Many people have visited a casino in a gambling hotspot like Las Vegas, Atlantic City, Monaco, or Macau, and most people are familiar with how real-world casinos operate, from the games that are played to the pit bosses who monitor gaming to the excitement of a big win. The operations of casinos have become the subject of countless movies and TV shows, but the average gamer probably doesn’t know as much about how crypto casinos work or the ins and outs behind the scenes of online gambling.
There are certain similarities between online gambling operations and their real-world counterparts, as well as a number of key differences, particularly in how you keep your account funded and manage your assets during wagers. Most importantly, crypto casinos allow you to gamble with cryptocurrencies. While real-world casinos are starting to move into this space, they remain at the forefront and specialize in virtual gaming that allows you to participate from anywhere and on the go.
In this article, we’ll take a look at the operations of casinos, how they work, and how they differ from the real-world casinos you may be more familiar with.
What Are Crypto Casinos? A Quick Overview
At the most basic level, a blockchain-based casino is an online gambling site that accepts crypto currency. But if that was all they are, we wouldn’t need to explain how they work. These platforms may allow you to deposit funds, bet, and withdraw your winnings using cryptocurrencies like Bitcoin, Ethereum, Tether, and more, but that’s only the start. Such casinos all use blockchain technology to secure their operations and enhance the speed, privacy, and transparency of transactions.
We’ll discuss the blockchain in just a moment, but first, we need to discuss one of the most important differences between a traditional online gaming platform that uses fiat (i.e. “real”) money and a crypto currency. Traditional online gaming often takes several days to pay out money you attempt to withdraw because of the delays built into any system relying on banking. By contrast, because of the decentralized nature of crypto and the flexibility of the blockchain, deposits and withdrawals can occur almost instantly, greatly speeding up the gaming process.
Beyond this, cryptocurrency also allows users to gamble anonymously, without creating a banking trail behind your transactions. With no credit card numbers to enter or bank account details to provide, crypto casinos keep your gaming away from the prying eyes of governments, credit agencies, and anyone else who may monitor financial transactions.
Finally, these platforms typically use provably fair games, a specific type of gaming that allows users to verify that each outcome is fair. We’ll talk about how that works below.
What Is Blockchain Technology? The Foundation of Casinos
Crypto gambling sites rely on blockchain technology for their operations, but few concepts are more mysterious to those outside the world of crypto than the blockchain. So, what is it? Blockchain is a decentralized ledger that provides a record of transactions across a network of computers. Because it is decentralized and distributed across a network, it virtually eliminates the ability of any one person or entity to tamper with entries in the ledger or alter them.
While this is the foundational technology for online casinos, the gaming industry does more than simply use blockchain for payments. Many of the best crypto casinos leverage blockchain to enhance security, transparency, and efficiency. Let's take a look at how these platforms deploy blockchain technology.
First, the most important aspect of the blockchain is its decentralized nature, which provides strong security benefits that dovetail with the high-stakes demands of gaming. Before blockchain, traditional gaming sites used centralized servers, which made them tempting targets for hacking and fraud. While successful attacks were rare, they were still possible, and given the amount of money involved and the personal information that was stored, any vulnerability could create exponentially greater risks.
Blockchain minimizes these risks by distributing transaction data across multiple nodes, which makes it nearly impossible for a bad actor to gain unauthorized access. A transaction is verified by multiple nodes, making it virtually impossible to manipulate the blockchain.
Blockchain isn’t just good for transactions. It can also host smart contracts that are self-executing and have their terms of agreement written directly into the code. These are especially useful for crypto casinos because these contracts can automate the payout process and speed payouts. Once the conditions written into the contract have been met, there is no need to have an intermediary execute the agreement; funds are instead automatically withdrawn.
This is made possible by the blockchain’s immutability. Because the blockchain cannot be changed, game outcomes and transactions cannot be changed once they have been recorded. These records are also verifiable, helping to protect against fraud. Anyone can view its transactions on the blockchain, providing a record of bets and winnings to prove they have been accurately paid out.
How Casinos Conduct Cryptocurrency Transactions
The heartbeat of any crypto casino are the transactions that pump crypto through the games and (with luck) back into players’ crypto wallets. In an online casino, crypto transactions are processed with speed and privacy because blockchain technology protects users’ anonymity even while eliminating the need for banks or payment processors that slow down transactions at traditional online gaming sites.
Let’s take a look at the process of conducting transactions, starting with the first transaction most crypto casino users will perform, a deposit. Depositing crypto funds is relatively simple. After creating your account with the casino, you will choose from the available cryptocurrencies that the casino accepts and transfer the amount you want to have available in your account. This will move from your wallet to the casino’s deposit address, and the transaction will be recorded in the decentralized ledger on the blockchain for verification.
Withdrawals are very similar, but the currency flows in the opposite direction. When you are ready to withdraw funds from a casino, you will initiate the withdrawal by providing your wallet address and the amount to be withdrawn. The casino will then send the funds and record the transaction on the blockchain, just as occurs with a deposit.
The key to any blockchain transaction is the process of verification, which is distributed across various network nodes to verify authenticity. Because of the distributed authentication process, fraudulent or duplicate transactions are virtually impossible. Once a transaction occurs, it is permanently written into the blockchain, forever publicly accessible and unchangeable.
One of the great benefits of using crypto for gaming is that these transactions involve much lower fees than a typical bank transfer. The blockchain is designed to cut out the middleman—the banks and other financial institutions—and thus save money for both the casino and the player. However, the one weak spot in the process is the crypto wallet. Players need to be sure they are using strong encryption and two-factor authentication (or even a hardware wallet) to help prevent anyone from gaining access to your private keys.
Provably Fair Gaming: Key Benefits
The other half of the operation of a crypto casino that makes it different from a traditional online gaming site is the use of provably fair gaming to verify that games have truly fair and random outcomes and are not being rigged. “Provably Fair Gaming” is a system for using cryptographic algorithms to independently verify the fairness of each game, giving players the confidence that they will receive a fair shake.
Provably fair gaming can be a bit complicated to explain because of some of the challenging terminology and complex processes involved, but there are a few basic concepts that can help you understand why this is a strong and effective way to guarantee fair play.
In a provably fair game, the casino generates a cryptographic hash called a server seed that serves as the starting data for the game. You as the gamer will then provide the client seed. Together, these two seeds ensure a random and unique outcome. The player can verify this at the end of the game when the casino reveals the original server seed, which can be compared to the hash to prove that the game was fair and unaltered.
Traditional and Blockchain Casinos: Key Differences
Traditional online gaming sites and blockchain casinos might look the same on the surface, but as we’ve seen, there are several reasons that a crypto casino is a smarter choice for many gamers. These casinos aren’t limited by fiat currency and the fees and limitations imposed by financial intermediaries. These casinos can move at the speed of the blockchain, and they are more private and anonymous than their traditional counterparts. Of course, there are also some differences that may be seen as risky. First, blockchain-based gambling platforms are often less regulated, which means that there is less oversight of their operations. Second, crypto is a volatile asset, meaning that its value can fluctuate wildly as coins rise or fall in value. On the one hand, that might allow you to reap great value if you win with a coin on the rise, but you may also lose a great deal of value if the coin you use falls during your gaming.