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Bitcoin... The Future Of Online Gambling?

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Not too many people have probably heard of Bitcoin but I'm guessing within the next year or so you will, particularly if you play offshore. I have been following this new currency for a few months and have found it one of the most fascinating things to come around in a LONG time. Bitcoin or something similar to Bitcoin in the future has the potential to completely revolutionize the world economy much like the internet has done in the past 20 years. This could just be another flash in the pan but I am really starting to think it won't be as there is a lot of angst around the world against government controlled currency with the 08 crash and the quantitative easing (currency manipulation) that has gone on since along with the Euro issues and Greece's basic insolvency. This could be the beginning of a revolution in world currency.

There is no way that I can adequately describe what Bitcoin is so I will post some links below but if you know what torrent is or what the original Napster was supposed to be it works on the same premise. It is a DECENTRALIZED currency that runs on the P2P network. No owns it, no one controls it, and nothing backs it up like gold. For those that want to do away with the FED banking system this may be the answer. If fact it has been mentioned in a senate hearing headed up by RenoChazz's favorite politician Ron Paul. Quite honestly I think governments are scared of something like this as there is very little they could do to control it.

Wikipedia Page

Reddit Page

We Use Coins

BitCoin Magazine

Wired Article

It all sounds creepy and unsafe to be honest and I felt the same way before I got involved. There are actual reputable exchanges similar to the FOREX with the largest being the MtGOX exchange where millions of dollars are traded with various currency's. More and more companies are starting to accept BitCoin and regulators in Europe and the US are now allowing direct bank transfers to purchase and sell Bitcoins as it is SLOWLY starting to be treated as just another currency.

So.... how does this all relate to sports wagering? Well Bitcoin is 100% anonymous and if setup properly is completely untraceable. Basically you have a digital wallet that is setup on your phone or computer with lets say 100 Bitcoins which has an approximate value of $1,350. A second person had a wallet which could be the sportsbook. Your wallet and their wallet are only known by a unique identifier that is just a string of numbers and letters. No names are known and no identity's are relieved. When you send 100 BitCoins to the sportsbook it goes from your address to the sportsbook's address through the P2P network bypassing all banks and regulating agency's and the only thing that is known is the unique address of wallet A and wallet B. Again... no names, no email addresses, nothing. The sportsbook could then keep the BitCoins for paying out someone else or release them into an exchange like MtGOX and get other currency wired right to their bank. If you want to avoid banking all together there are sites like LocalBitCoins.com where people in your area will meet up and buy and sell them for cash.

Now... there are servers and computers all over the world that are supporting the network and of course they would not do this for free. When you send BTC (bitCoins) from one wallet to another you must include a fee of about 1 cent to complete the trade.

Here is the best part that I have found. Remember Matchbook? There is actually a site similar to Matchbook setup for just BitCoins called BTCSportsMatch.com. They are a sportsbook that matches sides based on Pinny no vig lines. That's right... NO VIG. The winner of the bet pays a 1% fee when the wager is decided. The problem with this site is it is still in it's infancy so there is not a lot of people using it yet but for the major games I have found no problem getting my orders matched.

All of this is 100% legal. By using Bitcoin you are not breaking a single US law. As long as people pay there taxes there is nothing wrong with moving money around like this.

So whats the problem? Sounds great right? Well it's not perfect....

To get setup using Bitcoin is not the easiest thing although every month there seems to be a new product come along that makes it easier and easier. Even though it has been around for 4 years now it is still in it's infancy and some of the things you have to know and do are quite techie. It is no where near ready for the mainstream but there are a lot of startups working on making it point and click. Eventually it will become quite easy to use.

If you look at the MtGOX charts of the value it can swing quite wildly. It has been as high as $30 and as low as $2. It takes months to do this but it is not like holding onto an american dollar. If one wanted to simply use it as a vehicle to move money you would want to get in and out of it within a few days as you could lose value just by sitting on it... but you could also make money. Currently there is only 10.5 million Bitcoins in the world with a increase to 21 million in a hundred years or so. There will never be any more so if this where to catch on the value of each BitCoin would be astronomical. For this reason you can trade down to 8 decimal places of a single coin so actually Trillions of smaller pieces.

Theft and security is always a concern and there has been a few issues with this but it was more to do with people being stupid with their digital wallets and companies leaving un-encrypted hard drives laying around. As long as you are not moving your entire bankroll or life savings around around and you are very safe with you wallet you will be fine. Theft and security is just as much an issue with fiat currency as well.

The bottom line is as the UIGA continues to strangle the money flow to and from books and the US govt seems hell bent against internet gambling the books and their clients will have to get more and more creative with their funding options. BitCoin seems to be the answer. Anonymous, virtually untraceable, and not illegal. Additionally if BitCoin or something similar where to take off it sure would be nice to have 100-200 of these coins when prices shoot through the roof.

