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Could Digital Currency Bitcoin Set Online Poker Free?
Since the birth of online poker there have been governments, banks and bureaucrats actively trying to control the game.
Those parties have done everything in their power to limit the game geographically, tax it and in some cases restrict people from playing altogether.
All those limitations lead online poker players to dream about a world where everyone can play whenever they want, wherever they want.
Bitcoin represents a potential paradigm shift in the online poker world as it could easily bypass the number one issue that has plagued online poker from day one: payment processors.
In this special feature PokerListings.com takes a closer look at the rising popularity of Bitcoin and how it could potentially change the online poker world forever.
What the Hell is Bitcoin?
There are many things that Bitcoin is but let’s make one thing clear straight away: Bitcoin is not real money.
At least not in the way that people traditionally think about money.
No government is behind the online currency and it does not represent gold, silver or any other physical commodity.
Bitcoin is simply a system of virtual tokens that can be exchanged for goods and services where it is accepted.
There are risks. Since the entire system is open-source and online there are fears it could be hacked. Bitcoin has only been in existence for a few years and many economists still consider it an experiment.
Here’s perhaps the most surprising thing about Bitcoin, however:
Despite concerns about stability and security, Bitcoin is a hot commodity and as of September, 2012, the digital currency is currently trading at $10 per Bitcoin with a total monetary base of over $90 million USD.
It’s been called potentially world-changing and it’s starting to be used by businesses including Wikileaks, Free Software Foundation, Freenet, Internet Archive and more.
e-Money experts like Jon Matonis, who contributes to Forbes Magazine and is the editor of The Monetary Future, believe Bitcoin is potentially a game-changer.
“Bitcoin is definitely not a fad because it is the world's first genuine cryptocurrency,” he told PokerListings.
“Prior attempts at crypto-based currencies required a centralized coordinator of some sort and that was always a potential source of vulnerability. Bitcoin was designed to be resilient.”
A Brief History of Bitcoin
The history behind Bitcoin sounds like something out of a Cyberpunk novel.
The Bitcoin network came online in 2009 when creator Satoshi Nakamoto (thought to be a pseudonym) released the client as open-source software.
Nakamoto did not just simply release bitcoins into circulation, either. Instead Bitcoins are awarded to “bitcoin miners” who use powerful computer systems to solve blocks of the network and release 50 Bitcoins at a time.
The difficulty in mining Bitcoins establishes a rarity and gives them more real-life value.
There is a hard limit and no more than 21 million Bitcoins will ever be issued.
Since being released the price of Bitcoins has fluctuated rapidly and gone from $0 per Bitcoin up to over $30 and then back down to under $5.
So why would anyone want anything to do with a digital currency that could eventually prove to be as valuable as dust?
It’s simple. Bitcoin represents a global currency. It can be transferred instantly, it does not rely on government or company backing and it does not require a payment processor like PayPal or Neteller.
Oh, here’s the other thing: you can use it to play online poker anywhere in the world.
How Bitcoin Could Change the Poker World
In many ways Bitcoins are ideally suited to the online gaming world.
Because of their decentralized, global and anonymous nature Bitcoins could potentially take governments right out of the online gaming equation.
Bitcoins are simply used to buy chips on online poker sites. Because banks are not involved there is no way for government agencies to restrict people from using Bitcoins on whatever they want.
Already several online poker sites have started accepting the digital currency including Switch Poker and Bitcoin-only SealsWithClubs.
Poker pro Bryan Micon, the man behind controversial poker forums NeverWin and more recently DonkDown, is the SealsWithClubs chairman.
“The revolutionary idea of Bitcoin is that instead of a government, cryptography is the backer of bitcoin - that is what prevents counterfeiting and other manipulation,” he said.
“Mathematics governs this system, not men. Bitcoin is one of the most amazing feats of human science I have seen in my lifetime.”
The story of SealsWithClubs is noteworthy in its own right.
According to Micon, an anonymous poker player named Freemoney decided to start SealsWithClubs after the events of Black Friday in 2011 made him unable to play online poker in the U.S.
In the beginning Freemoney would run all the games himself, playing heads-up matches almost 24/7. Eventually poker players and Bitcoin fans caught on.
