Cryptocurrency barely has a decade of history, but it’s already grown into a game-changing technology. It’s only natural, then, that it has also attracted the attention of online casinos.
Crypto casinos have grown exponentially over the past couple of years, and the trend is likely to continue.
The rise of cryptocurrency casinos has been driven by a number of factors. Firstly, the decentralised nature of cryptocurrency means that there are no banks or financial institutions involved in transactions. This makes it much easier for casinos to operate without having to deal with traditional banking systems.
Secondly, the use of cryptocurrency allows for much faster transactions than traditional methods. This is particularly important for online casinos, which need to be able to process payments quickly in order to keep players happy.
Last, and perhaps most importantly, the use of cryptocurrency means that casinos can offer anonymous accounts. This is a major selling point for many players who value their privacy and do not want their personal details to be associated with a gambling account.
But, plenty of people in business, especially those who spent the majority of their professional life in a pre-crypto landscape, are still trying to understand how these casinos make money. How does one generate revenue in a space that is decentralised, fast, and anonymous? In this article, we will take a look at the business model of crypto casinos to help you understand how the companies on any Bitcoin casino list make their profit.
How Online Casinos Typically Make Money
The vast majority of online casinos make money by charging a small fee on every bet placed. This is called the “house edge” and it is the percentage of each bet that the casino expects to keep over time.
Any fair casino game is luck-based. The exact outcome of the slot, roulette or blackjack spin is entirely unpredictable and random. However, playing these games over time will result in a predictable outcome: the casino will win some percentage of the money bet.
This statistical advantage ensures that the game provider will make a profit on all of the bets placed while still making big wins possible for players. The size of the house edge varies depending on the game being played – blackjack tends to have a very small edge, while slot machines have fairly big ones.
Brick-and-mortar casinos, fiat online casinos, and crypto casinos alike make money on the house edge. This basic principle is at the heart of the gambling business and simply because a site takes a different type of payment doesn’t mean they’re making their money in a different way.
The Business Advantages of Crypto Casinos
Online gambling is a growing industry. In the UK, the gross gambling yield (GGY) of remote casino games has been growing steadily for the past 7+ years. The pandemic-driven drop in 2020 did affect the business, but not in any lasting way. In 2021 and 2022, iGaming is already recovering and is poised for further growth.
Crypto casinos are a new and growing sub-segment of the online gambling industry with popularity driven by the numerous advantages they offer over traditional online casinos. While the basic way crypto casinos make a profit remains the same as a physical casino, there are still multiple differences. Let’s look at the advantages of crypto casinos over regular online casinos and how they are able to make a profit.
Appealing to Younger Players
The first and most obvious difference is that crypto casinos are able to target a younger audience. Millennials and Generation Z are the generations that are most comfortable with new technology – and there are some true crypto die-hard fans among them.
While 71% of the general British population says it doesn’t understand cryptocurrency, this number is far lower in the bellow-35 group. Considering that over two-thirds of online gamblers belong to that age group, it’s clear that crypto-friendly casinos have a significant advantage over regular casinos.
Anonymity and Security
The second big selling point for crypto casinos is the anonymity and security that they offer. When using a traditional online casino, a player would have to provide a great deal of personal information – including their name, address, date of birth, and banking information. This can be a big turn-off for players who are concerned about their privacy.
Bitcoin casinos are often licensed in lower-regulation locations like Curacao and Costa Rica. This, combined with the fact that they accept cryptocurrency, allows them to offer a much higher level of anonymity than regular online casinos.
Once again, this is an important selling point when it comes to younger gamblers. However, it could also become a regulatory challenge in the future.
Lower Operational Costs
To turn a profit, any business should keep their expenses lower than their earnings. Blockchain technology and cryptocurrency make it easy for online casinos to operate with far tinier overheads than traditional casinos.
For example, a fiat-powered online casino would have to deal with bank transfers and card payments, which can be costly and time-consuming. They’d also have to invest in sophisticated anti-fraud technology to protect themselves from chargebacks.
A cryptocurrency casino would simply need to find a payment processor that supports cryptocurrency payments. By their nature, most crypto payments are irreversible, making chargebacks a non-issue.
Cryptocurrency transaction fees are also far lower than those associated with fiat payments. Since they are verified by the blockchain, these payments are no less secure than bank transfers.
In other words, cryptocurrency casinos can operate with much lower costs than traditional online casinos, giving them a significant competitive advantage when it comes to profit.
Ultimately, the business of online casinos relies on people enjoying the casino experience AND trusting the gambling site. Cryptocurrency casinos check both of these boxes.
Thanks to the rise of crypto adoption among younger people, even the fact that a casino offers cryptocurrency payments can be a selling point. What is more, Bitcoin casinos can offer enhanced security and anonymity, as well as faster transactions and simpler KYC procedures.
While the crypto casino business is no different than any other gambling pursuit (in that it makes money from the house edge), blockchain technology has opened up new opportunities in the gambling industry. We are looking forward to seeing where this takes us in the years to come!