Originating in 2009 as a cryptocurrency designed for the internet era, partly in response to growing demands for fast and secure electronic transfers of capital globally, Bitcoin provides an increasingly popular and reliable alternative to conventional systems of payment. The history of Bitcoin shows that it was originally thought to be an entirely niche enterprise, but that bitcoins are now gaining more mainstream acceptance and use is unsurprising given that ever-growing numbers of people are living increasingly large proportions of their lives online.
A peer-to-peer digital money system, which is free to use and through which payments can be made instantly, Bitcoin is beyond the control of central banks and governments (although Japan has recognised it as a legal payment method), and instead relies on users themselves for its management and operation through open source protocols. This produces high levels of security, as all transactions receive multiple confirmations that are logged in public ledgers known as blockchains in such a way that they can’t be altered or erased, thus ensuring the integrity of any Bitcoin transaction.
The value of a bitcoin is not set, nor is it tied to any particular currency, meaning that its price fluctuates in real time in the way that stocks and commodities do, and therefore it is the willingness of consumers to buy bitcoins that ultimately determines what they’re worth. The value of a bitcoin broke the USD$5,000 barrier for the first time in September 2017 as a result of the Bitcoin hard fork on 1 August and the subsequent creation of Bitcoin Classic and Bitcoin Cash. Increasingly, as a result of such rapid surges in value, bitcoins have also come to be seen as a form of investment.
In terms of day-to-day use, consumers appreciate the fact that it’s free to send and receive bitcoins online, which is possible because their circulation is not controlled by any single entity, whether that be a private company or a state. In turn, this ease of use and growing popularity has also meant that bitcoins have been gaining wider acceptance as a mainstream payment method for both goods and services by a growing number of businesses, organisations and financial institutions worldwide. The introduction of bitcoin ATMs has also meant greater acceptance and accessibility in previously hesitant markets and jurisdictions.
Online gambling using Bitcoin
Given the nature of bitcoins, in terms of their operating outside of the control of conventional financial institutions and the degree of anonymity they provide when used in transactions, it’s unsurprising that online casinos are increasingly accepting bitcoins, particularly as gambling sites have to offer a range of different payment methods. The online gambling industry has always been an early adopter and innovator when it comes to new technologies, and so its embrace of bitcoins is a logical extension of the way it has always conducted its business.
The number of online casinos already in existence and where bitcoins can now be used alongside other payment methods has been increasing, albeit modestly; however, there is also now a rapidly growing number of sites that have been established specifically to appeal to and cater for casino players who want to use bitcoins, and who make a virtue of their Provably Fair games (a concept strongly associated with Bitcoin).
And whether it’s because some financial institutions and jurisdictions place restrictions on the use of a variety of conventional payment methods at online gambling sites, the desire of many players for anonymity, or simply the need for online casino payments to be processed more quickly than is currently the case, the entry of Bitcoin into the world of online gambling has been both welcomed and inevitable.
In order to use bitcoins as an online casino payment, it’s necessary to set up a digital wallet that enables you both to buy bitcoins and to carry out transactions using them. Most e-wallets that deal in bitcoins, like Coinbase, are also exchanges that enable you to purchase bitcoins via conventional methods such as PayPal, bank transfer or via a credit/debit card, although the precise services available currently depends on your location.
Once you have set up a bitcoin wallet, the process for using it as a casino payment method is quick and straightforward. You simply need to log into your online casino account, go to the cashier page, and select Bitcoin as your payment method and the amount you wish to deposit. You will then be given a wallet address that the funds should be sent to. Then return to your e-wallet, enter the casino’s bitcoin wallet address and authorise the payment, which should be completed almost immediately and your deposited funds available to play with straight away.
Although providing convenience, speed and privacy, there are nevertheless some drawbacks to making bitcoins your only or primary online casino payment method. Firstly, although there are a number of software developers producing games for bitcoin online casinos, including well-respected and established names such as BetSoft and Evolution Gaming, at present none of the ‘big 3’ casino game developers — NetEnt, Playtech and Microgaming — is producing games in which bitcoins can be used as the in-game currency. This means that the choice of games at bitcoin online casinos is currently a little limited, and players can’t access any of the big progressive jackpot networks of the major producers.
