The Crypto Betting Industry
A Fundamental Research into Decentralized Betting Platforms
*Disclaimer: this article only represents the personal opinion of the writer and should not be used as financial advice.
*Decentralized platforms for casino games are not analyzed in this report, because casino games belong to the gambling industry.
1. Overview of the Current Betting Industry
At the moment, sports betting accounts for the largest market share in the global betting industry. It is one of the fastest-growing markets in the world and has the potential to grow even more. According to a report by Zion Market Research, in 2017 the global sports betting market was valued at 104.31 billion USD and is expected to reach 155.49 billion by 2024, with a compound annual growth rate (CAGR) of 8.83% from 2018 to 2024 . With the expansion of digital connectivity, online sports betting accounts for a majority of the total betting market. It is forecasted to reach 87.75 billion USD in 2024 .
Online crypto betting can be divided into two categories:
Centralized platforms — these platforms are centrally managed and not based on blockchain technology. They might accept cryptocurrencies as deposits or offer payouts in the form of cryptocurrencies.
Decentralized platforms — these platforms are built with open source code and utilize the benefits of decentralized blockchain technology. At the moment, there are three types of decentralized platforms:
· Platforms that focus on sports and /or esports betting.
· Platforms that focus on market prediction, i.e. players can bet on anything from sports to politics to weather to prices of financial assets.
· Platforms that are made for developers to build their own customized betting/prediction dApps.
· There are also platforms that combine all of these 3 functions.
Centralized online betting platforms face several problems:
· Trust issues — Bettors have to trust the market operators in order to play.
· Centralization — Limits where users can participate and in which markets they can bet in.
· Lack of transparency — Operators could steal funds and commit fraud.
· Movement of money — Deposits and withdraws might take days due to electronic fund transfers and wire transfers.
· Fairness — Odds are in favor of the bookmakers.
· High fees — Betting operators normally charge high fees due to high operation costs.
This report will only focus on decentralized betting platforms.
2. How does Blockchain Change the Traditional Betting Industry
Public decentralized blockchain technology has several important characteristics that can bring revolutionary change to the existing betting industry:
· Transparency — Code is 100% open source and can be viewed on Github. This enables anybody to do his or her own due diligence to examine the code. Funds are stored in public blockchain wallets and payments can be tracked on a block explorer.
· Trustless — Participants do not have to trust a central authority, payouts will be guaranteed by smart contracts.
· Peer to peer — Participants bet against other players directly, without the need of a central operator.
· Permissionless — Anyone from anywhere in the world can be a market creator and/or a bettor. They can bet on anything such as sports, weather, politics, asset prices, etc.
· Decentralization — This will result in the removal of central operators, which leads to lower fees due to reduced operating costs. Thus, the platform can offer better margins for players, fairer games and better chances for players to win.
The fundamental research of blockchain-based betting platforms takes the following factors into account:
· Level of decentralization — Even though there is a company or an organization behind each project, the platform should be as decentralized as possible. This means that the company or organization building the platform should not hold the majority of the coin/token, or in no circumstances should be able to influence the bet outcome.
· Size of community and userbase — One can build the best product, but without users, the product cannot achieve its potential. Decentralized projects rely heavily on community members. These include investors who bought tokens/coins during the ICO, participants who will be the first users of their products. Other community members might also contribute voluntarily to improve the code to make the product better.
· Expertise and credentials of the management team — Any company or project cannot succeed without qualified and highly committed leaders.
· Oracles — An oracle verifies and submits real-world occurrences to the blockchain network so that the information can be used by smart contracts. Oracles that are unbiased and feed information to the network with extremely low latency are very important for betting platforms.
· Tokens / Coins — The usage of the tokens or coins that have been created for the network will be examined. Tokens/coins without real use or utility are a waste of resources and in the long term will not bring value to the blockchain space.
· Robustness of platform — This takes into account on which blockchain platform the project runs and which consensus algorithm it uses. At the moment due to the Bitcoin network, proof of work (PoW) has a track record for being the most secure algorithm. In the future proof of stake (PoS) and byzantine fault tolerance (BFT) could prove to be more efficient.
Information of each project is gathered through the websites of the projects, white papers, Github, different news websites as well as social media platforms.
4. Analysis of Existing Betting Projects Based on Blockchain
There are many projects aiming to solve problems in the betting industry with blockchain technology. This section gives a basic assessment of 11 projects by exploring their strengths and weaknesses, as well as their overall potential.
The Augur platform had its ICO in 2015  and launched the main net in July 2018 . It puts emphasis on the possibility of betting/market prediction from anywhere on anything. Users from around the world can put bets on virtually every topic, be it political events, sports results, or the future price of various assets. Built on Ethereum, it is a 100% open-source project with a native token named REP. The value of REP comes from that market creators must pay a fee and reporters (oracles) must stake REP in order to report event results. Market participants forecast the outcomes of events by trading shares of those market outcomes in Ether. Anyone can be a reporter if the designated reporter fails to report the event outcome. Reporters get a part of the fees as a reward if the reported result is valid.  
