By now even your average sports bettor knows about bitcoin. They have either used it themself to send funds to a sportsbook offshore or know someone that has. There are two main kinds of sportsbooks that take bitcoin and there is a new generation of “decentral” apps on the way. Everyone wants their piece of the sportsbetting pie but which platforms will be used by crypto freaks in their mom´s basement and which will become somewhat mainstream and capture a part of the pie? Let´s take a look at the pros and cons of crypto sports betting platforms.
What do sportsbettors use bitcoin for?
In most cases they use it simply as a way to transfer value. The sportsbook is happy because there are no charge backs from credit cards and less fees as other methods. The bettors are happy because there are less fees and less of a paper trail of their activity. In general the waiting time for a withdraw or deposit to process is faster and takes place 24–7. This is not always the case with other methods.
Two kinds of bitcoin sportsbooks
There are two main kinds of bitcoin sportsbooks. There are the traditional “offshore” sportsbooks like 5dimes, betdsi, betonline ect. They have been around a while and now all accept bitcoin as a payment method. When your bitcoin arrives it is directly converted to USD value. In this way you are avoiding currency risk and shorting bitcoin 1x. You have what bitcoiners would say “gone to fiat”. When you withdraw (if you are not rekt and blew your account out) then your funds are converted back into bitcoin and sent to your wallet. This is the way that most bettors use bitcoin to bet at sportsbooks.
- Currency risk is reduced. I do not have to worry about the price of bitcoin when betting.
- Exit scams are less likely. The sportsbooks are often long standing and have a public reputaion to defend. In short they are less likely to just close shop with all the funds than a pure bitcoin sportsbook.
- Good Support. Nearly all offshore sportsbooks have a support chat 247.
- Bets graded incorrectly can be reversed.
- Withdraw can be slow. Compared to pure bitcoin sportsbooks the offshore sportsbooks are very slow on withdraws. It can often take 24–48 hours and in some cases longer.
- Security. Some books do not have 2FA or only email 2FA or device approval. However there is no way to withdraw bitcoin right away. In this case the friction of approving withdraw via email and 48 hour delays is a feature. Still the offshore sportsbooks need to up their 2FA game.
- Platform Risk. Since withdraws take a long time you can not withdraw after every event you bet on, it simply is not feasable. If something were to happen to the platform then your funds could be at risk.
- KYC. Most offshore sportsbooks have some form of KYC (know your customer).
There is another type of bitcoin sportsbook, the “pure” bitcoin sportsbook.
Pure Bitcoin Sportsbooks
The use of “pure” bitcoin sportsbooks is on the rise. A pure bitcoin sportsbook is one that does not have a fiat currency symbol on the site at all. Your funds are always in bitcoin and the bets are all taken in bitcoin. For example at the offshore sportsbook you would bet 100$ on Mc Gregor to win but at the pure bitcoin sportsbook you would bet 0.04 BTC on Mc Gregor to win.
- Quick Withdraws. Withdraw is often instant and 247–365. In many cases you need to enter your password and/or 2FA in order to withdraw. This is much faster than the offshore sportsbooks.
- Exposure to the bitcoin price. If you are bullish on bitcoin then you will want to stay in bitcoin and not fiat.
- No KYC. If you want your betting activities to be private then your best bet is a pure bitcoin sportsbook.
- Bets graded incorrectly can be reversed.
- Currency Risk. for some it is a pro for others a con. If the bitcoin price dumps 10% during the event you are betting on, then you lost 10% of USD value.
- Support. In general support is slower and not as active as with the offshore sportsbooks.
- Risk of exit scam. Allthough the pure bitcoin sportsbooks have a reputaion to defend, they have much less to lose if they were to just close shop and leave. Having only bitcoin on the site makes this easier.
There is a new type of sportsbook on the way that is “decentral”
These are still in development so there are not any concrete working examples with lots of betting volume. In these examples you do not bet with bitcoin but with a token. Think of it as betting with another crypto like Litecoin or Etherium. In order to use the platform you will need to get the token. Similar to the pure bitcoin sportsbook all balances and bets are done in the token and not USD or BTC. For example bet 100 tokens on Mc Gregor to win. Why go through the extra trouble of getting a token to bet with?
Who has the funds?
The platforms are decentral so they make the promise of getting rid of exit scams . Basicly there is no central place or no central person with the funds of the sportsbook. So nobody can run away with all the tokens and then cash them out for bitcoin.
Who is grading the bets and with what data?
Since the platforms are decentral there has to be a way to get the data for the games in a decentral way. There are several ways different platforms want to do this. In the end they are going to use some of the same apis that the other sportsbooks use. The people in the decentral network that report data are called “oracles”. There is a kind of checks and balances structure in order to make sure nobody gives the wrong data or is cheating by sending the wrong result of an event. Then the bets are graded with the data when the network approves the result. We all know that there can be mistakes with reporting the wrong outcome and with grading bets. There can be human errors or technical errors. The network of oracles in most of these systems is suppost to prevent the incorrect report from getting through. It sounds good but it is a lot harder than people think.
