Exploring Fully Decentralized Online Crypto Casinos: The Future of Trustless Gambling

Gambling via Smart Contracts

In this original CoinBets guide, we’ll take a deep dive into the world of decentralized online crypto casinos. We’ll look at how they function, their benefits, and the challenges they face. We’ll also check out some popular decentralized gambling platforms, offer security tips, and contemplate what the future holds.

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What Are Decentralized Casinos?

Since the first online casinos launched in the mid-1990s, online gambling has grown into a huge global industry. Indeed, according to Statista, by 2029 it is projected over 290 million people will use online gambling sites and market volume will be around US$133 billion.

However, a new kind of online gambling site is poised to change everything: the fully decentralized crypto casino. These decentralized gambling platforms are dovetailing with DeFi (decentralized finance) protocols and opening up an entirely new frontier in gaming.

Traditional online casinos are, fundamentally, digital versions of land-based casinos. They are owned and operated by a company that is physically located in a specific place.

Conversely, genuinely decentralized casinos are owned by token holders, governed by DAO (Decentralized Autonomous Organizations), and located on the blockchain.

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How Decentralized Casinos Work

Okay, first things first. There’s a lot of confusion out there when it comes to decentralized crypto casinos. In truth, most current crypto casinos are not fully decentralized – even though their marketing often suggests otherwise.

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Partially Decentralized (Hybrid) vs Fully Decentralized

The most popular platforms like Stake, Roobet, and Gamdom, are still very much centralized casinos. Yes, they do incorporate decentralized elements, like provably fair gaming, crypto payments, and crypto token ecosystems. However, they are still owned and operated by centralized companies, and the majority of their games are based on traditional RNG (Random Number Generator) technology.

Even casinos and sportsbooks that largely rely on decentralized platforms for their operational functionality aren’t truly decentralized if they are controlled by a single entity. we’ll talk more about this when we look at specific platforms.

Strictly speaking, it’s more accurate to call them ‘hybrids’ or ‘partially decentralized’.

Sure, some are definitely more decentralized than others, but they are certainly not fully decentralized casinos. It’s very similar to the wider crypto space. All cryptos use blockchain technology, but tokens like Tether, USD Coin, and XRP are not decentralized in the way that Bitcoin or Ethereum are.

Truly decentralized casinos harness tech like smart contracts to automate processes and eliminate intermediaries altogether.

So, let’s take a look at the main components of fully decentralized online gambling platforms.

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Smart Contracts

A smart contract is a self-executing contract with its terms written directly into code. These are used to automate everything from game logic and fund management to the distribution of winnings.

As soon as a player has placed a bet, a smart contract takes over. It will calculate the outcome, transfer funds, and execute payouts. Smart contracts are deployed directly onto the blockchain and operate autonomously.

Using smart contracts can completely eliminate the need for human intervention. This means players do not need to trust in any fallible third party, thus creating a truly trustless environment.

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Blockchain Networks and Protocols

Although there are many blockchain networks, the majority of decentralized casinos operate on major networks like Ethereum, Solana, or Binance Smart Chain. Each blockchain has its own advantages and disadvantages, and choosing the right one for a project can be the difference between success and failure.

For example, Ethereum is by far the most well-established blockchain in decentralized gambling and gaming, with extensive smart contract support. However, despite improvements, it can still suffer from network congestion, leading to high gas fees and slow speeds.

On the other hand, Solana and Binance Smart Chain are much faster with lower fees but have smaller developer communities.

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DAOs (Decentralized Autonomous Organizations)

At fully decentralized casinos, DAOs take the place of operating companies. They allow sites to be entirely governed by their communities. By holding governance tokens, users can participate in decision-making processes by voting on things like platform features, new games, and profit distribution.

The DAO model creates a sense of ownership and shared responsibility, naturally aligning the casino’s interests with those of its user base. If a platform isn’t owned and governed in a decentralized manner, then it can’t really be considered a fully decentralized online casino.

