Blockchain 101: Bringing transparency to online gambling
How much do you know about blockchain? The concept is actually pretty simple to understand if you break it down into terms people are familiar with.
Say the word 'cryptocurrency' and most people automatically think of bitcoin. Despite there being thousands of cryptocurrencies now on the market, bitcoin remains the one most people are familiar with. That is not necessarily a bad idea from a technology perspective. After all, it is bitcoin's blockchain that really gave birth to crypto.
Most of the MegaMoolah.com articles don't really mention the blockchain. Yet it recently occurred to us that we have never explained exactly how blockchain works. This post is intended to do just that. We will break down blockchain into its most basic components and explain it in the simplest possible terms. You will hopefully have a better understanding of bitcoin by the time you finish reading.
Blockchain's standard definition
Let us begin with a standard, dictionary definition of blockchain. The Investopedia website defines blockchain as follows:
"A blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions. Constantly growing as 'completed' blocks (the most recent transactions) are recorded and added to it in chronological order..."
Now let's break down the individual components:
- Digitized - The record that makes up a blockchain is completely digital. It is not on paper. It only exists as computerized data located on computers in various locations around the world.
- Decentralized - This means that a blockchain's ledger and data are not controlled by a single, centralized authority. There is no government or central bank that controls either the blockchain or the cryptocurrency fueled by it.
- Public Ledger - Think of the blockchain ledger as a spreadsheet. If you prefer, a paper register used to record checkbook transactions also suffices. It being public means that there are literally thousands of copies scattered all over the world. Anyone who wants a copy can get one.
- Blocks - These are chunks of computerized data used to maintain cryptocurrency records. If you were to deposit bitcoin at your favorite casino in order to play Mega Moolah, the deposit transaction would generate data that would be recorded in a new block on the chain.
From these terms we have built a basic foundation of what blockchain is. But that is still not enough. Now we need to know how it works in a practical sense. For the purposes of illustration, we will use the example of a spreadsheet from this point forward. Imagine the blockchain powering bitcoin as nothing more than really long spreadsheets.
Creating the spreadsheet
Let's say you wanted to start your own cryptocurrency to compete with bitcoin. You and your business partners come up with a spreadsheet that you plan to use to record all your transactions. Your spreadsheet contains five columns:
- User ID
- User wallet value
- Transaction amount
- Sender address
- Receiver address.
Whenever anyone conducts a cryptocurrency transaction, all five columns are filled out.
Now, each of you has a copy of the spreadsheet. That means you all have to update your copies whenever a transaction takes place. You have agreed that once a transaction has been entered in all five copies it cannot be modified or reversed. It is permanent.
Also note that everyone in your group has to verify that the other members record the transaction correctly. So your spreadsheets have to be compared after each new entry. Transactions can only be made permanent if all copies of the spreadsheet agree.
Your spreadsheet is essentially a rudimentary blockchain. Every time someone in the group completes a transaction, its associated data is added to the next line in the spreadsheet. In theory, the spreadsheet could continue to grow in perpetuity to accommodate all the new transactions. Practically though, your spreadsheet would eventually become unworkable.
Adding members to your group
Now let us say you and your friends start telling people at work about your new cryptocurrency. Suddenly, you have more people interested in becoming part of the group. You may quickly have tens of crypto owners, each with his own copy of the spreadsheet. Now it takes every transaction a little bit longer to finalize because twice as many people have to modify their spreadsheets.
If the 10 of you end up recruiting 10 more, you now have 20 members and 20 copies of the ledger to deal with. As you can see, this arrangement can quickly spiral out of control. Things are especially problematic when it comes to comparing every copy of the spreadsheet for accuracy. The more copies you have out there, the harder it becomes to compare and finalize transaction data. So what do you do?
One member of your growing group happens to be a computer programmer. He creates a software package that completely automates the process. Every member of the group gets a copy of the software to put on his or her computer or mobile device.
Things work a bit faster now. When you spend some of your coins, you enter it into the software program instead of a spreadsheet. Your copy of the software automatically records the data and sends it to the rest of the members. Their software receives the data, enters it, and then presents its copy of the spreadsheet for comparison. The software on each of the computers compares the spreadsheets for accuracy and finalizes the transaction.
The computer software not only automates the process, it also speeds things up and eliminates most of the mistakes related to human error. You and your friends can now trade cryptocurrency via an automated platform that does all the computation and verification for you.
