Bitcoin casino: The lowdown
Published 7th September 2014
Gambling has been reported to account for as much as 60% of historic bitcoin transactions. What are the reasons for this?
There are many reasons why gambling with Bitcoin and other crypto-currencies has become so popular. Playing with bitcoins resembles the feeling of playing with casino chips in a land-based casino.
There’s also a high level of privacy, due to bitcoin being pseudonymous, and payments are instant and irreversible. There are no transaction fees. Lost bets also carry no reimbursements or chargebacks, a big issue which was increasing transaction costs for the iGaming industry from the start. The games are more transparent with the use of cryptographic methods, which ensure and make it possible for players to verify the fairness of every bet.
Gambling with bitcoins can also be much safer when it comes to the security of funds, since bitcoin gambling sites hold funds for a very short period of time, and when players decide to leave an online casino, they transfer their bitcoins directly to their online wallet by means of instant cash outs, with no fees involved.
What are the benefits and drawbacks of the Block Chain ledger for gambling?
The biggest invention of crypto-currencies is most definitely the open source, semianonymous decentralized public ledger system, where all currency transactions are recorded and there is no possibility of double spend. This is a good fundament, not only for digital money but also for storing any unit of value. It is extremely important, because for the first time you can store something
digitally and be sure that it will not be duplicated or counterfeited. Public ledger is also a great source of transparency as every transaction/bet that a player makes is public and proven to be fair.
The only downside of using public ledger from a player perspective is that for every single game/bet/round players need to make a bitcoin transfer from their bitcoin wallet to a certain bitcoin address of the gambling website. We try to make this a bit easier for players by giving every one a unique bitcoin depositing address, so whatever bitcoins land at this address will instantly be added to the player’s account wallet. The advantage of doing it this way is that players do not need to send bitcoins to certain bitcoin addresses every time they place a bet on roulette or slots, only when they are recharging their wallet.
All the big game providers will slowly realise there is money to be made and start to offer bitcoin wagering on their games as well.
How do you get players? What type of marketing strategies do you use?
We quickly realized how effective marketing campaigns would be among online news publishers and communities that are well into crypto currencies and whose readers are already well educated about bitcoin. For instance, bitcointalk.org is most popular bitcoin blog, where in the near future we are planning to implement a campaign.
Besides the typical social media marketing on Facebook and Twitter, we have also concluded a few deals with real-money casino affiliates, who are slowly starting to grasp the advantages of the crypto currency and are extremely interested to test and add at least one bitcoin casino to the portfolio that they offer their most valued players.
Are players easier - and less costly - to acquire than at a real-money online casino?
Yes, currently the player acquisition price of the bitcoin player tends to be lower compared to the real-money online casino player. This is connected to cheaper advertising among the bitcoin community when it comes to bitcoin-related services and entertainment. It is also true that the amount of bitcoin casino players in general will be very tightly connected to the amount of bitcoin adopters and success of the bitcoin crypto currency in the coming months and years ahead.
We strongly believe that with such rapid growth and so much innovation, together with the money pouring into the bitcoin space of late, it is not a question of “if” but “when” we are going to see a mainstream adoption of the bitcoin.
How do bitcoin players compare in terms of spend and lifetime values? Are they more or less valuable?
As there are zero transaction costs, a player can make a deposit of less than a dollar and there is no minimum withdrawal, which is something that real money online casinos simply cannot match or afford. So, combined with instant transactions we see a big amount of smaller value players that deposit very small amounts. In the period we have been in operation, we have noticed
that an average bitcoin player tends to have a lower lifetime value compared to the real money online casino player.
There are a growing numbers of new entrants to the space. Is it becoming more competitive and crowded?
There are new bitcoin gambling sites opening every day so the space of online bitcoin gambling is definitely maturing and the entrance is becoming more challenging than it was a year or two ago. When we first came to this space casino games were very simple. In saying this I believe that with bitcoin and its adoption, all the big game providers will slowly realise there is money
to be made and will start to offer bitcoin wagering on their games as well.
How many games are you currently able to offer your players, and from which suppliers? Can you give us an idea of how fast this is growing and developing?
Right now, we offer around 50 games from SoftSwiss. We are also adding Live Casino from Ezugi in the coming days, and are in talks with one of the larger land-based slots manufacturers over featuring their games, with a view to becoming the first bitcoin casino to offer games which are currently only possible to play in land-based casinos.
We are also working towards adding more original products in the future. While the regulatory bodies in the bitcoin space are still a bit behind on this cryptocurrency phenomenon there seems to be quite a few irregular players in this space as well. They seem to be providing a lot of non-genuine, false products and games from big suppliers like Novomatic, NetEnt, Aristocrat and Playtech.