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Benefits of Fully Decentralized Casinos

Fully decentralized crypto casinos offer several advantages over both traditional and partially decentralized online platforms. Let’s look at them in more detail.

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Trustless Operations

For most users, the trustless nature of a decentralized casino is the biggest attraction. Players no longer have to put their faith in an operating company – or the gambling authority that regulates them. And, let’s face it, historically, the online gambling industry hasn’t been the most trustworthy!

The smart contracts that manage everything from bet placement to payouts are unlikely to be corrupted because the code is open-source and publicly auditable. This trustless system creates a truly level playing field, guaranteeing transparency and fairness.

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Provably Fair Games

Traditional online casino games like slots and video poker rely on random number generators (RNGs). These RNGs should be fair, and in most cases are – for example, operators licensed by the UKGC and MGA must undergo regular audits by accredited testing labs.

But, there is no way players can have absolute certainty. Of course, this is a particular problem with unlicensed casinos or those licensed in more ‘lenient’ jurisdictions like Anjouan or St Kitts.

However, provably fair games allow players themselves to verify the fairness of each outcome using cryptographic algorithms. As previously mentioned, partially decentralized casinos tend to offer some provably fair games, but all games at fully decentralized casinos are provably fair.

For more, check out the CoinBets guide to provably fair gaming.

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Enhanced Security and Privacy

Because decentralized casinos operate on blockchain networks, players can engage with them directly via a supported cryptocurrency wallet. This means there’s no need to provide any personal information, effectively eliminating the risk of identity theft and fraud.

Plus, the decentralized nature of blockchain-based platforms makes them inherently less vulnerable to hacks or data breaches. Even if a part of a network is compromised, operations can usually continue safely.

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Community Governance

Centralized and partially decentralized casinos build player communities but users still have no real say in governance. However, because fully decentralized casinos are governed via DAOs, site users can directly influence decisions.

The amount of influence individual users have will typically depend on the number of governance tokens they hold. So, while those with most tokens can still dominate voting, decentralized casinos are more responsive to their users. Naturally, this is better for building a real sense of community.

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Limitations of Fully Decentralized Casinos

However, it’s not all plain sailing for fully decentralized casinos. As with everything in the blockchain and crypto space, there are some nagging issues.

Let’s run through some of the most significant.

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Scalability and Transaction Speed

Long one of the biggest challenges in the blockchain space, scalability is still an issue for decentralized casinos. This is especially true for those based on Ethereum – which has been a victim of its own success.

Precisely because Ethereum is so popular, the network can get extremely congested, leading to high transaction fees (gas fees), and slow speeds. This is especially problematic for things like low-value bets, which high gas fees can often render impractical.

However, other blockchains, like Binance Smart Chain, Solana, Polkadot, and Avalanche do offer compelling alternatives, and Layer-2 protocols and sidechains are being developed to address scalability issues on Ethereum.

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Complex User Experience

As with any new technology, it takes some time for products to become truly user-friendly. In the decentralized technology space, this has been a prominent issue for some time now.

Large centralized platforms have entire teams dedicated to creating seamless user experiences. Everything is tested and refined to reduce friction as much as possible. Processes are distilled to simple, intuitive flows.

Meanwhile, decentralized platform users are left to figure out crypto wallets, manage private keys, use crypto exchanges, and navigate the complexities of blockchain transactions. This learning curve is proving to be a very sticky barrier to widespread adoption.

In part, this is because much of the innovation has come from individual developers, aka. ‘tech nerds’. They tend to build things that make perfect sense to them, but are opaque to the general population. Thankfully, as decentralized tech matures, user experiences are improving.

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Regulatory Uncertainty

Fully decentralized casinos aren’t operated by an identifiable entity based in a specific geographical location. Hence, they are incompatible with traditional legal frameworks and jurisdictions. And although this is a problem common to all decentralized projects, including cryptocurrencies and DeFi platforms, there is still no international consensus regarding a sustainable way forward.

