Over the past few months EOS has seen a huge influx of activity coming from a new wave of gambling DAPPs. It all started back in early September of this year when eosbet released its simple but addictive dice roll game. Since then, over a dozen clones and altered takes on the concept have popped up, as well as other gambling games such as blackjack, lotteries, and baccarat, to name a few.
The fact that gambling is turning out to be one of the first big real-world use cases of the blockchain should come as no surprise to anyone, but it’s their profit sharing business model that has been the underlying cause of the boom. Casinos have something called an edge on most of the games they offer, which means they have a small (0.5-2%) statistical advantage over the player, and this ensures that they will make a profit over the long run. Traditionally, casinos keep 100% of these profits, but what if they shared their profits as a way to keep customers returning?
Something that all of these gambling DAPPs have in common is that they all have their own platform token that yields EOS dividends, which comes out of the house’s profit pool. You obtain the tokens either by buying them from an exchange, or by playing the game: for every 1 EOS wagered you receive some amount of their token in return. In other words, in true Justin Trudeau fashion, if you lose, you win! If you stake these platform tokens, you will receive a certain proportion of the house profit over a given time period, relative to your stake size. The exact mechanisms and formulas used varies between platforms, but the underlying idea is the same for all of them: Stake tokens, receive payouts. Additionally, as these tokens are “mined” by people playing the games, the ratio of wagered money to rewarded tokens declines, similar to traditionally mined cryptocurrencies. This means that they become more scarce over time, which theoretically should drive the token’s value up and reward early investors.
As with most things in the crypto world, nothing comes without big risks. There are two major risks involved here. The first one is trust. It must be stressed that investing in these platform tokens is not the same thing as investing in a trustless/decentralized cryptocurrency. The owners of these custom token smart contracts–many of whom are anonymous–have full control over your wallet. This makes it a perfect venue for scammers, and a juicy target for hackers. Although it is possible to create a custom token that is both effectively immutable and tamper-proof like the EOS token itself*, I haven’t seen anyone do this yet. This is certainly something that we should be making an effort to move towards in my opinion, so as to completely remove one major risk factor.
The second big risk is the more obvious one, which is that these platforms will only yield dividends so long as the development team remains active and people keep playing their games. Although some of these platforms are currently yielding a daily return in the 1-4% range, this is almost certainly not sustainable over the long run (and if anyone tells you otherwise they’re either not very good at math, or are trying to scam you). There is no guarantee that all or even most of these gambling platforms will end up succeeding, and in my opinion, most probably won’t.
With the risks fully understood, I believe that this is an opportunity to get in on something revolutionary at ground level. Some of the most popular forms of gambling such as poker and sports betting are still being worked and are just around the corner. While I can’t say for certain which of these online casinos will continue to grow and succeed in the long run, or how many, I can say with much more confidence that at least one will, and whichever ones do succeed will make their early investors very happy people.
Many will probably consider it too risky for serious investments at such an early and unsure stage, but it’s definitely still worth keeping a close eye on. And for those who do take the risk, always remember to never invest more than you can lose.
*The EOS token smart contract is controlled by the 21 block producers, so while it is technically still mutable, its security is contingent upon the underling security mechanisms of the EOS platform. In other words, the token is as secure as the network itself.