Does anyone have any experiences with BitCoin? I would like to know what others think and what the computer genius Patrick has to say about it.

BitCoin sports wagering links:

OSGA Article #1

OSGA Article #2

Calvin Ayre Article

Calvin Ayre Video

Edited 12/28/12 at 2:14PM by Parker - No reason listed.

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Great post Parker, very interesting stuff. This has some serious potential. I just can't help but think somehow if it grew to be big enough some regulatory agency wouldn't be put in place. I just can't see the US being OK with this much untraceable money floating in the abyss.
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There is no doubt the governments of the world will find a way to regulate and tax it if it where to grab hold. They could easily regulate the exchanges like MtGOX and any other FOREX type exchanges that where to come along. Beyond that I really wonder what they could do. There was an FBI paper that was released this spring that shows they are quite concerned about it. Their aspect was more criminally related then taxes as this new currency I guess is used quite extensively for drug deals, weapons, and other unsavory stuff. I really don't see any way the government could completely shut it down. Millions of dollars of movies, music, software illegally change hands every day on torrent and there is virtually nothing any company or government has done or can do about it and most likely never will be able to do other then shaming people out of it. It is 100% legal for people to create and use other currency's in this country, many have tried and no one has succeeded.

I just cant believe the there are not at least a few offshores that have not tried this out yet. It's getting easier by the day.

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Well if the US dollar doesn't become worth the paper it's printed on (which has happened in several economies in the past), then the "virtual dollar" could literally explode overnight. Thanks for sharing and doing a bunch of research on this Parker!
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From what I have read, this (or something like it) will catch on faster in other countries that have shaky currency's like in Iran due to all the worlds sanctions. My thought was that all the Mexican immigrants could now send money back home to Mexico every week for one penny rather then having Western Union extort them for $80. When you really think about it banks are a 19th century invention that just are not needed anymore on the scale they have become. They are so powerful though that it has been impossible for anyone to do anything about it. This may change that. There just is no need anymore for a 2 million dollar bank building on every corner of town and for Visa to charge 3%.
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That's my worry DSP. 100k in 1990 used to be something, now everything costs substantially more, yet 100k positions are less available. I have to think the inflation issue gets much worse.

Edited 12/28/12 at 4:31PM by Mike McClain - No reason listed.

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I've been following Bit coin for a few years now, but don't fully understand it and haven't used it. A lot of libertarians I know do use it though, and I've heard that some offshore sports books now take it, which makes getting paid as easy as it was with net teller. I do think digital money is the future of banking, much better than the system we have now, and also better than going back to a commodity based currency which would be close to impossible because of how big the world economy has become. A lot of the haters say it's just a fad and will eventually crash much like the tulip craze in Europe. No sure how long it's been around, but I think it actually started quite a while back.
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Great Post Parker,

I'd give it two thumbs up if I could

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We use Bitcoin to pay a company that provides our Craigslist Posting software now since CL seems to have stopped the big ones from taking those payments. So far it has proved to be a good alternative once you have done the first transaction. The first was not easy and took seveal steps to complete.
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Thanks Reno. It really is the future. 500 years ago gold and silver where to main currency around the world. The pieces where worth what people where willing to give for them at the time. Nothing more & nothing less. Governments could try to manipulate the value of gold by hording or flooding the market but there is a finite amount of gold in the world so they couldn't overdo it. Today there is so much currency manipulation and it is not backed by anything other then the faith of the government. I certainly wouldn't expect anything like this to take the dollars place for a VERY long time if ever but there is no reason we couldn't have a one world currency controlled by no one along side what we have now. In a nutshell we do have a one world currency called gold but you cant scan a piece of gold and send it to someone in Germany in less then a minute.

Reno as you eluded to the system is very nerdy right now and not setup for everyone. The basic network is in place just like the internet was in the 70's & 80's. What we need is our "Netscape Navigator" to come along with a pretty GUI and this thing could go nuts. Just in the past few months there are sites like BitInstant.com coming along where you can now go to any Bank Of America or Walmart, give them cash and have Bitcoins in your account in less then a minute. Just yesterday I met a guy at a Starbucks through localbitcoins.com, gave him $300, he scanned a QR code on my phone and instantly I had 21 bitcoins. I immediately sent them to BTCSportsmatch and was betting games within 5 minutes with no vig and it cost me a total of 2 cents in transfer fees. I could just as easy withdraw and send them to my bank account or meet up with someone else looking to buy and get cash in hand. Just like Netteller in the good ole days.

I just wish places like 5dimes would start taking it.

I also think this has huge potential for local bookies. You no longer have to meet up with people just send the BTC to their wallet.

