Alternative Currency Bitcoin Gains Traction with Online Gamblers
Amid all the recent talk of the legalization of online poker at the state level and, in some states, other sorts of online gambling, there is a rapidly-growing segment of the online gambling market that has largely gone unnoticed so far. Just what is this mysterious force, you ask?
It is Bitcoin, which is an Internet-based virtual currency based on peer-to-peer technology and lacking any centralized backing, such as a bank or a government issuer. Bitcoin is, in fact, the most widely-utilized alternative form of currency and is swiftly gaining momentum in the world of online gambling.
A little background on Bitcoin – it was first developed and launched by an enigmatic person or group of persons using the sobriquet Satoshi Nakamoto. There will be a finite number of Bitcoin released – 21 million to be exact – with the last to be released in the year 2040. According to a Bitcoin conversion website, currently the value of .04 Bitcoin is equal to one American dollar.
The use of Bitcoin is appealing to the online gambling market, as technically Bitcoin is able to function effectively like cash since it is transferred via the use of e-wallets (not entirely dissimilar from popular online payment processor Paypal) and again, lacks any sort of central oversight. The natural question that follows, of course, is making such online wagers using Bitcoin legal?
That is a question that can have several different interpretations. According to a recent story on NPR.com, in which the reporter acquired some Bitcoin with the purpose of accessing online gambling sites, users collect their winnings in Bitcoin and are responsible for converting them back to dollars if they so desire.
The fact that this extra step is required, notes the article, is not an accident. As far as the site operators are concerned, the players are using what amounts to play money. Because they are not processing any payments or using any banking institutions, it is a very real way to circumvent regulation, some say.
Seals With Clubs is the most prominent and most popular Bitcoin online poker site. Says Bryan Micon, its spokesman, “We don’t have a bank account at Seals with Clubs. There’s no bank account. There’s no bank of any sort that we do. We only do this one weird brand-new Internet protocol transaction that some of the nerds out there are calling money.”
Thus, sites that operate online poker games and other wagering games can operate in a grey area of sorts, especially in places where the legality of online wagering is murky. This scenario is the case in much of the United States with the exception of Nevada and Delaware, both of which have passed laws clearing the way for regulated online poker, though games have not yet gone live.
At issue for many is whether Bitcoin is a “real” currency with real value, or whether it is just a form of invented money. Bitcoin’s overall place in the economy remains to be seen, but it continues to grow as a form of very legitimate payment for more than just gambling. Bitcoin can be used from everything to pay for services to purchasing a cappuccino.
There are some Bitcoin advocates who see the birth of such a currency as a natural progression of the development of the digital age.
CEO of the largest Bitcoin payment processor, BitPay Inc, Anthony Gallippi, said, “Credit cards were never designed for the Internet. Using a credit card over the internet is a situation known as card-not-present.”
“It was never intended when credit cards were designed, and when we try to use them this way it carries higher processing fees and substantially higher risk. Payment fraud represents nearly 1% of our GDP [$100 billion] in the United States,” he added.
