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Cryptocurrencies in the Gambling Industry: the Positives and Negatives

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Bitcoin has seems unstoppable over the past year-and-a-half. The one-time experiment has outperformed real-world currencies, given financial institutions something to think about. Recently, it has become a regularly traded commodity with millions of investors, miners and sellers interacting with the ecosystem. Granted, it’s had its hiccups lately, and there are plenty of pretenders to the throne who are jumping on the bitcoin bandwagon, but the first true cryptocurrency is really showing the world it’s potential applications and how problems like scaling are being solved.

One industry that could change massively from increased use of bitcoin is the online gambling industry. Built completely on millions of online transactions, gaming companies could see that way that their services are paid for transform if more people were to adopt bitcoin as a preferred currency. There are plenty of implications for both players and the owners of these companies, many of which could end up saving both sides plenty of money. But are cryptocurrencies the best currencies to gamble with?

No More Middleman

The big advantage of bitcoin is the lack of an agent to transfer funds. Bitcoin negates the need for a bank or credit card, with the trade taking place directly between the customer and the business. This could result in a huge cost saving for online gaming sites, which would eventually be passed on to the customer. The other side of the coin is the time taken to transfer funds, although playing online games like poker is extremely convenient, players are often left frustrated with the amount of time it takes for them to get their hands on their hard-earned winnings, if online poker sites were to adopt bitcoin the waiting time would be none existent. Unfortunately, for certain banks and credit card services, there can be a wait for several working days before funds become available in the player’s bank account after a win.

One of the biggest outgoings for online gaming sites are currency fees. This can be anything from a credit card charge to the costs associated with exchange rates. Dealing with banks, credit companies and even companies like PayPal instantly means surrendering a percentage, usually around 1-2% of the initial payment from the player before any profit is made. This can often be in the millions per month when large numbers of players carry out multiple transactions and payments in a short space of time.

Security

The trouble with credit card details are that they can be easily stolen, and with the amount of big-profile hacks seen in 2017, customer details are big business for cybercriminals. We already know about the benefits of blockchain technology for casinos and how much more secure it can be, and this is definitely another advantage for players who wish to deposit their funds using a cryptocurrency. Thanks to the anonymity afforded by bitcoin, there’s also no personal details to file, or any personal information held by the online casino that could be stolen.

Anonymity could be a problem for online gambling companies, however. Crimes like money laundering are already a problem for physical casinos, and allowing anyone to deposit sums in a gaming account without any indication as to who they are could be fraught with issues. The best workaround for this is for all users to register with their personal details before they can deposit anything with their bitcoin account, but there’s still the risk of information being falsified. In addition, it’s a lot easier to buy bitcoin than it is to register a bank account.

Volatility

Accepting or making payments in dollars or pounds is a pretty safe option for gamblers and online gaming companies. It’s unlikely that the currencies will devalue or rapidly increase in value over a short period of time, and it can be favorable to generate interest from money being held in multiple accounts. Although bitcoin has the same growth elements, it is nowhere near as safe as a traditional currency in terms of predictability and stability.

It’s key to remember that bitcoin is unknown territory. We had never seen a cryptocurrency before bitcoin arrived, and for a long time the growth of bitcoin was both exponential and rapid. Last year, a price of $20,000 was topped, before a rapid decrease to a current price of around $8,000 per coin today. This huge change could be very problematic if, for example, a casino accepted payment in bitcoin, but then offered the option to withdraw in a different currency. The easiest solution is to only pay out in bitcoin if payment was made in bitcoin, but then online casinos don’t have the benefits associated with holding cash.

There’s also the more extreme possibility of cryptocurrencies collapsing altogether. Bitcoin may be fairly solid with plenty of public interest and a solid investor base, but there are plenty of others looking to take market share who may not last as long. Accepting payment in a less established cryptocurrency could spell problems if it doesn’t take off, or even disappears altogether with customers expecting a payout.

Scalability

With bitcoin prices at just over $8,000, and with previous prices over $20,000, it’s unlikely that people will be betting that amount in one go (unless they’re Floyd Mayweather). The average stake in the U.K. is just under £9, so expecting anyone to have that sort of cash on hand is unrealistic. Bitcoin can be fractional, but this creates more hassle in terms of transfers and mathematics.

Bitcoin miners have realized this issue, and so have their competitors. Bitcoin cash is the latest challenger, a cryptocurrency aimed at being closer to Satoshi Nakamoto’s original concept by being less about boosting value through investment and more about daily use. As the people behind bitcoin cash are all ex-bitcoin ‘enthusiasts’ (bitcoin is anarchic, with no management or staff, managed totally by an online community), then this could be the hard fork that splits bitcoin truly down the middle.