For now, while some countries have begrudgingly accepted the new crypto reality, authorities in others continue to make life difficult for decentralized projects. This means players in some locations may have to contend with ISP blocking and legal uncertainties when using decentralized online casinos.

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Liquidity and Funding

Another potential issue for decentralized casinos is ensuring enough liquidity, especially to facilitate high-stakes betting.

Liquidity pools can help address this issue, but some decentralized platforms, especially smaller projects, can struggle. This can limit potential payouts and damage player confidence.

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Popular Fully Decentralized Crypto Casinos and Games

New decentralized gaming projects are being launched all the time, but let’s take a look at some of the leaders in the space.

Decentralized Gambling Platforms

• Lucki.io
  Rumored to be from the team behind Rollbit, this Solana-based casino claims to be fully decentralized, with games running on the Proov protocol. The platform offers dozens of provably fair games, including original slots.
  
• Decentral.Games
  Built on the Ethereum network and governed by a DAO, Decentral Games bills itself as ‘the first Metaverse casino.’ It currently offers blackjack, roulette, and Texas Hold’em poker and also enables players to earn rewards through staking.
  
• Edgeless
  Another Ethereum-based decentralized casino, as the name suggests, Edgeless offers provably fair games with a 0% house edge. Available games include slots, blackjack, roulette, dice, and video poker. Whether Edgeless is actually fully decentralized is debatable. The site itself refers to an operating company and Curacao gaming license.
  
• FunFair
  FunFair Technologies offers a decentralized gaming platform that operates using the FUN token. This Ethereum-based platform is marketed as a ‘white label’ solution, meaning casino operators can build their brands on it. Again, while most of the operational aspects are decentralized, casinos using this platform aren’t technically fully decentralized because they are run by traditional companies.
  
• DAO.Casino
  Founded in 2017, DAO Casino is based on the Ethereum blockchain and provides a trustless platform where all game logic is executed by smart contracts. It is an open ecosystem allowing developers to build their own games and offer them in an open marketplace.
  
• Wagerr
  A decentralized sports betting platform built on its own blockchain, Wagerr uses a peer-to-peer betting model. The WGR token has a dynamic supply, with placed bets burned and winning bets minted.

As previously mentioned, it can be difficult to establish whether a casino is fully decentralized or not. For example, if you Google or ask ChatGPT for decentralized casinos, you’ll get results like BetFury, EarnBet, and TG.Casino. And, while all of these do feature blockchain-based elements, including native crypto tokens, they are all owned and operated by centralized companies

Despite this, some try to give the impression they are fully decentralized. For example, in BetFury’s case, the operating company isn’t listed anywhere in the footer. But, if you refer to the Privacy Policy, you’ll discover the platform is owned by Universe B Games B.V., a limited liability company registered in Curacao.

In a nutshell, if you can find details of an operating company, then even if there decentralized elements, it is not fully decentralized. On the other hand, finding details about a DAO is a good indicator that it is decentralized.

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Decentralized Crypto Casino Games

At fully decentralized crypto casinos, you’ll find a variety of blockchain-based provably fair games. Some of the most popular include:

• Dice – Simple betting on the probability of the outcomes of dice rolls
  
• Roulette – Provably fair versions of a casino classic, often featuring a slider rather than a wheel
  
• Blackjack – Blockchain-based versions of the world’s favorite table game
  
• Slots – Usually much simpler and more limited than regular online slots, and often based on the classic fruit machine / one-armed bandit
  
• Crash – Multipliers increase the longer the thing flies, but you need to cashout before it crashes (or speeds away)
  
• Video Poker – Provably fair versions of hugely popular card games like Texas Hold’em
  
• Wheel Games – Bet on which section of the wheel the pointer will land on
  
• Mines – How many tiles do you think you can uncover before striking a mine?

Compared to traditional online casino games, these provably fair titles tend to be very simple in terms of graphics, mechanics, and features. Think of them as ‘bare bones’ or ‘stripped down’ versions of those you’re used to seeing.

