Power To The Players: How Web3 Is Poised To Revolutionize Betting

Wagering has been a part of the human drive for millennia, ever since an ancient risk-taker first staked some beads on a race or a test of strength. The modern gambling industry has channeled that urge into a $700-$800 billion global business, with most of the activity now taking place online.

Yet anyone who's regularly tried their luck at casinos or on sports betting - either online or in person - knows that the odds are fundamentally stacked against them. We all know the adage "the house always wins." This reflects how betting conglomerates have conditioned players to accept they'll be losing money the moment they enter the casino or the sportsbook site. Bettors are hooked to the rush of hitting it big and are effectively paying an "entertainment fee" to the house in exchange for the opportunity.

What's more, online betting has a rotten user experience. Participants have to hand over their private data to open accounts, pay high fees on deposits and withdrawals, and wait days or weeks for payouts. Legal restrictions on betting force people to use unregulated offshore sites where they are vulnerable to unscrupulous operators. These providers regularly manipulate spreads, steal or block funds and collect and sell clients' data without permission.

We're overdue for a transformation in experience that gives power back to the players. Blockchain technology is now poised to empower individual bettors the way decentralized finance (DeFi) is helping to democratize access to finance.

DeFi has enabled users to play the role traditionally taken by banks and other financial institutions. By connecting your crypto wallet to a DeFi protocol, you can earn yield by providing liquidity to markets and lending to those on the other side of a market. The blockchain allows platforms to be open, trustless, decentralized and transparent.

More recently, blockchain has entered gaming in the form of play-to-earn Web3 games, which are particularly popular in Asia. Now the markets are primed for a product that disrupts betting with similar principals, bringing players a vastly improved user experience and a truly level playing field for the first time.

This goes far beyond using cryptocurrencies like bitcoin for gambling, a service that many sites already offer. All that does is add volatility to a bet and give operators another chance to collect fees on conversions to and from fiat currencies.

This will be a much more fundamental change, giving users full transparency into betting markets, complete privacy and direct control of their funds. It will also remove their reliance on centralized providers and enable them to manage their risk much more effectively than they can on current platforms.

Web3 betting platforms can for the first time give gamblers the opportunity to "be the house," increasing their long-term odds of success. By providing liquidity to a betting market - whether that's a Superbowl final or a casino-style card game - users can offer to take wagers from those on the other side of a bet, taking the role traditionally played by the house.

While the house will of course have bad days as well as good days, experience has shown that it always enjoys better odds in the long run.

In contrast to Web2 sportsbooks and casinos, users of blockchain-based gambling protocols will be able to access markets without sharing their identity. They can simply connect their wallet, start playing within seconds and withdraw funds in an instant. Providers can't block withdrawals or otherwise interfere with your control of funds because there is no centralized entity in charge of things.

This new era for gambling is going to yield exciting innovations in betting formats that will give players more options and a greater ability to manage risks. No-loss bets, for example, will enable users to win if their predicted result occurs without running the risk of losing their principal. This is achieved through placing their principal in a high-yield DeFi protocol that earns interest while the bet plays out, allowing players to experience the benefits of DeFi returns while still taking a betting risk.

As blockchain-based betting develops, algorithms will work to automatically calculate the most accurate odds based on supply and demand.

Web3 gambling protocols are still in their infancy and face plenty of hurdles. The biggest is the huge regulatory gray zone into which they fall in most countries. Gambling adds a layer of complication and controversy onto DeFi, which itself falls outside current financial regulations. Against this backdrop, protocols will need to take precautions, such as formally blocking access from some countries and performing some screening for underaged players. These protocols also need to make efforts to avoid the tech snafus and bugs that still plague DeFi and which would undermine user confidence.

Despite these challenges, it's a safe bet that blockchain technology will help millions of people enjoy a fairer, more transparent gambling experience in the coming years.

Carlos Liang is the CEO of Divvy, a decentralized betting platform allowing users to "be the house."