Bitcoins: The Future of Online Gambling?
In a surprising move that promises to set new standards for the online gaming industry, the startup BitPay, a Bitcoin payment processor that bills itself as “PayPal for Bitcoins,” received half a million dollars in seed capital last week from heavy-hitting investors like Shakil Kahn, the founder of Spotify, and Barry Silbert, founder of SecondMarket.
This move brings fantastic tidings for the online gaming industry, who has struggled to find reliable payment processors, especially in the United States, since Neteller exited the market in 2007.
What are bitcoins?
Bitcoins are a decentralized virtual currency that can be traded among anyone online. No “account” is necessary to hold or transfer bitcoins, not in the traditional sense of the word. Bitcoins stored in one account, like MtGox, a currency exchange market à la USD-EUR, can be transferred seamlessly to any other account in any quantity. It’s the technology behind Bitcoins that is particularly interesting, though: from crowdsourced transaction verification to a fixed quantity of total available Bitcoins.
Since Bitcoins can be bought, sold, transferred, or bartered anonymously, they prevent draconian anti-gambling laws, like those enacted in the United States, from having any enforcement ability. In essence, with the right infrastructure and support from online gaming sites, Bitcoins could be seamlessly transferred from one site to another or to a third-party payment processor (like BitPay) or to a marketplace where BitCoins could be converted into USD or any number of other currencies (like MtGox).
The darker side of Bitcoins
The anonymity of Bitcoins has created a thriving underworld in person-to-person money transfers. FBI and DEA reports suggest (and this reporter has confirmed) that online marketplaces exist for buying and selling drugs, guns, viruses, and even hitmen. Due to the nature of the currency, and, in actuality, speaking highly of its potential effectiveness in regulated industries like online gaming, government agencies have found it impossible to track these transfers.
How will this impact online gambling?
Over 2,100 online merchants already support payment for goods or services through BitPay, which can be implemented on a website much like PayPal. With an extra $510k in seed capital, the BitPay service will have all the capital that it needs to continue to expand the service and bring new merchants, like online gaming rooms, on board.
We see Bitcoins as a trend that will have drastic impacts for the future of the world. In the short-term, it will make citizens of otherwise regulated countries able to easily take part in the online gambling world once again. In the long-term, it will make the governments of the world less able to control the monetary supply, leading to freer commerce and travel, and eventually, freer people.