These games also can also differ from traditional online casino games in terms of RTP/house edge. The operating costs of a truly decentralized crypto casino, run by a DAO, will be much lower than a traditional or hybrid online casino, thus allowing for higher RTPs (return to player).

To learn more about RTP and house edge at crypto casinos, check our original CoinBets guide Understanding RTP in Crypto Casinos: How It Affects Your Chances of Winning.

NFT-based games are also available at some decentralized casinos. These allow players to own in-game assets or unlock special features using non-fungible tokens (NFTs). Thanks to blockchain-based ownership, players can buy, sell, and trade assets on decentralized marketplaces.

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Security Measures and Best Practices for Players

Fully decentralized crypto casinos offer enhanced security compared to traditional online casinos. Even so, there are some things you should keep in mind to stay safe:

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Wallet and Key Management

Always use reputable, secure non-custodial cryptocurrency wallets and follow best practices for managing your private keys.

1. For maximum security, consider using hardware wallets like Ledger or Trezor.
   
2. Remember, that if you lose your private keys/recovery phrase, you will lose access to your wallet.
   
3. Make sure you store your private keys/recovery phrase somewhere safe. They need to be able to survive things like fires and floods.
   
4. If you suspect your wallet password has been compromised, change it immediately.
   
5. Consider maintaining several different crypto wallets, and spread your balance between them.
   
6. Never leave large balances of crypto on centralized exchange wallets like Binance, Kraken, Coinbase, etc. (remember what happened to FTX), on-casino wallets like Gamdom’s Vault, or on browser-based Web3 wallets like MetaMask.

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Verifying Smart Contracts

Smart contracts are fundamental to the operation of any decentralized crypto casino. However, poorly coded or outdated smart contracts can be exploited by bad actors.

Before using any decentralized casino, you should check that the smart contracts have been audited by reputable firms (you’ll usually see logos and links in the footer). Of course, you can also monitor on-chain data and verify the provably fair games yourself.

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Participate in DAOs Safely

While being part of a DAO can be a rewarding experience, giving you a real say in a platform’s governance, you should be careful. Only get involved once you have fully understood the mechanics of decentralized voting and profit distribution.

Any genuine DAO should provide a white paper detailing how it works and long-term plans for the project. Remember, whenever you are staking or providing liquidity at a decentralized platform there are both potential rewards and risks.

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The Future of Decentralized Casinos in Crypto Gambling

As blockchain technology becomes more mainstream, the future of decentralized casinos looks very promising. Here are a few things likely to transform the industry over the coming years.

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Innovations in DeFi and Casino Integration

The integration of DeFi elements into decentralized gambling platforms will continue to open up new possibilities. Liquidity pools, staking, and trading casino tokens on decentralized exchanges (DEXs) will allow players to gamble and earn simultaneously.

However, the availability of things like crypto loans at some casinos may also encourage irresponsible gambling.

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Expansion of Blockchain Protocols

While scalability has long been an issue for blockchain adoption, another stumbling block has been cross-chain compatibility. Projects were largely limited to their own network ecosystem.

The development of cross-chain projects like Polkadot, Cosmos Network, and Wanchain, along with blockchain bridges like Ren network and the ERC-20 Wrapped Bitcoin, are helping to address this.

These, along with Layer 2 solutions to improve scalability, will make fully decentralized platforms more accessible. They will also lower costs, provide better performance, increase available liquidity, and enable decentralized casinos to better compete with traditional platforms.

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Increasing Community Ownership

As we’ve seen, at present there are very few truly fully decentralized online casinos. Even those integrating significant decentralized technologies are usually owned by a traditional operating company.

However, as decentralized casinos continue to evolve and blockchain technology becomes more accessible, we’ll see an increasingly democratized online gambling experience. Within a few years, a significant percentage of online casinos could be fully peer-to-peer, player-owned, and player-governed platforms.