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Exploring Fully Decentralized Online Crypto Casinos: The Future of Trustless Gambling
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 online crypto casino.
While most online casinos are, fundamentally, digital versions of traditional land-based casinos, owned and operated by a company that is physically located in a specific place, fully decentralized casinos are owned by token holders, managed by DAO (Decentralized Autonomous Organizations), and located on the blockchain. These decentralized gambling platforms are dovetailing with decentralized finance (DeFi) and opening up an entirely new frontier in gaming.
In this original CoinBets guide, we’ll take a deep dive into the world of fully decentralized online crypto casinos. We’ll look at how they function, their benefits, the challenges they face, some popular decentralized gambling platforms, security tips, and what to expect moving forward.
How Fully 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 they often try to portray themselves as if they are).
The vast majority, including the most popular sites like BC.Game, Shuffle, BetFury, TG.Casino and Gamdom, are actually still centralized casinos. Yes, they do incorporate decentralized elements, like provably fair gaming and crypto payments, and some even have their own crypto tokens and tokenomics ecosystems. However, they are still owned and operated by centralized companies, and the majority of their games employ 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 owned or controlled by a single entity or company - 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 what we see with cryptocurrency - 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 cutting-edge technologies to automate processes and eliminate intermediaries altogether. So, let’s take a look at the main components of fully decentralized online gambling platforms
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 - completely eliminating the need for human intervention. This means players do not need to place their trust in any fallible human third party, thus creating a truly trustless environment.
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 transaction fees and slow speeds. On the other hand, Solana and Binance Smart Chain are much faster with lower fees but have much smaller developer communities.
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, and naturally aligns 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.
Benefits of Fully Decentralized Casinos
As we’ve already seen, fully decentralized crypto casinos offer several advantages over both traditional and partially decentralized online platforms. Let’s look at them in a little more detail.
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!
On large, well-supported blockchains, the smart contracts that manage everything from bet placement to payouts are unlikely to be corrupted by deliberate manipulation or fraud - because the code is open-source and publicly auditable. This trustless system creates a truly level playing field, guaranteeing transparency and fairness.
Provably Fair Games
Traditional online casino games, like slots and video poker, rely on random number generators (RNGs) to decide the outcome of games. Now, these RNGs should be fair, and in most cases are - for example, operators licensed by the UKGC and MGA have to 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 crypto casinos or those licensed in more ‘lenient’ jurisdictions (like Anjouan).
However, provably fair games allow players to verify the fairness of each outcome by using cryptographic algorithms. As previously mentioned, partially decentralized casinos do 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.
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.
Community Governance
Sure, some centralized and partially decentralized casinos may try to build player communities through things like tournaments, live streams, chat forums, and social media, but ultimately users still have no say in governance. However, because fully decentralized casinos are governed via DAOs, site users can directly influence decisions. Although the amount of influence individual users have will usually depend on the number of governance tokens they hold, this system still makes decentralized casinos much more responsive to the needs and preferences of their users and fosters a real sense of community ownership.
Challenges and 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.
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.
Complex User Experience
As with any new technology, it takes some time for products to become truly user-friendly, and in the decentralized technology space, this has been a very prominent issue for some time now. In large part, this is due to the fact that much of the innovation has been driven by individual developers you could describe as, well, ‘tech nerds’. They tend to build things that make perfect sense to them, but are very opaque to the general population!
For example, while centralized platforms have entire teams dedicated to creating seamless user experiences, decentralized platform users must learn how to use 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.
Regulatory Uncertainty
Because fully decentralized casinos aren’t operated by an identifiable single entity based in a specific geographical location, they are completely incompatible with traditional legal frameworks and jurisdictions. Of course, this is a problem shared by all decentralized projects, including cryptocurrencies and DeFi platforms, and there seems to be no international consensus regarding a sustainable way forward.
For now, while some countries have begrudgingly accepted the new crypto reality, authorities in others (yes America, we’re looking at you), 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 accessing decentralized online casinos.
Liquidity and Funding
Another potential issue for decentralized casinos is ensuring enough liquidity, especially to facilitate high-stakes betting. Although liquidity pools can help address this issue, some decentralized platforms, especially smaller projects, can struggle to secure the necessary level of financial backing, thus limiting potential payouts and damaging player confidence.
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.
- 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 truly fully decentralized is debatable. The site itself refers to an operating company and Curacao gaming license - however, operationally, the casino appears to be entirely on-chain.
- 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.
CoinBets Tip
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, they 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 although the casino might be using decentralized elements and platforms, it is not fully decentralized. Conversely, finding details about a DAO is a good indicator that it is.
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
- 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 - remember, they probably won’t have been developed by major developers with resources like art and animation studios.
These games also can also differ from traditional online casino games in terms of RTP/house edge. For example, 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 rates). 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.
Security Measures and Best Practices for Players
Although fully decentralized crypto casinos offer enhanced security compared to traditional online casinos, there are some things you should keep in mind to stay safe:
Wallet and Key Management
Always use reputable, secure cryptocurrency wallets and follow best practices for managing your private keys.
- For maximum security, consider using hardware wallets like Ledger or Trezor.
- Whichever wallet you are using, remember, that if you lose your private keys/recovery phrase, you will lose access to your wallet.
- Make sure you store your private keys/recovery phrase somewhere safe. Ideally, store them in a durable format (like a metal engraved card) at a separate location from where you live. This will help protect from things like fires and floods.
- If you suspect your wallet password has been compromised, change it immediately.
- Consider maintaining several different crypto wallets, and spread your balance between them. This way, if one is compromised, you won’t lose all your crypto.
- 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.
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 to verify the transparency of game outcomes.
Participation 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.
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.
Innovations in DeFi and Casino Integration
The integration of DeFi elements into decentralized gambling platforms will continue to open up new possibilities, like liquidity pools for staking rewards and decentralized exchanges (DEXs) for casino tokens. So, savvy players will be able to gamble and earn passive income simultaneously. However, the availability of things like crypto loans at some casinos may also encourage irresponsible gambling.
Expansion of Blockchain Protocols
As already mentioned, scalability has long been an issue for blockchain adoption, but another stumbling block has been the lack of cross-chain compatibility. Projects were fundamentally 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, lower costs, provide better performance, increase available liquidity, and make them more competitive with traditional online casinos.
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 and widely understood, we’re likely to 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 governed platforms.
Conclusion
There’s no doubt that fully decentralized crypto casinos offer a groundbreaking alternative to traditional online gambling platforms. Things like trustless operations, provably fair games, and community governance are transforming the space for the better. But there remain many issues, like scalability, regulatory ambiguity, and user experience. Clearly, these will need to be addressed before fully decentralized gambling goes truly mainstream.
In the meantime, it’s important that players in the crypto casino space recognize the type of casino they are really playing at. In reality, the vast majority of ‘decentralized’ gambling platforms are not decentralized - they are operated by traditional gambling companies who’ve figured out a way to sound cool, cut their operational costs, and exploit the crypto gambling hype. However, that’s not to say that even these crypto casinos aren’t offering a rapidly improving product thanks to the integration of elements like provably fair games and crypto payments.
All things considered, we’re still in the very early stages of the blockchain and decentralization era. And, in those decentralized elements at major crypto casinos, and the few trailblazing fully decentralized platforms, we are seeing the future. At some point, it seems logical that virtually all online gambling will take place on totally decentralized platforms that are owned and governed by their users - the core benefits are just so compelling. The question is, how long will it take us to get there?
We hope you’ve found this original CoinBets.com guide interesting, and if you’ve got any thoughts about decentralized online crypto casinos and the future of trustless gambling, we’d love to hear them below.