Scalability becomes an issue
Everything is running along swimmingly for your new cryptocurrency group for several months. Over that time, you continue adding members and distributing more copies of the software and ledger. One day you realize your computer is working extremely hard to process your transactions. In fact, so much work is being done by your cryptocurrency software that it is monopolizing all the resources on your computer. Now what do you do?
The larger your ledger and group become, the more computing power is required to keep track of everything. So your computer programming friend comes up with a solution: create a hash value the software can compare instead.
Each of the five columns in your original spreadsheet is assigned a numerical value based on the data entered. Your computer programmer friend has implemented a formula into the spreadsheet to automatically assign field values for each transaction. He also creates a second formula that adds all the values together to come up with a number. That number is the 'hash value'.
Now, the software on everyone's computer doesn't have to go through five different fields to verify transaction. It just has to look at the hash value. If the hash value on all copies of the ledger agree, the new transaction is finalized. And by the way, this is essentially what makes cryptocurrency transactions irreversible and impossible to modify. A change on one copy would generate a new hash value that differs from all the other copies. It would automatically be void.
Encrypting your data
Finally, your group has grown to hundreds of members on its way to becoming thousands. You suddenly realize that all your data is at risk because it is publicly available. So you ask your computer programmer friend to encrypt everything. He does. Now, every hash value representing a new transaction is sent across the network as encrypted data.
All the other computers receiving the data must decrypt it in order to compare the hash value. This takes a little more time, but not enough to create a problem. The few extra minutes it might take to verify transactions is well worth it given the security afforded by encryption.
That is how blockchain works
If you were able to follow our explanation of blockchain, you should now have a basic understanding of how it works. It is not all that complicated in principle. We just tend to complicate it by using technical words and phrases that too many people do not understand. When you break it down into simple terms, blockchain becomes very understandable.
It is the blockchain ledger that powers every form of cryptocurrency on the market. From Bitcoin to Ethereum and Bitcoin Cash, they all exist because of the decentralized ledger known as blockchain.
One last thing to note is the number of coins available. That is determined by the person or group starting a new cryptocurrency from scratch. You and your friends could create as many coins as you wanted to meet the needs of your group. But know this: the total number of available bitcoins is finite. This is one of the big differences between bitcoin and fiat currency.
There are only so many bitcoin coins available. Once they are all mined and owned, there will be no more to get. That is not the case with fiat currencies. Governments can print new bills all day and night if they wanted to, creating a virtual endless money supply. We all know what happens when they do just that - in the worst case scenario it's called hyperinflation.
Thanks to bitcoin's ledger technology, there are now thousands of cryptocurrencies that people can use to conduct business online. Moreover, blockchain has been adapted for other purposes as well. You could say that blockchain is the most revolutionary thing to happen to technology since the invention of the internet. The blockchain and the internet will most likely get intertwined and morph our internet as we know it to something different in the future.
Blockchain and Mega Moolah
Blockchain brings some interesting characteristic to gambling and it might not be that bitcoin will win the token battle. For now however it's bitcoin that is the token most accepted at crypto casinos. In the future it could very well be that Ethereum and Smart Contracts take over at least the sports betting scene.
One of the concerns most people have with conventional online gambling sites is data transparency and trust. As such gaming results, winnings and payouts are not so easy to find or are in an unusable format. The integration of blockchain technology into the online gambling industry is expected to resolve these concerns. The online gambling industry will become more verifiable.
We are still in the very early stages of this crypto revolution and for now if you play Mega Moolah at the bitcoin-only casino, the most that you will see on the blockchain is your deposit to the casino.
To look up your deposit on the blockchain all you need to do is visit https://www.blockchain.com/explorer and use the search bar on the upper right and enter your bitcoin address and hit enter. This is proof of your deposit, and it works the same way on withdrawal too.
So what's the big deal? After all you can see the transaction in your credit card or bank statement... The difference is that blockchain is public. Your credit card or bank statement is not public because they contain way too much personal information. So you can just imagine how the blockchain can be used to verify transactions by other computer systems and e.g. Smart Contracts, which we'll talk about another time.
If you are interested in playing Mega Moolah with bitcoin we recommend the Bitcoin Casino as a starting point because it is a pure bitcoin casino accepting only bitcoin for deposits and withdrawals. This means you can actually see your bitcoin transactions to and from the website on the blockchain. This is a pretty cool way to start getting familiar with the blockchain... Also there's a nice bonus available!
Byline: This article was published by Mega Moolah expert Henry. Media and other enquiries.
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