bookmaking industry is largely trustworthy. After all, word quickly spreads around the internet about any rogue operators.
Nevertheless, not every gambler has complete faith in a betting site located hundreds or even thousands of miles away. They may be suspicious that a bookmaker won’t honor a big win.
The same fear doesn’t come about with decentralized gambling. The latter even gives you the means to verify the authenticity of wagers using blockchain technology.
Deposits Go Through With 100% Success
Some countries have restrictive betting laws that make it hard to place deposits. When making online deposits in the US, for example, some banks even reject debit and credit card deposits in perfectly legal online gambling markets.
These cryptocurrencies are all decentralized as well. Therefore, you don’t need to worry about a bank rejecting your Bitcoin deposit since they have no control over it.
You Won’t Get Banned
Bookmakers have a reputation for banning winning bettors. The general thinking is that they ban people just for making profits.
This thought isn’t entirely true. Online sportsbooks usually only prohibit gamblers who win via controversial methods like steam moves and arbitrage betting.
But you still may not like the fact that they ban winners under any circumstances. If so, you’ll find decentralized wagering to your liking.
The decentralized industry doesn’t exercise any control over platforms. That said, you can use any strategy necessary to book profits.
Drawbacks of Decentralized Betting
Decentralized sports wagering has been around for a few years and has yet to take the industry by storm. Here are the key aspects that are holding it back.
For all their flaws, betting sites are a rather easy to use. You just need to sign up for an account and deposit to get started.
Even if you’re brand new to sports gambling, you shouldn’t have much trouble with this process. Signing up is self-explanatory, and banking isn’t much harder either.
Decentralized wagering, on the other hand, is much more involved. The sites that house these platforms may look like Greek at first glance, even if you’re an experienced gambler.
Depositing is an even bigger issue when you’re new to the cryptocurrency world. Depending upon a platform’s popularity, or lack thereof, you may need to go through a convoluted route when buying certain coins.
For example, Tron—one of the more popular cryptocurrencies—isn’t currently available to US residents through a regulated exchange (e.g. Coinbase, Binance US). Instead, you need to use an unlicensed exchange, such as KuCoin, to purchase it.
You should be able to figure this process out without too much trouble. Even still, you’ll yearn for the simplicity of regular betting sites.
Must Buy Tokens to Use Platforms
Many decentralized betting entities feature their own tokens. You must buy these tokens before placing wagers.
The fact that you can’t always just use a mainstream coin, like Bitcoin or Ethereum, is annoying enough. But you might also run into the aforementioned problem of having to use an obscure exchange to get the token.
Again, these problems don’t arise at traditional sports gambling sites. They simply make it harder to place decentralized wagers.
Platform Could Get Hacked
Not all blockchains are resistant to hackers. Various projects have suffered hacks or 51% attacks that compromise network security. Assuming you use a decentralized betting site with poor security, then you could end up losing your tokens.
Of course, you can remedy this problem by using the platform’s wallet (if applicable) to store your coins. This way, you maintain sole ownership over the tokens.
Once again, though, this brings us back to the point of decentralized betting being tough to use. The average gambler doesn’t want to learn how to use a no-name digital wallet just to store coins.
An online sportsbook has obvious incentive to draw as many customers as possible. They make more profits as they collect more juice from gamblers.
Those who develop these platforms make most/all of their money from Initial Coin Offerings (ICOs). Assuming their project is a hit, the token value goes up and they can sell their coins at a higher profit.
Of course, the founders have less incentive to market their platforms after the fact. It’s then up to volunteer developers and community members to push the project.
Not Much Public Faith in Blockchain
Blockchain’s image is slowly improving as more large companies adopt this technology. However, it still draws a negative reputation due to its association with cryptocurrencies.
Luckily, Bitcoin has gained acceptance among the general population. People no longer solely view it as a digital currency used by criminals and scammers.
However, there are others scam throughout the crypto industry. Some of the founders behind coins will exit scam and abandon projects after making enough money.
Nothing is to say that the same won’t happen with certain decentralized betting projects. For now, the general population is still skeptical of anything related to blockchain and crypto.
A Look at the Sports Betting Market Today
The sports wagering industry is at its highest peak ever. According to research, the worldwide betting market is already worth well over $104 billion. This amount is expected to eclipse $155 billion by 2024.
Of course, bookmakers still exercise a great degree of control over the industry. But they also need to be fair with customers or lose out to the competition.
Can Decentralized Betting Ultimately Overtake Traditional Betting?
Decentralized projects involving casinos, finance, real estate, and more are all relatively new. Most of these projects have existed for less than two years.
With that said, the jury is out on whether decentralized betting, or any decentralized industry for that matter, can go mainstream.
This type of sports gambling does offer plenty of promise. It cuts out the middleman and allows bettors to connect with each other. The blockchain aspect also offers absolute transparency. You can check wagers at any points to ensure that they’re valid.
You also don’t need to worry about banks blocking deposits nor long waits on payouts. Instead, you’ll be using decentralized currency to both deposit and withdraw money.
The big question, though, is if these benefits are enough to actually interest people in blockchain betting. After all, gamblers aren’t exactly turning out in big numbers to wager.
Decentralized betting must solve its liquidity problem first. Then, just maybe then, it might have a chance of succeeding.
The future of decentralized betting remains quite uncertain. While this type of gambling offers promise, it hasn’t drawn many gamblers to the virtual table yet.
Of course, more time is needed to determine if decentralized sports gambling can be a success. Most projects have only been around for two years or less.
Decentralized wagering theoretically solves problems like high vig, country restrictions, lack of transparency, and deposit rejections. However, it also requires bettors to master a learning curve when buying tokens.
The general public may not be ready to embrace decentralized sports betting just yet. Maybe they will, though, in another five to 10 years.