There is also the disadvantage that the value of the money in your online casino account can fluctuate quite rapidly as the price of bitcoins moves. While this is not necessarily a problem when you’re playing (especially if your casino allows bitcoins to be used as the in-game currency), it can be if you want to withdraw winnings and the value of bitcoins has fallen since you originally deposited your funds — of course, the value may also have increased, so as a bitcoin user you need to be prepared for these changes happening often. You should also be aware that online casinos that accept bitcoins as a deposit method do not automatically allow you to withdraw them.
Forex trading with Bitcoin
It has always seemed inevitable that the highly liquid market of forex trading would eventually become associated with a dynamic cryptocurrency like Bitcoin and so, while not universally recognised yet, an increasing number of forex brokers have now ventured into accepting bitcoins.
How much forex trading is currently undertaken using bitcoins is unclear, but it’s estimated that the daily volume of cryptocurrency forex trading in Japan alone could reach USD$8.7 billion (1 trillion yen) within a few years.
It is the very volatility of bitcoins, allied to its decentralised nature, high leverage opportunities and low transaction costs, that for some makes their use in forex trading so appealing, but at the same time, this volatility is also a major drawback and one of the primary reasons why forex trading using bitcoins has not yet become universal.
In simple terms, this is because exchange rate fluctuations (e.g., the value of bitcoins relative to USD$) can turn a win into a loss, because you are essentially introducing a third currency into a trading pair. For instance, it could be the case that you make a profit on a GBP/USD position, but a rapid drop in the value of bitcoins (which is not unheard of) between the time you made your deposit with your broker and when you eventually come to withdraw your bitcoins, could erode any profits made on your original GBP/USD trade. For this reason, it’s always important to know which exchange your forex broker is using when giving you a Bitcoin exchange rate (BTC), as these can vary.
Binary options trading with Bitcoin
Binary options are relatively straightforward, albeit high risk options, of which the most common type is known as high-low. Essentially, a trader takes a position on a stock, commodity or currency having risen (known as purchasing a call) or fallen (purchasing a put) in relation to its value at the time of the wager (the strike price) by the time of a set expiry date. If your forecast turns out to be correct, you get a fixed return; if not, the investment is lost. Expiry dates can be as little as 10 minutes, or much further away, and the profit a trader receives is relative to this timeframe.
Given the volatility of bitcoins, for some they are an ideal instrument for binary option trading; with very short time frames for expiry dates available, and the degree to which the value of bitcoins can shift in a single day compared to other currencies, there are constant opportunities to purchase a call or put. (It should be noted that brokers as a rule only offer BTC/USD as a currency pair for binary options.)
In addition, binary options trading can be attractive because it comes with known risks and rewards that are established at the outset, there are no commissions, and there is great flexibility with regard to strike prices and expiry dates.
However, there are significant risks, as there are with any form of binary options wagering. Most significantly, the potential rewards will always be lower than the risks, as any payout will only be a percentage of your investment, but any loss will be of the whole amount. This is because the difference between the amount they pay out in wins and receive from lost investments is how binary options brokers make their profits.
New and emerging cryptocurrencies
Unsurprisingly, given the rapid increase in value and booming popularity of Bitcoin, other cryptocurrencies are following in its wake. A number of these have features in common with Bitcoin, most notably open source protocols and de-centralised control, but whether they can match its take-up remains to be seen.
Online gambling sites have again been at the forefront of embracing these newer cryptocurrencies, with Litecoin, set up in 2011, Ripple (2012), Monero (2014), Dash (2014), Ethereum (2015) and zCash (2016) all being accepted as a payment method at selected online casinos. Some of these new cryptocurrencies can also be bought and sold in exchanges as Bitcoin is, with prices measured against the USD$; generally, however, many exchanges at this stage only buy and sell Litecoin and Ethereum, alongside Bitcoin.