Bitcoin Poker & Crypto Currencies
Why Use Bitcoins?
Bitcoin is one of many cryptocurrencies to hit the Internet in recent years, and it is also the most popular and widely adopted. Bitcoin is leading the digital currency movement and the mainstream media attention that surrounding it, but a lot of Internet users still don’t understand what bitcoin really is and why they should be using it. You’ve got a credit card and PayPal already, why would you bother switching to bitcoin? Once you’ve read this article, you’ll be ready to make the change.
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Bitcoins are replacing what is now becoming an antiquated means of transferring value from one place to another. Cheques, wire transfers and bank transfers frequently suffer from delays and human error as different people get involved in the process from both ends of the transaction.
Bitcoin transactions are much faster and if a user chooses to select ‘zero confirmations’, the payment can be processed instantly. ‘Zero confirmations’ can be risky as users are capable of reversing transactions before the payments have been validated in the block chain, but even with just a few confirmations from the block chain, a transaction of any amount can be completed in a matter of minutes. Larger transactions often require more time as it’s recommended that there are no fewer than five confirmations before the funds are accepted; but even the largest movement of money would take no longer than a few hours.
Bitcoin Transfers Are Cheap
One of the major advantages to using bitcoin as a method of payment is that the fees are substantially cheaper than what you would expect from a bank transfer or online payment system like PayPal. Why should you pay a fee for moving your hard earned money?
Bitcoin trumps the entire market when it comes to competing on fees. This isn’t to say that bitcoin transfers are free of charge as merchants may choose to levy an admin fee on their customers, but you’ll be looking at a few cents and no where near the $50 fee that you might see when using a bank.
Bitcoins Are Decentralized
Modern history has shown a number of examples where central banks and human involvement have turned economies upside down over the course of a few years. In March 2013, Cypriots who had uninsured savings accounts larger than $100,000 were seized by the Central Bank to offset their own economic crisis. This type of aggressive economic policy is a result of central banks and individuals being unable to take full control of what is rightfully theirs – the money that you have in your bank may well be safe for now, but it is never truly your own.
Bitcoin is different. What happened in Cyprus could not be repeated if those savings accounts were stored in bitcoin. Bitcoin is owned by the people and it is maintained for the people with no strings attached.
Bitcoins Don’t Have Chargebacks
When a bitcoin transaction takes place, it’s complete and there are no chargebacks. In some instances, an unethical user can reverse a transaction using illicit software, but only when the transaction has not been confirmed by the block chain as mentioned above. The overwhelming majority of transactions are completed and can be refunded by the recipient once the transaction has taken place. This makes it almost impossible to commit fraud, something that is rife when using credit cards or other processing systems like PayPal.
Secure and Anonymous Bitcoin Transactions
Security and anonymity is perhaps the biggest appeal of bitcoin. The majority of online purchases made through credit cards are insecure, online forms disclose their credit card number, expiry date, security number and personal details that can be used for identity fraud and theft. These forms can be and have been exploited by hackers in dozens of high profile data thefts.
Bitcoin does not require that same level of exposure. When a bitcoin transaction takes place, a security certificate is generated that combines public and privately held information on both users so that the two parties can see the information they require to complete the transaction. So long as the certificate isn’t openly shared, those who aren’t involved in the transaction will not be able to see any sensitive information whatsoever.
Bitcoins Aren’t Subject To Extreme Fluctuations in Value
Governments and/or central banks control the money supply in their own economy, meaning that they can print or remove currency from the market as and when they please. This type of ‘monetary policy’ is often used to tackle or promote inflation and it is not uncommon for it to be misunderstood or misused for the benefit of short term gains.
Bitcoin was designed with this very principle in mind. Only 21 million bitcoins can ever be in circulation on the global economy and this supply cannot be affected in any way – while the price of bitcoin fluctuated heavily in its early years, this certainty on supply gives investors confidence and provides stability.
