1

Let's say I wanted to start an online casino that accepts Bitcoins.

Would it make sense to manage my own Bitcoin wallet for this site? Or would it make sense to just use a third-party service that manages the wallet for me?

What other considerations are there?

2

Integrating your casino with a 3rd party payments processor translates to much easier bootstrapping for your casino but also higher operating costs. Higher operating costs in turn means that your are by definition less competitive, as you will not be able to provide your users with a smaller over-round and also you won't be able to control the deposit and withdrawal costs.

Another thing to consider is security; having a 3rd part service deal with your money means that if they fail, you fail; if they vanish, your money vanishes with them.

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    I'm not sure it's obvious that using a payment processor results in higher operating costs and more risk. Doing it yourself also has costs (running servers, writing and maintaining software, hiring experts) and risks (server vulnerabilities, dishonest employees, etc) and in principle they could be greater. – Nate Eldredge Oct 10 '14 at 3:01
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    @NateEldredge a business needs to be flexible and define its own margins. The trading volume is also very important; for low-volume trading a pay-as-you-go plan in a payment processor would be more cost-efficient but when volume gets high an in-house solution would soon meet the initial investment and yield from that point on. I agree that certain conditions must be met for the in-house solution to work as expected but I prefer to have total control over my customers' funds than trusting them to any payment processor, which then essentially becomes a "quis custodiet ipsos custodes" problem. – George Kimionis Oct 10 '14 at 4:04
  • @George - the question is, can the customers have faith in you more so than a trusted name casino or a new casino backed by someone like Coinbase? I'd personally not use a casino without proven trustworthiness. Remember the quote "anyone can design their own encryption and not break it. The trouble is not having other people break it" – Wizard Of Ozzie Oct 10 '14 at 8:00
  • You're assuming that it would be more cost efficient to write the wallet manager yourself. This ignores one of the major benefits of the division of labor: specialization. There's nothing inefficient about outsourcing. – Tyler Oct 10 '14 at 14:11
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    @AussieCryptocurrency I somehow fail to see how integrating with a known payment processor would make you any more trustworthy. You can still decide to take the money and run or not to proceed with some payouts and Coinbase can do nothing about it. Trustworthiness in casinos comes with either a good reputation that you build over time, a known team of founders and/or investors and eventually by obtaining a remote gaming license and getting regulated by financial and gambling authorities. – George Kimionis Oct 10 '14 at 14:11
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The main considerations are going to be:

  1. taxation records to keep out of trouble further down the road
  2. DIY-hosted wallet will require a top-notch security team/protocol. The hot wallet will be targeted if word gets out you've asked on here for example then opened a casino because that makes an easy mark to hit.
  3. Knowledge of the Bitcoin protocol and vulnerabilities that could be exploited (ie txn malleability would only be an issue if your code had a bug allowing this, see #4
  4. Correct auditing of customer balances
  5. proof of fairness and deposits for the losing gamblers demanding their money back

I'm of the opinion you'd want professional security, wallet hosting and networking architecture design for a casino. It's a complicated venture. I do know Bitcasino.io offer some type of "franchise" but what the cost is I couldn't tell you.

0

It is not as complicated as you may think. Let's assume for the moment you have a casino. You either make the platform your self, and outsource the games. Now you are ready to accept bitcoin deposits. Here are the main items you have to take into consideration.

  • You can have your own wallet hosted on your server. If you do, you will save a small commission by not using a third party. You have to have excellent security, and manage your funds accordingly. (Have a cold wallet). Players can withdraw and deposit funds on the wallet.
  • You can use a third party like coinpayments.com which take a .5% commission. The good thing about that is that you do not have to worry about security, because they are doing it. More importantly, you can accept other forms of cryptocurrencies like Monero, Bitcoin casino, Ripple, etc..
  • You save about 20% using crypto currencies instead of fiat (CC, Neteller, Skrill etc). The down side is that the amount of players who use bitcoin is much lower. Many do not even know what bitcoin is at the moment.

Our team has solved these issues with our site: www.betbit.com There will be more exciting developments I am sure. I think the next stage are casinos have the wagers on the blockchain. That would be the ultimate transparency.

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