- Reduces Exit Scams. There is no central person with the funds so it is going to be hard for all of the funds to be taken.
- No KYC. Just like with the pure bitcoin sportsbooks there is no KYC.
- Hard to censor. A pure bitcoin sportsbook could be blocked in a region since you have to access it via the web. A decentral solution would be harder to block.
- Double Currency Risk. Since you need bitcoin to buy the token you are now risking the price of bitcoin and the price of the token. Not to mention slippage when trying to go in and out of the token.
- Lack of Support. Who do you call when the decentral platform doesnt work? The decentral support that tells the decentral network they graded a bet wrong?
My platform has better odds
This is a claim that most of the options are going to make. Right now the pure bitcoin sportsbooks are very close and sometimes better than the offshore sportsbooks. The decentral platforms claim that they will have better odds. That might be true but they also have added friction in order to place a bet. Unless they have clearly better odds then there is no reason to use them since I have to add double currency risk and double slippage risk. If there are better odds after all that then they will be arbitraged out and the odds will reflect the market minus the friction costs.
My platform has a feature that the others do not have
If that feature really catches on there is no reason a pure bitcoin sportsbook or an offshore sportsbook cant add that feature and vice versa. Most features are not exclusive to one of the types of sportsbooks. This includes adding altcoins at a pure bitcoin sportsbook, being able to use a token or altcoin can be added by any sportsbook if there really is a market for it.
Example of using a pure bitcoin sportsbook vs a decentral sportsbook
You will need to buy the token. What is the token price? How do I get it? What is the spread and fee at any exchange where I get it? Oh wait I won! Great, oh nice now I get to pay fees again to get bitcoin or whatever I bought the token with to start with.
Lets say I want to bet 5,000$ on Frankfurt vs. Hamburg German Soccer
A pertty big game in the world scale. I only have USD since I am one of the mainstream people that the new platforms are suppost to attract. I buy 5000$ of BTC at exchange. Let´s say fees and spread end up costing 0,5% that costs 25$ , ok now I send to the pure bitcoin sportsbook, let’s say transaction fees cost 2$ that day, 27$ of cost , I bet on Frankfurt at 1.90 odds (-110 American)
OH SHIT I WON!
If the bitcoin price doesnt move, then we have 9448.7$ USD. Now lets send that to exchange. Minus 2$ bitcoin transaction fee. We are going directly into USD to secure our win value in USD. That costs another 0.05% which is 47.2435 USD$ and now we have 9401.45$
I heard that there is a cool new decentral platform. I am going to try it. We have to access an app or webpage that only takes a token. A lot of the steps are the same, but there are two extra steps if we win. Each step will take a little bit more of our profits Let’s just say for today that everytime I change from BTC to Token I pay 0.25% in fees or spread cost and that the token has less than one cent USD transaction fee. After going from USD to BTC and sending I have 4973$ and now I have to buy Tokens. Exchange or spread fee 0.25% now I have 4960.57 USD. Now I bet as in the example above at 1.90 -110 odds
YES we WON!
9425.08 USD ! huh? You mean we won less?
Yes because we had to pay the 0.25% , meh thats ok now I need to go to USD. Now go from 9425.08 USD into token, but wait, the market is not so thick and liquid. Can you trade 5k of an altcoin on any exchange with no slippage? Sometimes, but it would be a rare event. but we will leave the issue of slippage out in this example.
Now lets be nice and say I have to only pay 0.25% fee or spread again and I have 9401.52 ! which is 5$ LESS. Keep in mind this is when the price of bitcoin and the token have not moved and we have not taken into account any slippage.
“but Theo I want to hold my tokens I dont care about going back to BTC”
That is fine but if these platforms are targeting the mass market of sportsbettors I do not think they care about tokens or have an ideological connection with crypto. They will quickly notice how much extra risk they are taking if they use a pure bitcoin sportsbook or a decentral sportsbook.
More risks to think about with any of the above sportsbooks
- The exchange you use to buy bitcoin closes your account for violation of terms regarding sending to a sportsbook
- Offshore or pure bitcoin sportsbook is hacked
- Decentral network is DDOS attacked
- Decentral network grades a bet wrong and there is nothing you can do
- “the public” wins a bet and is using a token. That means most people won and what will they do? DUMP the token to get BTC and in that case you have more currency and more slippage risk.
- Offshore sportsbook bans you for winning too much or betting big on exotic markets
There are risks with all of the above platforms. The question is which kind of platform has a chance to catch on in the mass market. These risks are about the the same if you are talking about casinos as well. Just replace the word “sportsbook” with “casino” and you have the same pros and cons. Keep in mind I have not named any platforms besides examples for the offshore sportsbooks (without links). I am not attacking any type of platform, in fact I like all the innovation and experiments. All three types of platforms can learn from each other and need improvements.