Bitcoin is Private
There are times when transactions simply need to be private, and bitcoin satisfies this need for privacy. Of course all transactions are made public on the block chain, but this information only relates to how many bitcoins were moved and to which address. Compare this with what you would expect from a card-based transaction where a full paper trail can be linked back to your name, ultimately leaving you with no real privacy as to how you spend your money.
Bitcoin can be spent anywhere, anonymously and at any time, this also applies to those who choose to deposit at a bitcoin casino!
Is Bitcoin Part of the Future of Poker?
If there’s one thing we’ve learned about Bitcoin since the online crypto-currency was first introduced in 2009, it’s that the people who use it certainly love to gamble.
Indeed, one of the earliest Bitcoin-supported online betting sites, SatoshiDice – named after the currency creator’s mysterious pseudonym, Satoshi Nakamoto – was at one point responsible for half of the transactions on the entire Bitcoin Network.
This fact was certainly not lost on some high-profile gambling companies, and now, in 2016, there are a plethora of Bitcoin-supported online casinos for players to choose from.
The poker world, however, has been significantly slower to adopt the digital currency – and in this blog, we’ll take a closer look at why this may be the case while also providing a bit more background on Bitcoin.
The Beginnings of Bitcoin
Nakamoto first introduced the concept of Bitcoin to a cryptography mailing list in October 2008, but it wasn’t until the following year that the currency was released as open-source software.
Designed as a reward for payment processing work in which users offered their computing power to verify and record payments in a public ledger, Bitcoins were distributed to those who pioneered the system.
Known as “mining”, this process allowed early adopters of the currency to accrue a steady supply of Bitcoins, but as the number of transactions using Bitcoin increased, so too did the value of the units themselves and the amount of work required to mine them.
These days, Bitcoins can be exchanged for other currencies, products and services, with an optional transaction fee going to the miners.
So, What Is a “Bitcoin”?
As explained above, a “Bitcoin” is a unit of digital currency that can be used to make peer-to-peer transactions between users without the use of an intermediary.
These transactions are verified by network nodes and recorded in a publicly distributed ledger known as the “block chain”. As only a finite number of Bitcoins will ever be made, their value will continue to rise as the market evolves.
Users are able to store their Bitcoins in a handy digital wallet, which they can then use to pay for goods and services or trade for cash in other currencies.
As the block chain is a publicly maintained ledger, all Bitcoin transactions are made anonymously, with those who are approved to edit the block chain merely confirming that an exchange has taken place and updating the record accordingly.
Bitcoins and Online Poker
Although poker sites have generally been fairly slow to adopt Bitcoin, there are a number of online casinos that currently support the currency.
Here are some of the advantages this provides to users:
• Anonymity: The use of Bitcoin provides an extra level of security to users as they will never have to submit any of their personal details when processing a transaction. This factor naturally alleviates concerns over poker site security as sensitive user information is never put at risk.
• Safety/Low Fees: In addition, any Bitcoin transactions have to be approved by both parties before they can be updated in the block chain. This means that the fairness of all exchanges is guaranteed, and the lack of an intermediary results in little to no transaction fees for sites.
• Increasing Value: To preserve the value of the Bitcoin economy, only a finite number of units will ever be produced. This fact ensures that over time, existing Bitcoins will steadily increase in value and aren’t prone to the same market crashes as other forms of currency.
Generally speaking, a Bitcoin will increase in value as the amount of computer processing required to mine one also becomes steadily more prohibitive.
That said, the strength of other currencies does have a bearing on Bitcoin conversions, as you are then pitching units against an independent currency market.
Is Bitcoin Legal?
Given the media reports of bitcoin and its association with underground dealings on the Internet, it’s not uncommon for users to be asking questions surrounding bitcoin legality. Bitcoin is also of interest to politicians, police forces, tax agencies and other legal bodies because of its potential to disrupt the current state of the global economy.
What is clear about bitcoin legality is that it largely depends on what users are doing with them.
