## Digital Coins and Distributed Ledgers: New Challenges or Crucial Answers? – iGB
The simplicity of use and price fluctuations of digital coin transactions can result in a rise in dependency rates, as it shares similarities with wagering. Nevertheless, the underlying technology, rather than the currency itself, can be utilized to fortify player protection measures.
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Digital coins and distributed ledgers: New Challenges or Crucial Answers?
The potential of distributed ledgers and digital coins has been widely discussed, with recent conversations focusing on its possible application as a method of enhancing secure wagering standards. However, one individual working in both the wagering and crypto sectors has expressed doubt about whether operators are exploring its potential.
They contend that the crypto space may be trailing behind the wagering industry by a decade in terms of customer protection.
“In crypto wagering, it’s a slippery slope, but most are basically on the same level as Curacao license holders – in fact, most now have Curacao licenses. Some are trying to at least show they are going above and beyond.”
Companies taking this step include Yolo Group’s Sportsbet.io, which is the sponsor of Premier League club Southampton FC. It was involved in the club’s “Listen to Your Inner Saint” campaign in 2020 to highlight the potential risks of wagering and promote its secure wagering hub.
Nevertheless, some individuals believe a greater chance is being missed here. “Cryptocurrency/blockchain operators possess the capability to provide superior protection compared to what we witness in the traditional currency realm if they desire to,” one person stated. “The transparency of blockchain (in theory) grants them the chance to possess a more comprehensive understanding of a player’s expenditures (not merely the amount they wager directly with them).
“However, as I mentioned, the willingness must exist.”
“Bit” Outweighs “Coin” in Value
That willingness does exist, although it originates from the traditional currency gambling world.
Paul Foster, a seasoned professional in the gambling industry, having worked with operators such as bwin.party, Gala Coral, Ladbrokes Coral, and GVC Group (now Entain), serves as the Chief Executive Officer of Crucial Compliance, a Gibraltar-based provider of regulatory, corporate responsibility, compliance, and professional services solutions.
He sought the assistance of research firm nChain and its blockchain interface platform Kensei to aid in the development of the company’s Crucial Player Protection monitoring solution, which aims to record and track player feedback, interactions, and interventions.
“The collaboration with nChain arose from our search for a solution to a challenge, and that challenge was data integrity,” Foster explained. “The issue we encountered was that we constructed a system with exceptionally high data integrity that could fulfill the demands of operators and regulators, but the reality was that the data remained in the possession of the operators.”
As a result, there’s a danger of tampering, and thus, complete data reliability can never be attained.
Foster clarified that the gaming sector is primarily focused on profit generation and financial transactions, rather than the decentralized ledger technology that underpins digital currencies. He highlighted that the industry has an extremely high demand for data reliability, but has been unable to achieve it due to the lack of dependable solutions.
“We recognize that we ventured out and attempted to determine how to obtain a database that was independently maintained. We explored all the options with third-party providers, the expenses were exorbitant – the industry would never accept it.”
He added that this relies on digital bits – data – rather than coins – payment mechanisms. Most forms of digital currency are still too costly, although Bitcoin SV (Satoshi Vision) is utilized by nChain, which is striving to break down the blockchain into smaller components, thereby lowering transaction costs and providing straightforward and cost-effective data storage.
“nChain has grasped this issue and constructed the Kensei system, which we will employ to access BSV and store all this data in Crucial Compliance,” he added.
“This is a challenge we have found a solution for because a company shares our perspective and is a leader in their field. This implies that you can utilize the blockchain to store player protection data, which will always possess integrity, will always be time-stamped, can never be altered, and is readily accessible if you have a code flow number. The time is opportune.”
Therefore, there is a risk of manipulation, and therefore complete data integrity can never be achieved.
The video game business solely views blockchain as a means to generate revenue, not as a remedy for their difficulties, he stated. Everyone is sluggish in comprehending that blockchain can resolve numerous regulatory matters.