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Excellent post Parker. I was pointed here by someone on BTCSportsMatch.com. I have been playing there for months and it's great. Bitcoin is the best kept secret in the business. But probably not for long, the links you listed show a lot more press coverage recently. I have no problem getting 100-500 USD equivalent amounts per game matched on BTCSportsMatch.com - mostly on football, but there is decent action on NBA and NCAA hoops as well. Best odds on the planet (true vig-free auto updated, winner pays only 1% on won amounts only).

There is no doubt bitcoin, or something like it, is the future. As Parker mentioned, it's like the old Neteller days but BETTER - because you don't need NETELER as a central entity. It's all peer to peer like bitorrent.

Edited 12/29/12 at 2:42AM by Robw2 - No reason listed.

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It'll need the exchange rate against the $ to stabilise for an extended time - a lot of books will have been spooked by the insane volatility.

Once that happens, it's almost ideal. No reversing of transactions and entirely automated, makes it very cheap to handle.

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It will slowly start to stabilize as the volume increases. Right now you could dump 100K of BTC on the market and drop the price 10%. Once there is more volume to absorb larger transactions the swings wont be as wild.

If a book really wanted to do this right now, and other then the volatility I have no idea why they wouldn't, they could easily setup an account at the MtGOX and exchange their BTC every day... or even every hour to a more stable currency and avoid the swings.

The UIGA was designed to SLOWLY starve the offshore gambling industry and for the most part it has been a success. It's next to impossible to use a credit card anymore and with HSBC being fined over a billion dollars for money laundering in Mexico this past month I see that door being completely shut in the next year. No bank or credit card company will risk fines like that. What is left? P2P? You really don't think big brother knows and is watching those? There is no reason they cant start cracking down on those as well.

@RobW2 BTCMatch is amazing to me. It has so much potential. Right now I am just mirroring my wagers on there for 1-2 BTC to get a feel for things. So far I have been able to match every wager so it has worked out well for the smaller amounts.

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Bitcoin is one of the single greatest revolutionary concepts in... ever. Though unlikely to ever amount to much, it might be prudent to buy one bitcoin just in case.

The major feature of this system is that it's decentralized. You do not live in a free country if your medium of exchange is regulated by a central authority (the government). If bitcoins were accepted as a means of exchange then we would be an incredibly more free people, liberated from the unconstitutional restraints applied on us by our government and, ultimately, banks. Its finite distribution means you never have to worry about your arsenal being devalued due to deflation; governments can not simply create more bitcoins to free themselves from their own messes.

The likelihood of its adoption, however, is quite small in my opinion for a number of reasons. For something like this to work it would need a critical mass of people willing to invest their "real" money for bitcoins. There are some changes that need to take place before such a critical mass could be possible.

Bitcoin, at least in its current state, is not the easiest concept to grasp. I'm a pretty nerdy guy, and it took me quite some time to understand how it all works. Further, the whole concept of purchasing, transferring, and keeping secure a virtual wallet containing bitcoin encryption hashes sounds understandably daunting for your Average Joe. That said, there is nothing stopping the creation of a PayPal-equivalent that provides an easy front-end interface for the system.

The concept of the shift in power may be too much to handle for some people and/or businesses. If it became the main currency of the world, its early adopters would be equivalent to modern trillionaires, while folks like Mark Zuckerburg, if not early adopters, would turn into middle-class citizens. Of course in Mr. Zuckerburg's case this would be instantly offset by the real value of his existing business, but it would greatly reduce the significance of past financial gain. Additionally, I imagine it would only further the disparity between wealthy and poor, though to be fair it would likely increase total global wealth in the long term once full adoption has taken place.

It may put large corporations in a spot where they fight to their death against the change. If Walmart were to skip out on early adoption, then it may be forced to forego middle adoption as well as its only chance to remain a powerhouse would be for the Bitcoin system to fail. Even if such holdouts were ineffective, it would undoubtedly destroy some of the modern conveniences we've grown accustomed to in American culture. For whatever reason people have this bizarre sense of national pride, so the threat to American dominance may dissuade adoption. Same goes for the other relative powerhouses of the world.

I saw a slogan on a guys car that said "Proud to be an American" and I thought "What the fuck does that mean?" I'm fully Irish, and when I was a kid I would go to the St Patrick's Day parade and they sold a button that said "Proud to be Irish", but I knew that on Columbus day they sold the same button only it said "Proud to be Italian", then came Black Pride, and Puerto Rican Pride. And I could never understand national or ethnic pride, because to me Pride should be reserved for something you achieve on your own. Being Irish isn't a skill, it's a fucking genetic accident. You wouldn't be proud to be 5'11". You wouldn't be proud to have a pre-disposition for colon cancer. -George Carlin

I find it extremely unlikely that the US government, or any other "free" government of marginal dominance will allow Bitcoin to naturally flourish. Therefore, in order for Bitcoin to become anything of significance I believe the movement will have to start in countries where monetary regulation is not as strong. No matter how much the US government were to fight its adoption, it would be left with no choice if the rest of the world was using this "currency" thus destroying the relative value of the dollar.

