Bitcoin gambling on Mega Moolah & cryptocurrency as a monetary system
When we at MegaMoolah.com discuss gambling with Bitcoin, we are discussing a scenario in which cryptocurrency is being used as a monetary system. This might sound obvious to you, but all is not as it appears...
Consider the fact that some governments do not recognize cryptocurrency as money. Rather than Bitcoin being a monetary system, it is considered a means by which tokens become investment assets or properties.
Does this matter? Yes and no. From the individual user's standpoint, it doesn't really matter how the government views bitcoins in terms of him/her being able to use them to play Mega Moolah. But it does matter to large investors and businesses that decide to accept cryptocurrency from customers.
The discussion for this post will focus primarily on cryptocurrency as a monetary system. We will discuss how it works, what you can do with it, and why you might be interested in replacing some of your fiat currency transactions with cryptocurrency. So let's get started.
Digital tokens, not coins
If you have ever seen photographic representations of bitcoins and assumed those coins were real, dismiss those images from your mind. Cryptocurrencies deal in digital tokens, not coins. There are no tangible coins involved when you purchase bitcoin (BTC) on an exchange.
Why are there no tangible coins involved? Because they are not necessary. The value of any given cryptocurrency is controlled primarily by supply and demand. There is nothing artificial propping the value of Bitcoin for example, so there is no need for a tangible coin representing some sort of value tied to a backing mechanism.
When you purchase digital tokens, they are represented as computed data in the cryptocurrency blockchain. You receive that data at the time of purchase. The data is also recorded across the cryptocurrency network in every existing copy of the blockchain. This way, everyone has a record that states you hold so many tokens.
Buying or selling with cryptocurrency consists of nothing more than a data swap. Let us say you make a casino deposit with bitcoins so you can play Mega Moolah. Completing the transaction generates a new data set that is sent to you, the online casino, and the cryptocurrency network. The data indicates that so many digital tokens were transferred from your wallet to the casino's wallet.
Cryptocurrency's bearer value
If you know anything about the inner workings of fiat currency, the lack of physical coins and a backing mechanism in a crypto platform presents an interesting dichotomy. It is a dichotomy directly related to the value of a given currency.
The value of fiat is controlled by central banks and government authorities. Control is maintained through a combination of fiscal and monetary policy. Let us take a look at the U.S. system as an example.
In the U.S., the federal government is responsible for controlling fiscal policy. In other words, they control how money is spent by government agencies. They control the price of government-issued bonds, the volume in which new bills and coins are produced, and so forth.
The Federal Reserve, which is the central bank in the U.S., controls monetary policy. They ultimately decide how much cash is in circulation at any given time. They determine interest rates as well. Combining their monetary policy with the federal government's fiscal policy ultimately determines the value of the U.S. dollar.
Cryptocurrency is remarkably different. There is no central bank or government involved in determining production or price. Therefore, the value of any particular token relies on an agreement between sender and recipient. This is known as 'bearer value'. Why does this matter? Because bearer value does not require debt to create it.
Let's go back to fiat for just one minute. If you have 100 euro in your bank account, that money represents debt of some sort. How so? Because the cash originated with the federal government at the time it was minted. The government then loaned the money to a bank where it somehow made it into your hands - whether through your paycheck, selling something on eBay, etc. Ultimately that 100 is government property. It exists as a debt to the Treasury for as long as it remains in circulation.
There is no debt associated with cryptocurrency. Digital tokens are created at the same time the blockchain is created. And because the blockchain is not owned by any centralized authority, the tokens created by that blockchain are also not owned by anyone. They are put into circulation through mining without any debt involved. In a nutshell, that is bearer value. You own the value of every token you hold.
Digital token supply
Bearer value is critically important to the success of cryptocurrencies inasmuch as digital tokens are only worth something if buyers and sellers agree that they have value for completing transactions. But that sounds risky, doesn't it? After all, buyers and sellers could simply stop agreeing on the worth of digital tokens and the whole thing would fall apart.
There are no worries on this count. Cryptocurrency developers have addressed that concern through the creative way crypto platforms handle token supply. We will use Bitcoin to explain how this works. If you are not aware, Bitcoin was the first commercially viable cryptocurrency ever released.
The original developer of Bitcoin based its monetary policy on something known as 'artificial scarcity'. Simply put, it was decided that the total number of bitcoins in circulation would be limited to 21 million. That number was codified within the original Bitcoin code.
At current mining rates, it is expected that all 21 million coins will be in circulation by 2140. When the last coin is finally mined, there will be no more. The principle of artificial scarcity simply states that tokens are inherently scarce because the established supply can never be exceeded. This is far different from fiat currencies that continue to be printed and minted with impunity.
Artificial scarcity protects bearer value by providing an incentive to buyers and sellers to not abandon their crypto holdings. Once all the coins are out there, they are out there. At that point, demand will ultimately determine price. So it is in the best interests of buyers and sellers to continue using digital tokens with the knowledge that their monetary value should continue to increase over time.
An open monetary system
The foundation of everything you have learned thus far is the fact that platforms like Bitcoin are open monetary systems. By 'open' we mean that outside forces cannot control or manipulate them. No one can stop you from purchasing bitcoins on an exchange. No one can stop an online casino from accepting those same coins as a deposit. You and the merchants you do business with are free to transact with bitcoins in any way you see fit.
While that may seem true with fiat currency as well, it's not. A bank can control the fiat options of all of its customers. For example, a bank can tell merchants they are allowed to deposit U.S. dollars, British pounds, and euros, but nothing else. That would preclude a merchant from excepting Japanese yen and then trying to deposit it into his business account. Credit card companies can likewise limit the fiat currencies they are willing to deal with.
It is also well known that conducting cross-border transactions in multiple currencies can be expensive and confusing. This artificially inhibits such transactions because buyers and sellers do not want to go through the hassle.
There are lots of ways that fiat currency gets in the way of buyers and sellers doing what they want to do. Everything from monetary policy to government regulation controls how fiat currency transactions are conducted. Cryptocurrencies are free from such external influences.
Gambling with Bitcoin
As a monetary system, platforms like Bitcoin and Litecoin allow individuals to exercise their own economic decisions outside of bank and government interference. What does that mean practically? It means you can do things like gamble with bitcoin.
Doing so begins with the purchase of BTC from one of the many online exchanges. You purchase tokens which are then transferred into your digital wallet. Bear in mind that your wallet can be online, on your computer, on a separate storage device, or even recorded on a paper ledger.
The next step is to find an online casino that accepts bitcoin deposits. You make your deposit the same way you would using fiat currency. The only difference is that your deposit does not go through a bank. Rather, the tokens are transferred from your digital wallet to the casino's wallet. And by the way, it is a push transaction as opposed to a pull transaction.
Upon completion of your deposit you are ready to start gambling. Choose your favorite game and off you go. The entire transaction took mere minutes to complete without any need for you to involve your bank or credit card company. Moreover, the transaction was encrypted. For all intents and purposes, you remain anonymous to the casino as a depositor.
Hopefully you now have a better understanding of cryptocurrency as a monetary system. Perhaps in future posts we will discuss crypto as an asset or property. For now though, the important thing to remember is that you can use BTC and other cryptocurrencies as additional money to gamble online, buy products from retailers, and even pay for services.
Byline: This article was published by Mega Moolah expert Henry. Media and other enquiries.