Strengths & Weaknesses
+ Straightforward processes for participants: Creation of betting events, trade share of the market outcome, reporting of results and settlement of outcomes.
+ The developers have designed very detailed processes for each stage of a betting event to make sure maximum integrity.
+ Augur puts effort into good communication with its community. They publish information regularly on various social media platforms like Reddit, Twitter, and Medium.
+ The REP token has very good liquidity. It is available on major exchanges such as Binance, Bittrex, and Poloniex. 
- Latency issues: Outcomes of events are recorded on the blockchain with a delay. Malicious users could use this to their advantage. E.g A person watching a match in the stadium always knows the results earlier than a person watching the match on the TV or the internet.
Bethereum is an online open-source betting platform for sports, esports, and games. It is built on Ethereum with its own native token Bether. Bether will be used for transactions on the platform, and as rewards and commission to third-party developers and partners. Bethereum can integrate Apps developed by external developers . The project had an ICO in October 2018  and the main net is not yet launched.
Strengths & Weaknesses
+ The project has a team of more than 20 members and they have regular updates on Twitter and Medium.  
- Bether is not very liquid so far, it is only available on IDEX, CoinBene, Coin Tiger. 
BetProtocol is a decentralized online platform that enables developers to build their own dApps without coding. The project’s white paper was released in May 2019. BetProtocol focuses on compliance, safety and developer resources. It has its own native token called BPRO. The operating model is based on commission and subscription. The protocol works as a native blockchain on top of a public Turing-complete blockchain such as Ethereum or Tron. The outcome of each bet can be determined in 3 ways: 3rd party reporting, consensus from community, developer of the dApp. Payment in Ether and Bitcoin is supported. 
Strengths & Weaknesses
+ accept popular cryptos such as BTC and ETH
+ can be based on different public blockchains
- might lack developers to build on the platform
- shares the shortages of the blockchain it based on
Betrium is a sports betting platform built on Ethereum with its own native token BTRM. The team started the development of the platform in 2017. They have the Beta test version live at the moment. In order to guarantee fast speed, bets on the platform happen off-chain. Their token has not been listed on any exchange so far.  
BETR is an online open-source sports betting platform built on Ethereum with its own native token BETR. The project started in October 2017. They had ICO in January 2018. Their platform is still work-in-progress and there have not been any updates on their social media since accounts June.   Their token is listed on HitBTC, Bancor Network and Changelly with low liquidity. 
Decent.bet is an open-source peer-to-peer blockchain gaming platform where anyone can create a game, market bet, or casino room. It includes slot machines, esports, market predictions, sportsbooks, etc. The platform is built on VeChain, thus has a better transaction speed than Ethereum at the moment. The project had an ICO in October 2017 and it has launched its main net in November 2018. They keep frequent updates with their community members.   Their token is only listed on two small exchanges and is thus not liquid. 
Funsunite is a sports betting platform built for regulatory compliance, participants need to go through the know your customer process (KYC) before they can bet on the platform. Funsunite is also built on Ethereum with its native token FUN. Similar to Augur, FUN tokens need be to staked when reporting the results of events. The Funsunite platform aims to accommodate multiple tokens, i.e. participants can use any ERC20 tokens to bet on the platform.  Funsunite had their ICO in July 2018.  The FUN token has not been listed on any exchanges and the main net is not live yet.
The project started in January 2015 and had an ICO in April 2017. Gnosis is built on Ethereum with its own native token GNO. The platform’s emphasis lies in market prediction rather than betting. GNO tokens generate OWL tokens which can be used to pay fees (1 OWL = 1 USD). However, OWL is not yet traded on any exchanges. The concept of Gnosis offers more use cases than purely betting: information gathering, incentivization (provide incentive actions in the real world), hedging instrument, etc. Gnosis is not a platform that participants can use to bet directly, it is a platform for developers to build their own customized prediction dApps. 
Strengths & Weaknesses
+ GNO token has high liquidity, it is traded on major exchanges such as Kraken and Bittrex. 
+ They have a solid management team including Joseph Lubin as one of the board members and Vitalik Buterin as their advisor.
~ Gnosis uses third party sources as their Oracles: Reality Keys and Oraclize. This provides faster results but comes at the cost of higher centralization. 
- There is currently a lack of blockchain developers and questions remain whether this platform will attract enough developers to build dApps.
Similar to Funsunite, meVu is also built on Ethereum with its native token MVU. The platform allows players to bet on anything. Participants use and receive Ether for betting. Similar to Augur, participants who act as oracles need to stake the MVU token to earn ETH. Players will get referral rewards if they recommend a friend to use the platform.  The platform is still in the beta test phase. meVu had an ICO in June 2019 and. The MVU token is not listed on any exchanges yet.  There have not been any new updates on their blog since the end of June .