Once blockchain becomes more readily available through BSV and nChain, we can demonstrate to the world how it can be employed in real-world scenarios.
He believes that the collaboration with nChain is the initial illustration of blockchain being utilized in a regulated setting. This will contribute to safeguarding players, adhering to regulations, and propelling innovation in a highly stringent compliance domain.
However, he also asserts that this hinges on the technology itself. “We need to shift our focus away from the concept of cryptocurrency transactions, exchanges, and games, and concentrate on conventional gaming, payments, and anti-money laundering. This will alter the way things are conducted.
“We aspire to be the pioneers in showcasing how blockchain can be leveraged to support conventional gambling compliance.”
Foster believes that real-world applications represent the future of blockchain, not merely payment solutions. We ought to utilize the technology to bolster existing entities, not supplant them.
Regardless of the terminology used, it remains gambling.
The demand for practical blockchain uses is substantial, extending beyond just financial transactions. Foster and nChain appear to be providing such applications.
Although this could promote safer gambling in the realm of real money, a new problem has arisen in cryptocurrency trading: dependency. This issue, according to Tony Marini of Castle Craig Hospital in Scotland, shares the same traits as gambling.
He described the path to dependency that many face. Similar to gambling, it begins as a fulfilling activity. Traders often interact with individuals, businesses, or organizations they perceive as valuable and have access to a wealth of engaging content. The fact that they are quickly rewarded for successful trades or price fluctuations means they often daydream about acquiring things.
As traders pursue this fulfillment, it leads to riskier engagement. This results in increased participation – trading is a continuous activity. According to Castle Craig Hospital, traders may become increasingly agitated, emotionally detached from relationships, and experience growing social uneasiness, while their self-assurance and self-worth become linked to their investment results.
If left unaddressed, those involved may become entirely reliant on cryptocurrency trading.
This ultimately results in the disintegration of their self-esteem, encouraging substance abuse, criminal activity, and further seclusion – even making it impossible to differentiate between reality and illusion.
Marini, who possesses experience in handling a range of behavioral and substance abuse problems, focusing on behaviors involving drugs, alcohol, gambling, sex, and gaming, asserts that he has established the first facility providing treatment for cryptocurrency addiction. The facility aims to salvage individuals from this downward spiral and break the cycle of dependence.
As they reach their lowest point, individuals suffering from cryptocurrency addiction may take their own lives, encounter difficulties at work, with family or friends – even legal matters – ultimately leading to a complete emotional collapse.
Common Traits
He clarifies that the characteristics of those affected – and the treatment approaches – are identical. Just as problem gamblers may chase losses, attempting to quickly recoup the money lost by losing bets, cryptocurrency also exhibits “revenge trading,” where further trades are made immediately after a significant loss, endeavoring to balance the books once more.
One individual working in the cryptocurrency field, who requested anonymity, highlighted that many trading platforms present themselves as a form of investment, rather than gambling on the outcome.
A significant number of these goods are exceptionally well-crafted, leading individuals to believe they are making investments when, in actuality, it’s pure speculation, potentially more unpredictable and hazardous than placing funds into a slot machine. They stated that at least with a slot machine, there is a reasonable player return rate.
The valuation of cryptocurrency is entirely dictated by supply and demand, implying that the price can often soar or plummet. Conversely, with a slot machine, the player has a fixed probability of winning with each spin.
Based on Coinbase data, the price of Bitcoin, the most widely recognized cryptocurrency, was £9,921.15 on October 24, 2020. As of October 23, 2021, its price had experienced a 349.83% surge to £44,627.90, falling short of its peak of £48,426.53 on October 20, 2020. This represents more than double its lowest value of £21,864.49 on July 21, 2021. It exhibits frequent fluctuations, resulting in nearly constant opportunities for profit.
Adoption is also influenced by broader economic factors.