While traffic is still tiny on the network, there tends to be games running at most times.
More Benefits in Using Bitcoin for Online Poker
For Micon, Bitcoin represents a direct alternative to the current path of online poker.
“Remember the payment processors and all the needless trouble they caused? Yeah they don't exist anymore,” he said.
“No Daniel Tzvetkoff stealing $50 million and no checks from ‘Customer Service International.’”
Even an e-Money expert like Matonis agrees Bitcoin fits naturally in an online gaming environment.
Matonis was quick to shoot down the idea that a similar platform even exists.
“No, not really because any payment platform with a centralized point for issuance or transaction verification is a point of vulnerability,” he said.
“As with the Full Tilt case in the US, payment processors were the focus of the investigation and the enforcement. Bitcoin is the ideal digital casino chip because of user-defined anonymity and untraceability.”
Even if online poker is legislated in the U.S., which many experts think may happen over the next few years, Micon believes Bitcoin poker sites will remain a viable alternative.
“It will depend on the products produced by USA legal sites and Bitcoin sites,” he said. “ What if your choices are $6 rake "Bellagio Online" vs. mostly professional Nevada-based opponents or .1 BTC rake SealsWithClubs vs. randoms from around the world?”
“Bitcoin sites can gain a competitive advantage in a USA-legal online poker landscape by keeping the rake extremely low and by spreading the games that players want to play.”
Problems and Security Issues Facing Bitcoin Poker
Despite all the advantages to using Bitcoin for online poker there remain some potentially large obstacles for widespread adoption.
“This *is* the wild, wild west of online poker,” said Micon.
“The currency fluctuates wildly and I believe there to be a greater than 25% chance of total technical failure of the Bitcoin system. Remember we are depending on "unhackable cryptography" here. Those words scare the shit out of me, and they should you too.”
Still, that risk isn’t keeping millions of people from exchanging bitcoins.
The other challenge with Bitcoin is that it’s difficult to explain to potential new users and simply acquiring Bitcoins in the first place is difficult because you have to go through a third-party exchange.
Security is an interesting issue with Bitcoin because unlike payment processors like PayPal, the money does not exist solely on the cloud. It exists on your computer and if you lose or delete the file, that money is gone.
“A bitcoin payout is like receiving a stack of chips or a stack of $100 bills,” explained Matonis.
Historically Bitcoin itself has never been prone to large scale hacking but the exchanges (where you actually acquire bitcoins) have had issues.
Arguably the biggest black mark in the history of Bitcoin came on June 2011 when Mt.Gox, the most-popular exchange at the time, was compromised, which affected the equivalent of $8.7 million in bitcoins.
The Mt.Gox hack resulted in a huge drop in Bitcoin exchange rates, although the currency has recovered significantly since then.
The Future of Online Poker and Bitcoin
So is Bitcoin truly the currency of the future and the ultimate liberator of online poker?
It’s something that economists around the world are still trying to figure out.
At this point, however, the Bitcoin train is gaining momentum fast.
Even the fluctuations in pricing are to be expected, according to Matonis.
“Fluctuation like that is normal for a new, boot-strapped currency that is going through a process of global price discovery in a three-year period,” he said.
“The chart looks very similar to the price of silver, which went from $50.00 per ounce to $4.00 per ounce and then back to $50.00 again. No one says silver isn't money!”
Micon thinks it will be hard for online poker sites to ignore Bitcoin for much longer.
“There are too many wins for sites not to recognize the technology and what is possible with it,” said Micon.
“It is only a matter of time. The savvy companies are already looking into it, and for large sites it's likely not quite ready yet. For small niche sites it's currently perfect.”
If Bitcoin does take over online poker, the U.S. government or any government for that matter, will have little say over the future of the game.
“The US government may have a position on bitcoin as it relates to being a simple barter token for tax reporting purposes,” said Matonis.
“Otherwise, they are in a quandary because any attempt to define it as a currency and/or ban it outright would only serve to increase its legitimacy and increase its usage.”
“Since Bitcoin is decentralized, it cannot be taken down in the way that e-Gold or other centralized issuers are vulnerable.
So is Bitcoin the future of online poker?
Maybe, maybe not. But it does give us a preview of what the online poker world might look like without borders and boundaries.