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The Difficulty of Bitcoin – Where One Door Closes…

4 February 2013 by Devon Chappell

bit coin currencyIf you’ve been gambling online for any real period of time, you no doubt understand the serious struggles, legal problems, and technological advances this immense industry has seen.

Probably the biggest hit to the online gambling industry itself came on April 15, 2011, when the U.S. Department of Justice literally shut down the three largest online poker sites available to players in the U.S., charging eleven different people for engaging in illegal gambling, money laundering, and bank fraud. Customer accounts were immediately frozen, and thousands of U.S. based players could not access any of the money in their accounts. While this was a stunning event, nonetheless, the road forward commenced. In fact, a plan to combat the U.S. currency issue was already in the making.

Enter Bitcoin.

Created in 2009 by a programmer “known” as Satoshi Nakamoto, Bitcoins act almost like any other known currency. As of January 2013, the value of a single Bitcoin is approximately 13 U.S dollars, and is benched upon demand. Banking transactions are operated via a non-centered peer-to-peer network similar to that of online music and film sharing protocol BitTorrent. Today, Bitcoin is used by many different merchants worldwide, the most noteworthy of which is Silk Road – the online black market associated with illegal drug sales (according to an associate director at Carnegie Mellon’s Information Networking Institute).

While this all sounds a bit clandestine, it is one answer to the U.S. currency issue at hand. People can buy and sell Bitcoins using different worldwide currencies through such online exchanges as Mt. Gox. Players, for instance, can even use a service by BitInstant – a company that does the payment processing and which allows people to buy the virtual currency online for cash at a staggering 700,000 U.S. locations, including places you shop at everyday like 7/11 convenience stores, Duane Reade drug stores, and, of course, U.S. retail giant WalMart. It should be noted that not all retail outlet locations participate. Once Bitcoins are purchased, they are stored on computers (or mobile devices) in Bitcoin wallets (files) or in cloud-based e-wallets.

All loopholes and configuring aside, there is a certain speed to access involved here. If you’ve played at casinos online, in some cases you may have experienced delayed payouts. Players using Bitcoin, in most cases, can get a payout in just a few hours.

According to global gaming tracker GamblingCompliance, the U.S. online casino gambling market is valued between $4-6 billion. On April 15, 2011, for instance, real money online casino players in the U.S. alone had over $100 million sitting in frozen online accounts from the three aforementioned seized poker sites, some of which the U.S. government is still currently working to get back to the players (who were not the target in the seizure).

The Bitcoin situation is not all unicorns and rainbows though. While attractive due to its convenience for real money online gambling transactions, it is still unknown if the government will go after Bitcoin gambling sites. This is a burgeoning industry, and as advancements are made on one side, defenses will need to be created on the other. The Justice Department has remained without response.

Lastly, Bitcoin itself is not free of its own issues. There have been more than a handful of hacking issues. The company itself has shaky standings. Bitcoin Savings & Trust, billed as a hedge fund, took off with more than $5 million in investor money in what appears to be a Ponzi scheme. Also, those Bitcoin “wallets” mentioned earlier in this story have been known to disappear should your computer have hard-drive issues (crashes and the like). Bitcoin itself states that one client lost about 50,000 Bitcoins this way. With any growing industry, developing technology will be susceptible to kinks and problems.

Most online casinos do not use this technology yet, but Bitcoin-based gaming sites are increasing greatly. Most casinos using Bitcoin are associated directly with Satoshi (go figure). However, there are online casinos like Strike Sapphire (based in Costa Rica) that use Bitcoin, but still prohibit U.S. bettors. While the wait-and-see is taking place, it seems this time around more caution is being exercised, at least by sites not directly related to the Bitcoin developer itself. The bottom line is that the verdict is still out on whether Bitcoin will remain legal as it is.

If you are at all wondering if your fellow online gamblers are buying into this banking product, consider that SatoshiDice (a casino directly connected to the developer using Bitcoin) has reported an increase of 78% in betting between the official launch (March 2012) and December 2012.

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