Peerplays is a betting and games platform based on the Graphene open-source blockchain. It has a native token PPY, which is listed on Livecoin and IDAX, but with low liquidity . The consensus algorithm used by the platform is delegated proof of stake (dPoS), which enables it to have very fast speed (3 seconds block and 100 000 transactions per second). The development of the project is supported by PBSA (Peerplays Blockchain Standards Association).  
Betting platform Bookiepro runs on the Peerplays blockchain. However, BitFun, the token which can be used to bet on the platform is not available on exchanges. Markets on Bookiepro cannot be created by players, but only witnesses who run Peerplay blockchain. 
Wagerr is an online open-source project with an emphasis on privacy and anonymity. It provides betting on different sport events only. Users can choose three different options for betting: peer-to-peer betting (two people take opposite sides), multi-user betting (multiple users can take the complimentary position against a larger bet until the total value of the bet is met), and peerless direct chain betting (does not require a complementary transaction to forge a contract). Wagerr had its ICO in June 2017 and the main net launch in September 2018. The Wagerr blockchain uses proof of stake and has its own coin WGR, which participants use as currency on the network. Agents who operate oracle master nodes are responsible for results reporting and validating transactions. To do so they must stake their WGR. Their rewards come from block rewards as well as betting fees.   
Strengths & Weaknesses
+ Betting on the Wagerr platform closes 10 blocks before the event begins to avoid latency problems.
+ Wagerr applies a value coupling system which is self-balancing: when WGR price is high, the burn rate declines — when WGR price is low, the burning rate increases.
+ Peerless direct chain betting allows single users to bet on sport results even when there are no other betters.
- Not many exchanges list WGR, which means that it is difficult to buy .
- Wagerr’s censorship resistance can be both good and bad. It encourages money laundry and illegal activities. Sports betting is strictly regulated in many countries. This poses a challenge on whether Wagerr will be adopted on a large scale.
- Not much information on their team has been found.
5. Conclusion and Outlook
Regardless of their individual success, all decentralized online betting platforms still face a number of challenges:
· Generally speaking, blockchain technology is still at an early stage of development. It faces issues concerning scalability, transaction speed, security, cross-chain solutions, etc. As the technology matures, these problems will be solved. Until then blockchain-based betting projects will have to face these limitations.
· The average user of betting platforms has a low understanding of blockchain technology or concepts such as public key and private key. These hurdles will prevent many switching from traditional or centralized online betting platforms to blockchain-based betting services.
· Betting is a highly regulated industry. The lack of relevant regulation on decentralized blockchain technology puts uncertainty in the future of these projects. Successful projects will focus their efforts on markets (i.e. countries) that offer the most blockchain-friendly environment.
· In general, the tokens used for betting on blockchain-based platforms are complicated to buy. Users need to find and register on an exchange, buy Bitcoin or Ether and then exchange them into tokens. For the average user, this whole process is too long and too complicated which significantly lowers the incentive to abandon centralized online betting platforms.
Out of the decentralized betting platforms analyzed in this report, Augur offers the biggest potential. Among its competitors, the platform is well established. According to the website predictions.global , the total amount of money at stake in Augur’s prediction market is close to 3 million USD since its main net launch. In addition, the REP token has the highest liquidity among all the above-mentioned projects. All of this indicates a comparatively high number of users. This makes Augur a good choice for investors who do not want to take a high risk.
With its focus on anonymous betting, Wagerr reaches a growing niche market that offers a lot of future potentials. Another plus: it is the only platform to offer peerless betting. What potential investors need to take into account is that Wagerr’s emphasis on privacy could pose legal challenges within certain markets in the future. Buyers who are fine with taking some risk should consider this project.
The other projects analyzed for this report all come with significant downsides. Gnosis shows a lack of users even though the platform entered the market several years ago. BetProtocol seems to be a promising project because it fixes the cross-chain problem by accepting ETH and BTC. It also can be based on different Turing-complete public blockchains and positions itself as a compliant protocol. But it faces the challenge of having enough developers to build dApps on it. Because it is still a young project, we should keep an eye on it and have some patience to wait for it to deliver some solid progress.
The other projects in this report (Bethereum, Betrium, BETR Betting, Funsunite, meVu, Peerplays) are still very young projects that offer little substantial information. The majority of the newer platforms try to sell their service as “anyone can bet from anywhere”. As low user numbers for most projects indicate, this approach alone is not enough to gain traction. The various whitepapers also offer little insight into what niche markets these projects want to fill or describe concrete steps on how they can gain an advantage over their competitors. In addition, they show a general lack of marketing and communication efforts with their stakeholders. This leads to the conclusion that as of now investing in these projects is very speculative.