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.
2
The main considerations are going to be:
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.
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.
1I'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 – 2014-10-10T03:01:51.797
1@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 – 2014-10-10T04:04:52.230
@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 – 2014-10-10T08:00:01.147
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 – 2014-10-10T14:11:10.453
1@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 – 2014-10-10T14:11:10.773
I would be more worried about bitcoin gambling becoming illegal and the gov freezing the wallet. – Tyler – 2014-10-10T14:11:54.000
@GeorgeKimionis because using a known payment processor: 1) is indicative of proof of identity of at least one of the casino's owners, 2) because I'd trust Coindesk securing the funds moreso than an online casino with a hot wallet being tested daily by hackers, 3) because then you have records of earnings for the inevitable legal/fiscal issues you'll face. It wasn't meant to offend, apologies if it did. – Wizard Of Ozzie – 2014-10-10T23:23:44.193
@AussieCryptocurrency none taken, I appreciate your concern. I partially agree with your 1st argument, although this resembles the classical bank-fueled model and IMO it doesn't really fit in well with the distributed nature of bitcoin. On top of that any gambling service can obtain a remote gaming license and/or get regulated in a plethora of ways, it's not really the "bank"'s job to do it. And finally I don't see any value in your last argument as any business can go for a series of vanity addresses which it would heavily reuse, making these figures rather obvious into the blockchain. – George Kimionis – 2014-10-10T23:46:51.473