The big advantage with cryptocurrencies at the moment is public interest, and increasing trust. The blockchain model is extremely secure and practical, and is even being applied by organisations to provide more transactions, and the immediate, fee-free transfer of funds is very attractive for both users and businesses. But a big detractor is that cryptocurrencies are still fairly unregulated, and possibly even prone to the bubble effect. Speculation is managed in real-world commodity and stock trading by governments and financial regulators, but bitcoin and other cryptocurrencies are parallel to traditional financial institutions. If bitcoin collapsed tomorrow, there’s little in the way of insurance or financial protection.

Although cryptocurrencies have a long way to go, they’re still a great way of placing a bet. As well as being quicker and more secure to use, you’ve also got the possibility of your preferred currency actually growing as you gamble with it, something you wouldn’t get from using a traditional currency. The risk of losing everything is slightly higher, but then again you’re about to gamble with it anyway, so we’re sure you’re happy to take a risk! We’d recommend choosing a provider that accepts and pays out in both bitcoin and other currencies though, so you can take advantage of any market growth if your coins are currently being held by your gaming provider.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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2.3 stars on average, based on 1 rated postsAshley graduated from university in 2016, where he studied Business Management and Finance at London South Bank University.




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  1. Constantin

    March 14, 2018 at 6:44 am

    What about the coins that are meant for online betting and games, like Funfair?
    A follow up that includes these would be interesting.

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Overstock.com Shares Spike 17% After Chinese Private Equity Firm Pledges $270 Million for tZERO

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Shares of Overstock.com (OSTK) surged in after-hour trading Thursday after a major Chinese equity firm agreed to invest in tZERO, the blockchain subsidiary vying to reshape the investment world through a SEC-regulated alternative trading system (ATS).

GSR Capital to Invest Heavily in tZERO

CNBC confirmed on Thursday that Hong Kong-based GSR Capital will invest up to $270 million in tZero. The investment is based on a valuation of $1.5 billion, giving GSR an 18% stake in the new blockchain startup. GSR will also buy $30 million worth of tZERO security tokens.

“We are honored to have GSR Capital as a strategic investor,” said tZERO CEO Saum Noursalehi in a statement, as quoted by CNBC. “The tokenization of securities has the potential to disrupt global capital markets responsible for moving hundreds of trillions of dollars. Together with our partners, we will globalize our blockchain-based platform, bringing more efficiency, liquidity, and trust to capital markets.”

The announcement came less than six weeks after GSR Capital signed a letter of intent with Overstock to purchase $160 million worth of security tokens.

Launched in December, tZERO’s initial coin offering (ICO) has raised $134 million to finance its ATS infrastructure, which will provide a regulated venue for securities trading. The company plans to build similar systems around the world.

Despite a highly successful crowdraise, documents submitted to the SEC earlier this year revealed a target of $250 million. Independent valuations had placed tZERO’s ICO anywhere between $200 million and $500 million.

Overstock.com Spikes

Overstock.com’s share price was up by as much as 21% after-hours. It would eventually settle at $45.40 for a gain of 17.6%.

As the following chart illustrates, the OSTK price rose 4.5% in regular trading on Thursday to settle at $38.60.

Despite the gain, OSTK has been a dismal performer this year. Share prices are down 40% year-to-date, vastly under-performing the Nasdaq Composite Index, which has returned more than 14%.  What’s more, the stock is trading at less than half of its 52-week high.

Overstock’s share price has been rocked by disappointing quarterly results and the cancellation of a proposed public stock offering. Last March, the company offered four million shares of common stocks before abruptly cancelling those plans. Noursalehi said the decision to pull the offering was due to “market volatility and price.” To be sure, OSTK had declined 20% following the initial announcement to issue common stock.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 546 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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A Closer Look at Boerse Stuttgart’s New Cryptocurrency Platform

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The Boerse Stuttgart group has is expanding upon past product launches to create a complete holistic ecosystem for digital assets, including cryptocurrencies. This comes on the heel of them launching the “Bison” app, which allowed users to trade cryptocurrencies with zero fees, similar in functionality to that offered by Robinhood.

The difference between Bison and Robinhood, however, is that the Boerse Stuttgart group is the second largest derivatives exchange in Germany. Another unique feature of the Bison app was its “crypto radar” feature.

This functions as a social media tool that aggregates more than 250k tweets and analyzes them to determine the “mood” of cryptocurrency investors.

Having an existing (and profitable) large financial firm expanding their brand to cryptocurrencies in any capacity reflects a market that is increasingly accepting the reality of institutional capital flowing into crypto markets.

The new ecosystem is composed of three distinct pillars. Bison represents the first of these pillars. The second is a branded platform for initial coin offerings to sell tokens. The third is a safe custody solution for digital assets.

This ecosystem, in turn, falls within Boerse Stuttgart’s so called “digitization” strategy and should serve as a bellwether of changes to come in financial markets. After all, as an established market player, Boerse Stuttgart Group has extensive knowledge in the fields of technology, regulation, and trading models respectively.

According to their own CEO Alexander Höptner, “On this basis, we can offer central services along the value chain for digital assets, all under one roof. Investors and market participants know that Boerse Stuttgart Group stands for quality, transparency, and reliability. As a Germany-based provider, we want to transpose this standard into the digital world. We will help to promote acceptance of digital assets.”