Why aren’t the main iGaming casino suppliers adapting their games for Bitcoin? Do you foresee this changing in the near future, as bitcoin gains in legitimacy?
Traditional suppliers are mostly still afraid of bitcoins. One of the reasons is that bitcoin’s price tends to be very volatile. This can be a bit of a gamble from a supplier point of view, if it is to get paid the royalties made in bitcoins converted to real currency at the end of the month, as bitcoin can be worth more or less than the previous month.
Nevertheless, it is worth noting that the volatility of bitcoin has greatly decreased compared to the year 2013, and this trend is set to continue. The other reason suppliers are still a bit skeptical is because bitcoin is still not officially recognised as a currency in any gambling jurisdiction.
I predict that in the next year we are about to see at least one of the more reputable gambling jurisdictions like Malta, Gibraltar Alderney or Isle of Man figure out how to deal with bitcoin gambling businesses and start issuing them with licences. But despite all, there is already big interest in bitcoin gambling from the supplier side, and I think it is just a matter of time before other gaming suppliers follow the likes of SoftSwiss and Ezugi.
We have noticed that an average bitcoin player tends to have a lower lifetime value compared to the real money online casino player.
Trust is obviously paramount to getting more players to your online casino. How do you go about building this in the absence of normal regulation?
We start off by allowing any interested players to test our instant depositing and cash out services. Once a player feels comfortable and realises we only keep their money for a short period of time, with no extra payment or processing fees, they feel much more secure.
Secondly, we have implemented a provably-fair concept for most of our games, where we use cryptographic methods which ensure that we or the player can’t possibly know the outcome of the game until that moment when it is actually happening.
Last but not least, we have a 24/7 support team and an online live chat most of the time during the day to help out anyone who might have any issues or queries. We also have an official thread on the bitcointalk.net forum, where we offer support and inform players about all the cool things we are up to.
What are your main country markets? Is there a correlation between this and the level of dot.country regulation in these territories?
Bitstars started off with a focus on English speaking countries but we have noticed a lot of interest from other countries as well. Since bitcoin is still poorly regulated worldwide, the majority of traffic is coming from countries with people familiar with and in possession of bitcoins.
Since bitcoin is decentralised and can be used in any country, it is not a coincidence that the higher demand for bitcoin gambling comes from the jurisdictions that do not currently have dot.country regulations.
You recently launched your new affiliate programme. How does the model work compared to traditional casino affiliate programmes?
The affiliate model that we are using is quite similar. The only difference is in the NET revenue calculation. While the traditional classic casino really gives out higher revenue share % than bitstars.net, it is worth noting that we are not deducting any chargebacks, payment processing fees or monthly casino fees from the gross revenue.
We offer commission plans of up to 30%, which might look a bit on the low end at first glance. But considering the different NET calculation in our experience of operating real money casino, this is at least comparable to at least 40% on any popular online casino.
Are affiliates only paid in bitcoins, or can they get paid in other ways?
Right now, affiliates are receiving their payments in bitcoins once a month, which can be withdrawn instantly to their bitcoin wallet. On the other hand, we also have agreements in place on a case-by-case basis with certain affiliates that their payments are issued in euro.
I heard you also started accepting credit cards. How does this work alongside bitcoin, and what are the advantages?
The biggest issue right now in the bitcoin space is that buying bitcoins is still a very long process that can only be accomplished through bank wire transfer. Many people are still not holding bitcoins, but in many cases we found there was a large number who were curious about the bitcoin but were just not ready to wait a week. This was a normal process for anyone wanting to buy bitcoins for the first time on the biggest bitcoin exchange, bitstamp.net.
We wanted to change that so that our customers would be able to acquire bitcoins instantly, so we teamed up with a bitcoin cloud mining company to offer this service. It is worth noting that the stated company manages the whole process while we just receive the coins at the end of purchase. This way we do not handle any real currency at any given point in time. As things progressed, our bitcoin mining partner was receiving a lot of chargebacks since they were accepting credit cards trough PayPal.
This seemed like a very good idea for the end user, but for the merchant it was a different story. There were just too many people holding stolen PayPal accounts and using them in the gambling world. Combined with PayPal’s high buyer protection and a one-click chargeback option, PayPal proved to be a very bad payment method to use in such cases. In saying this, we are determined to stay committed to our goal of providing an instant way of acquiring bitcoins.
Therefore we are now working with our partner on some alternatives to provide an easy and fast experience of acquiring bitcoins with a possibility for players to deposit directly to their Bitstars account.