Cryptocurrency and gambling have been intertwined for at least a decade. What started with a handful of online casinos and sportsbooks has mushroomed to hundreds, if not thousands. Yet, all these years later, many gamblers are still unfamiliar with how crypto works. This article intends not to make you a crypto expert but to explain how gamblers use cryptocurrency in simple terms.
What is Bitcoin?
Bitcoin is a digital currency created in approximately 2009 by an anonymous developer (or developers). The core technology that powers Bitcoin is known as "blockchain." The simplest way to understand blockchain is to imagine a shared spreadsheet of wallet addresses. When you send Bitcoin or other forms of cryptocurrency from your wallet to another, a transaction is noted on that spreadsheet for the whole world to see. Your balance on the spreadsheet is updated accordingly.
The wallet addresses themselves are not tied to your identity. When bad guys with bad intentions use Bitcoin, they are tracked down through the centralized exchanges they use to convert cryptocurrency to dollars. These are the on and off-ramps for the world of digital currency. The exchange rate is constantly moving, and you have likely seen the large swings Bitcoin has had. In 2012, a single Bitcoin cost $13.50 U.S. Dollars. Today, in 2023, as of the writing of this article, a whole Bitcoin costs over $25,000.
One common misconception about Bitcoin is that it is used in whole numbers. It is not. You can buy, send, or receive fractional amounts. Bitcoin is divisible up to 100 million times its small unit. This unit is known as a Satoshi. One Satoshi would be expressed as 0.00000001 BTC.
While Bitcoin is notorious for its use by international criminals, Bitcoin in itself is one hundred percent legitimate. It started with digital hobbyists at inception and has now been adopted by some small countries like El Salvador. Major companies and financial institutions now carry Bitcoin as an asset on their balance sheets. Skepticism about Bitcoin not being worth anything has faded away to being considered a major international currency. Instead of being created by a particular government like the U.S. Dollar, it is instead backed by "miners" who solve complex equations to make transactions on the network run. Their reward is Bitcoin itself.
Understanding Crypto for Sports Betting and Casino Gambling
You don't need expert knowledge of crypto to gamble with it. We have already discussed the basics of Bitcoin, and we can say that many cryptocurrencies came into existence after Bitcoin.
Ethereum and Litecoin are other major cryptocurrencies used by sportsbooks. Like Bitcoin, their value in other currencies is constantly fluctuating. The crypto world devised a solution known as "stablecoins" for people who want digital storage value pegged to a particular currency. Tether (USDT) and USD Coin (USDC) are examples. These coins are pegged to the U.S. Dollar on a 1:1 basis. Even these coins experience some volatility, and there have been brief times when they have become unpegged. In lay terms, sometimes USDT and USDC have been worth less than $1 due to market fluctuations. Many sportsbooks accept these stablecoins in addition to traditional cryptocurrencies.
Gamblers who use cryptocurrency for their wagering do so by buying it on an exchange. Two significant exchanges in the United States currently are Coinbase and Gemini. Customers open accounts much as they would a bank account. On the exchange, they can swap their U.S. dollars for Bitcoin or the cryptocurrency of their choice. Likewise, you can change one type of cryptocurrency for a different kind. In addition to exchanging cryptocurrency, you can send and receive it from your exchange-hosted wallet.
Why Private Wallets Are Important
An important note about an exchange is that you don't own the wallet there. Like depositing money into a bank, you are ceding control to the financial institution you entrusted your funds with. You might hear the phrase "not your keys, not your wallet" from hardcore crypto enthusiasts. This common saying refers to the cryptographic keywords associated with individual wallets. When you create a Bitcoin or Ethereum wallet, you'll be given a series of words known as a "seed phrase." Anyone with this seed phrase can recreate the wallet and access its funds.
In order to use cryptocurrency, odds are you'll need an exchange account to buy it. Alternatives include purchasing it from another person who can send it to you directly, using a Bitcoin ATM, or mining (which is complicated and you likely won't be doing). However, having a private wallet to self-custody your funds is in your best interest.
In a significant case of irony, given their symbiotic relationship, sportsbooks and exchanges do not get along. Cryptocurrency exchanges have liability concerns about people receiving deposits from wallet addresses known to be associated with gambling. There have been many cases of customers being banned from exchanges for sending or receiving transactions related to casinos or sportsbooks. Likewise, some sportsbooks may have issues withdrawing funds to an exchange-hosted wallet.
To avoid these problems, gamblers would be best served by creating a private wallet as an intermediary.
How to Create a Private Wallet
There are hundreds of types of wallets for thousands of types of cryptocurrency. For this article, I will only point you in two directions.
Option 1: Find a wallet you like on the Bitcoin site https://bitcoin.org/en/choose-your-wallet?step=5
Option 2: My recommendation and the best security option is a hardware wallet known as a Trezor. This is a physical hardware device that acts as a wallet. Assuming you adequately protect the device and restoration seed phrase, this is your safest option. The only downside is that it's most easily used on a computer rather than a phone. However, there is a way to use it with an Android phone, and there are instructions for that later in the article. They're also developing an Apple IOS app that may be released by the time you're reading this article.
You can buy a Trezor on Amazon HERE
The cheapest option is the Trezor Model One, which is just $69 today. This basic option is more than sufficient for your purposes. No need to spend a couple hundred bucks on their more advanced wallet.
Once you purchase and receive your Trezor Model One, you can follow the steps in this video to set it up:
Once your wallet is set up, you should send Bitcoin you purchase on an exchange to your Trezor, and then from there, you can send Bitcoin to your sportsbook. This video demonstrates using the Trezor Suite software on your computer:
If you want to send/receive funds on your Trezor via your Android device then this link for instructions: https://trezor.io/learn/a/trezor-on-android
Pulling it All Together
We have covered a lot, so let me summarize the steps to using Bitcoin to bet with:
It's worth noting that you have other options than exchanging Bitcoin. Bitcoin can now be used to pay for goods and services.
Bitrefill, for instance, allows you to buy all sorts of gift cards using your Bitcoin, and you make these purchases directly from your private wallet without exchanging for cash. They have services you already use, such as Amazon, Doordash, Uber, and Instacard. You literally could live off of Bitcoin by buying gift cards.
Likewise, you could fund a Bitcoin ATM account from your private wallet and get physical cash. Bitcoin Depot has a search function to see where nearby ATMs are.
Be sure to bookmark this article because I'll likely update it in the future, discussing specific sportsbooks. There are a variety of sportsbooks, including ones that operate purely on cryptocurrency rather than giving you a dollar amount balance. Most commonly, though, when you send $100 worth of Bitcoin to a sportsbook, your sportsbook balance is updated to be $100. Bitcoin price fluctuations do not matter to you at that point. Holding funds in your private wallet subjects you to market volatility. How this works out for you depends on whether Bitcoin's price is going up or down.
I encourage everyone to hold on to at least some Bitcoin without converting or spending it because it has continued to trend up since its inception. Having it in a private wallet is very powerful for your freedom. You are your own bank at that point.
Likewise, we didn't get into other types of cryptocurrency. If your purpose is to gamble, Bitcoin is the most widely accepted cryptocurrency in the world. If you're interested in holding stablecoins, you must learn about the world of Ethereum. If anyone is interested in an article about that, let me know in the comments, and I'll write one.
Thanks for reading. Make sure you're following me on X (aka Twitter) @spooky47crypto.
Disclaimer: This article doesn't constitute legal or financial advice. Always consult proper legal and financial advisors in your jurisdiction.