**The Robinhood Effect**
Securities trading was once the exclusive realm of the City of London or Wall Street, with traders operating in glass and chrome offices on trading floors. In recent years, retail trading has attracted new investors and speculators, driven by platforms like Robinhood and activity on social media platforms like Reddit.
The most prominent illustration of this occurred in 2021, with the trading of shares in the video game retailer GameStop.
A groundbreaking event, driven by social media, saw users of the r/wallstreetbets forum initiate a short squeeze on GameStop’s stock.
GameStop’s closing price on the New York Stock Exchange skyrocketed from $19.94 per share on January 11, 2021, to $347.51 per share on January 21. This resulted in substantial profits for individual investors within a brief timeframe, attracting the attention of Tesla’s founder Elon Musk and garnering widespread media coverage.
The majority of the trading activity transpired on the commission-free trading platform Robinhood, which recently debuted on the New York Stock Exchange. Their latest earnings report for the three months concluding on June 30, 2021, revealed a 108.8% year-over-year surge in monthly active users, reaching 21.3 million.
During the same period, trading-related revenue soared by 141.2% to $451 million, with cryptocurrency contributing $233 million, a significant increase from $5 million in the corresponding period last year, surpassing all other products. The company highlighted that over 60% of net funded accounts were engaged in cryptocurrency trading, marking the first quarter where new customers initiated trading in cryptocurrencies rather than stocks.
The short squeeze on GameStop and similar enterprises like AMC Entertainment, a movie theater chain, may involve securities. However, returns on cryptocurrency trading can be substantially higher due to the inherent volatility of cryptocurrencies. Nevertheless, security measures typically concentrate on criminal activity rather than the addictive nature of trading.
Its crucial for Robinhood to emphasize that client assets are shielded up to a half-million dollars, including a quarter-million for liquid funds. This security is provided by the Securities Investor Protection Corporation. Nevertheless, digital currency investments are not included in this program. Although Robinhood provides crime insurance which may cover some stolen digital currencies, it doesn’t clarify what safeguards are in place for investors who might be susceptible to impulsive trading.
I contacted specialized digital currency trading platforms like Binance and Coinbase to inquire about the protections they provide, but they did not respond.
Marini believes the lack of information regarding safeguards is due to the absence of regulation in the digital currency market.
However, Amega, a brokerage firm that offers commission-free trading on all assets, asserts that their clients benefit from a certain level of security. They offer negative balance protection, ensuring traders don’t lose more than they initially invest. They also have margin notices and stop-loss levels for leveraged trades.
Given the unpredictability of digital currencies, Amega limits leverage to 1:20. This means traders can only gain 20 times their initial investment without depositing the full amount. For foreign exchange pairs, the maximum leverage offered is 1:1,000.
The firm has also put into practice internal risk management tactics that take into account the kind of trading instruments, past price swings, and anticipated price swings due to economic or political occurrences.
“Under the firm’s risk management strategy, Amega limits the maximum permissible position size for each instrument to safeguard clients from unusual fluctuations and potential losses,” the firm clarified.
However, Foster believes that the idea of player protection and security has never been driven by Bitcoin gaming operators or exchanges.
“They have been focused on compliance to meet the requirements of becoming regulated and legitimate organizations, especially in terms of anti-money laundering,” he stated. “The partnership with nChain stems from a genuine need for companies that haven’t utilized blockchain, haven’t utilized cryptocurrency, to develop the entire field anew, and they desire to find a way to use it that doesn’t harm the industry’s reputation, but that they can comprehend and make sense of.”
This will undoubtedly shift the emphasis away from cryptocurrency as simply a payment solution to broader—and potentially transformative—applications.
As for its use as a currency or trading asset, Marini believes that this may be a short-term occurrence. “This was initially due to criminal activities, such as purchasing illicit substances and money laundering,” he said. “I believe that as we progress, we will witness more and more governments prohibiting or regulating this behavior, and most companies will fail.”
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