The key to their ambitions focuses on solving two major problems. The first is that KYC procedures tend to be overly complex for average investors, as well as time-consuming. The Boerse Stuttgart group’s own KYC solution allows traders to pass KYC and start trading within minutes, as opposed to more typical solutions that take a few days.

The second issue they are tackling the liquidity and accessibility of ICO tokens post-sale. They solve this by allowing tokens launched through their platform to be traded within their broader ecosystem using Bison.

According again to the CEO, “At the trading venue tokens issued via our ICO platform can be traded on the secondary market. This is an important success factor for ICOs. At the same time, we are responding to demand from both retail and institutional investors for a regulated and reliable environment for trading with cryptocurrencies. Furthermore, established cryptocurrencies like Bitcoin or Ethereum will also be traded.”

This approach will likely serve to establish the Boerse Stuttgart group a prime recipient of crypto-intrigued institutional capital. After all, the early bird gets the worm. A key component of this future success also rests on how well they partner with authorities.

This exact point was also emphasized recently by the CEO, who said, “In designing the strategic projects we closely cooperate with all competent boards and committees, and especially with the supervisory authorities.”

While it remains to be seen whether retail investors make use of this ecosystem, it seems reasonable to assume that larger investors will flock to a simple crypto-specific ecosystem backed by an old guard stalwart of finance.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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MasterCard Could Be Your Best Friend

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Since just after the financial crisis, I have been searching for a way to beat MasterCard and Visa at their own game. These two brands dominate the business of processing debit and credit card transactions.  I have always considered this duopoly as the enemy of mankind, but could turn out to be a hasty judgement.

MasterCard and Visa don’t actually process transactions as much as they offer an electronic network and charge fees for the use of their name.  They collect about 0.11% per card swipe which ain’t much until you consider they are running more than 150,000 transactions per minute through their network.  Pretty nice business to be in. All together, the two will generate about $30 billion this year.

The problem with both of these guys is that it is impossible to get around them.  If you buy something anywhere in the world with a debit or credit card, it is almost guaranteed to run on either the Visa or MasterCard network.  In which case, in addition to the 0.11% taken out for the network, the store that accepts your purchase pays anywhere from 3% to often as much as 5% in total for processing fees.  And if you travel abroad and charge something, well forget about it. Everywhere along the network are intermediaries taking their nick of your wallet.

When foreign currency transaction fees are taken into account, that is where more intermediaries are included.  That is where the costs add much higher and that is often where the consumer is hurt most.

Fighting Back

The whole idea behind blockchain technology is to make transactions of all types fast with little or no dependency on intermediaries.  All this makes MasterCard and Visa the enemy of cryptocurrency developers. But neither of these brands are sitting still applying for patents on blockchain based payments methods.

The natural reaction is to sell to sell your crypto and find some easier way to earn a decent return.  We disagree: we think there is crypto to be made from MasterCards strategy. Here is why you should be encouraged.

ome time back, MasterCard applied for a patent on blockchain technology that created a link between crypto and fiat currencies. MasterCard is not alone, as there are any number of crypto projects with the same idea.  Recently we looked at TenX and there are others.

Using TenX for comparison, MasterCard’s recently awarded patent offers to convert crypto to fiat using the existing MasterCard network.  TenX and many others plan either create their own high speed mainnet or use the Ethereum platform.

In head to head competition, this gives MasterCard a sizable advantage since MC is pretty much accepted by merchants everywhere.  As much as I hate the duopoly represented my MC and Visa, right now they could turn out to be the best thing to happen for one simple reason.  They will unquestionable accelerate mass acceptance of crypto.

Their existing network and transaction speed, immediately solves the lingering Bitcoin/Ethereum issue of scalability.  In addition as observers have pointed out, both MC and Visa have had systems in place to identify fraudulent transactions.

Having said all of this, is MasterCard going to kill all other crypto payment wanabys like TenX and others? Before concluding the answer is yes, consider this.  In their recently released quarterly review to shareholders, MasterCard reported net income of $2.33 billion on revenue of $5.24 billion. That is a whopping profit margin of 44.5%!  This towers over extraordinarily profitable companies like Apple at 20.3% or the average US corporation at less than 10%.

When MasterCard’s blockchain system goes into use, it will plump up those already MC margins. So, as a crypto investor, you have to ask yourself, do you actually think that MC will pass on those savings or wallow in the cost savings?  The answer is pretty obvious.

MasterCard Could Be The Best News

Crypto naysayers are the first to deny that Bitcoin and others are a legitimate medium of exchange.  This is based largely on the limited number of mainstream merchants that are in the crypto loop. MasterCard could help take crypto mainstream and that would be a good thing for major names like Bitcoin, Bitcoin Cash and Ether.  And with the payments processing business dealing in over $50 trillion in transactions annually, there will be room for startups offering high speed scalability at lower cost. It will not happen this year but it will happen.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 96 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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