Edited 12/30/12 at 1:27AM by Patrick - No reason listed.

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The whole point of a currency is that there is something substantial behind it. Bitcoin has literally nothing behind it. Just perceived value. In my opinion, bitcoin will go to zero. Probably within 3-5 years. I wouldn't put a single dollar into it. I'm all for inventive ways to get around the US' ridiculous laws, but this isn't it.
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And what exactly is backing up the US dollar?
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Over all this will fail eventualy.

If it gets big enough, goverements will find a way to regulate it.

there's a bunch of legislation about gov having more control. Big UN meeting just recently.

And ways to tax internet transactions.

Right now it's too small for a gov to bother with, if it gets widely accepted they will step in.

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evo34,

I could be a snob and argue that nothing in the world has any value beyond that value which is perceived, but even I know that that wouldn't exactly be a fair argument (plus I like you) so I'll try to be more reasonable. I think, being reasonable, that you could look at what has utility value and what does not. eg, a diamond has significant utility value because of its cutting abilities, but its trading price is much higher due to perceived value created by jealous women and proud men.

To the best of my knowledge the USD has little more utility value than does the BTC. It does not have any backing beyond "The Full Faith and Credit of the United States Government" which sounds great but doesn't have a whole lot of meaning. If the relative value of the dollar were to drop from $1.00 to $0.30, then the value of its governmental backing also drops from $1.00 to $.30, making said backing essentially worthless. The dollar has already lost over 96% of its purchasing power since inception, and will only continue to do so, even if purportedly be design.

Even when the USD was backed by gold, that backing was insignificant as the overwhelming majority of gold's value is also perceived.

All that said, I agree that it will probably fail miserably and go to zero within a few years. But I think it will fail due to corrupt interference rather than internal misconfigurations.

As a post disclaimer, I should mention that I don't have a whole lot of clue about that which I am talking. This is merely the way I interpreted BTC vs USD, and there could easily be loopholes in my argument.

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But I won't say it's 100% certain to fail, just highly likely.

The way this would work is if it turned into a massive, worldwide anti-government movement. The next civilian uprising, and it's bound to happen at some point just based on historical analysis, will not and cannot involve the use of military arms.

Are we ready for such an uprising? No. Even though there are maybe as many as millions of us who think critically and understand how life really works, if you step away from your computer for a few seconds you'll see hundreds of millions who don't; you see tons of folks who think you're some conspiracy theory whacko because you don't worship your government like the second coming of Jesus Christ himself; you see people who reference dialogue on NBC as absolute truth. It's hard to imagine such a large-scale revolution with so little of the public involved. And while the advancements of the Internet have vastly multiplied the spread of this awareness, it still has a very large way to go.

In order for an uprising to occur, it must receive a critical mass of people willing to participate. The spread of information required to gain this critical mass will surely be done through the Internet, so it requires cooperation from the ISPs of the world -- cooperation that I find unlikely to come unless it were to make those ISPs even more wealthy.

If Bitcoin were to grow large in the US anytime soon it would be crushed, because the government is ready to crush it and the citizens are okay with the government doing whatever it wants. Like I said in my first post about this matter, I believe that the movement must start elsewhere -- somewhere with less ability for monetary regulation and for Internet regulation. It must become a widely-accepted local currency in a number of smaller regions, and it must stabilize to a degree. It must grow the same way that a popular website like Facebook grows, by starting locally and then slowly spreading. The unfortunate thing - if you want to call it unfortunate - with this (relatively) likely scenario is that it would lead to a worldwide shift in economic significance, seeing countries like America, UK, France, etc becoming less relevant.

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I think it's a mistake to thing there are only two outcomes: bitcoin taking over the world or bitcoin going to 0. There is a huge niche for grey market transactions and other use casess: where people wish to remain anonymous, simple tax evasion, or remittances to other counties for pennies rather than WU fees. The size of these markets are enormous but falls way short of Bitcoin replacing the USD or EUR, which is of course absurd.

Given the technical complexity and other hurdles for the general public to get into Bitcoin, I think it very likely that Bitcoin will be wildly successful as a niche currency - relatively unknown to Joe Public, but stepping into the obvious need of the grey market. Compared to 4 years ago when Bitcoin was just a Whitepaper, it already is a wild success - look at the size of the network, the number of people and merchants who accept them (WordPress sees the power of bitcoin - http://en.blog.wordpress.com/2012/11/15/pay-another-way-bitcoin/ no 3rd party to tell them who they can and cannot accept money from). The huge niche - yet not taking over the world is a very possible outcome.

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