What Are The Legal Concerns Surrounding Bitcoin?
Government agencies are doing what they can to tackle the issue of bitcoin. There is an increasing nervousness about how bitcoin is being used over the Internet, particularly in instances involving money laundering and to a lesser extent, terrorist activity. Specifically, law enforcement officials are concerned by the nature of bitcoin in that it is decentralized and ultimately uncontrollable. There is also a risk that bitcoin becomes monopolized by one user or a group of users who are then able to dominate and dictate the direction of the bitcoin market.
In April 2012, the Federal Bureau of Investigation published a bitcoin-related document that highlighted its fears and concerns about the network. It concluded by distinguishing between centralized and digital currencies. The FBI also mentioned that while US-based exchanges are regulated, the offshore services associated with bitcoin might not be and that they had potential to become safe havens for criminals and gangs to conduct illegal transactions without the knowledge of law enforcement officials.
Silk Road was a great example of the illicit use of bitcoin – operating as an underground black market for bitcoin users, Silk Road allowed users to engage in the buying and selling of illegal goods under complete anonymity. Despite the anonymity, the FBI were able to successfully shut down the network under the order of US Senator Charles Schumer resulting in its closure in October 2013. The widespread media interest in Silk Road led to a mainstream dislike and skepticism for bitcoin.
The Bitcoin Regulators
In the early years of bitcoin, the currency was considered to be outside of government jurisdiction and that government officials had no power to seize them. While there is certainly some truth to this, many countries have adopted strict regulations on bitcoin that have controlled the cryptocurrency to some degree.
Regulations vary across countries, but users can be sure that their national financial regulatory bodies are keeping a close eye on bitcoin and other forms of digital currency. In the United States, FinCEN (the Financial Crimes Enforcement Network) operates as part of the US Treasury. FinCEN was the first government body to take the initiative to start outlining a framework for how virtual currencies can be used. The guidance was published in March 2013 and outlined clear circumstances where virtual currency could be used legally and under what circumstances a user might be classed as a ‘money services business’. The importance of this is that money services businesses must be fully registered and obey by anti-money laundering principles. They must also have clear registration requirements for their clients, which fall under the KYC (know your customer) measures.
Those in the United States will also have bitcoin wallets regulated by the US Commodity Futures Trading Commission. The CTFC looks after financial derivatives, which include bitcoin, but they have yet to announce any formal regulatory standards as yet. However, it’s been made clear that they have power to do so if they please.
The US Securities and Exchange Commission
Perhaps the largest regulatory body in the United States, the SEC has taken a keen interest in bitcoin over the past few years. While the SEC hasn’t issued any solid regulatory suggestions, its Office of Investor Education and Advocacy published an alert to warn people about the fraudulent activities associated with bitcoin and how it should be avoided as an investment. It specifically targeted Ponzi schemes after Texas resident, Trendon T.Shavers raised nearly 700,000 bitcoins by promising investors a 7% weekly return in interest.
The case of Trendon T.Shavers was used to consider giving bitcoin legal status in the United States. But Mr Shavers’ argument at that time was that he couldn’t be prosecuted under the law because bitcoin was not considered legal tender. However, the judge presiding over the case issued a memorandum stating that bitcoin could be used as money. The case has yet to be resolved and questions still press on to this day.
The True Regulator of Bitcoins
One of the most important areas to note is that bitcoin is decentralized; this means that no one regulatory body will ever have the power to control it. Bitcoin is a currency made and maintained by the people – a fact that is certain to remain.
It is clear that the government in the United States is already trying to impose regulation on bitcoin, but has yet to overthrow the market and is unlikely to do so. What happens in the near future remains to be seen.
Ultimately, bitcoin will continue to be a legal tender so long as they are used for legal purposes. How they’re used determines their legality and so long as users avoid any illicit dealings, then their use of bitcoin should never be called into question.
Disclaimer: at the time of writing, the content of this article was considered to be accurate, however since writing there may have been changes to the legal stance of bitcoin and we strongly urge you to consult a legal advisor for any questions that you may have.
Bitcoin Values Over the Years
Since its inception, the value of a Bitcoin has (generally) remained on a steady upswing. From a value of $0.01 in 2010, when the first transaction was made (for a pizza, obviously), the value has gone up to hit a high of $1,250 in 2013.
The price soon slumped to around half that and again in 2014 when online exchange Flex-coin was breached. It hit a low of $200 last year but has rebounded to around $750 in 2016.
The Problems with Bitcoin Poker
Of course, while Bitcoin certainly seems a viable method of future payment processing at online poker sites, there are still a number of concerns that could prevent it from taking off.
• Low Acceptance: Bitcoin is not currently a widely-supported payment processing option at online poker sites. For as long as this remains the status quo, the digital currency’s use will be limited as players won’t be able to move sites as they can with other payment methods.
• Competition: There is nothing to prevent another form of online cryptocurrency being released that is in direct competition with Bitcoin. This scenario could divide the online marketplace and potentially lower the value of Bitcoin as users try to stockpile the new format instead.
• Dangers of Being Hacked: Although Bitcoin and the block chain itself are incredibly secure, whenever Bitcoin is hosted on a centralised network such as a poker or casino site, hackers have the opportunity to take advantage of any flaws in that network’s own security system.
In 2011, the value of Bitcoin slumped to an all-time low when online exchange Bitomat lost 17,000 coins. It wouldn’t be the only security face-palm to affect the currency’s value.
Bit floor was hacked in 2012, with 24,000 coins valued at around a quarter of a million dollars hacked and stolen. Insta wallet was hacked a year later, losing 35,000 coins, while a Hong Kong-based Bitcoin trading firm took off with $5 million from a group of investors in 2013.
Bitcoin investors hoping for some good news were disappointed in 2014 when Flex-coin exchange was hacked. It soon closed to avoid any further losses to traders.
• Processing Times: As the block chain has to be updated manually for any Bitcoin transactions, payment processing times can be exceptionally slow. At present, Bitcoin is limited to around seven transactions per second, and this must be increased if it is to scale.
• Paperwork: While payment processing options such as PayPal are handled by an intermediary for a set fee, the use of Bitcoin involves poker sites turning over money management to other users. As such, it is a complicated process in terms of book-keeping.
The Future of Bitcoin
In order for Bitcoin to flourish at online poker sites in the future, there are a number of basic issues that must first be overcome.
While the use of the cryptocurrency could open the door to grey markets like the US – where it is the processing of poker transactions by banks rather than the game itself that is illegal – the current transaction process is not as convenient as it is for other currencies.
For one, as a single Bitcoin is worth so much, it must be divided into smaller units when completing most regular transactions. This process can lead to considerable confusion when converting the currency into USD or GBP as these fractions can be worth seemingly arbitrary amounts.
Secondly, the more successful Bitcoin gets, the more tempting Bitcoin-hosting companies become to cyber criminals, with hacks on Mt-Gox, Flex-coin and Polonies proving that the industry remains a vulnerable target.
For the time being at least, the use of Bitcoin remains a stark contrast between ideals and realities. True, it has the potential to be a democratic currency that is decentralised and not influenced or controlled by a central bank or organisation.
Unfortunately, in order to handle the demand imposed on it by processing thousands of poker transactions each day, larger blocks will need to be processed simultaneously. That will require more computation and potentially turn Bitcoin over to a powerful elite.
But for now, the currency remains the preserve of some hard-core speculators, and some very trustworthy online poker players burned by too many years of online scandals. Who, in the end, needs another Ultimate Bet?
Last year, poker pro and businessman behind Bitcoin Site Seals with Clubs, Bryon Micron said that: “We are once again observing a small, unregulated market which is completely driven by human supply-demand.”
For now, as long as there is demand and a questionable handle on security, poker players will continue using their plastic.