Betting Exchanges be Warned: Decentralized Prediction Markets are Coming

Traditional sports betting – particularly in exotic markets – has rarely been a flawless experience. Those looking to benefit from specific knowledge can find themselves being locked out of a bet before they can place it – or worse yet, having an accepted bet be rejected only after the fact. The reality is that when it comes to sports betting – the power dynamic between the house and the punter is unfairly balanced against the hopeful player.

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However, a decentralized movement is firmly underway which aims to create absolute fairness in a market that has faced criticism for its lack of transparency and sometimes shady dealings. The blockchain, a distributed ledger that has no central authority, is now beginning to shine in its application for gambling markets. Rather than betting through a middleman, the blockchain enables players to bet against each other with a guarantee that the bet is honored and winnings distributed in an immediate and transparent fashion. While many punters may have heard of the world’s largest blockchain – Bitcoin – it is actually not Bitcoin which is making waves in the land of sports betting. Ethereum, a “programmable blockchain” is the technology that currently underpins the growing ecosystem of sportsbook protocols and this new betting paradigm.

Ethereum Betting

Ethereum is a blockchain that has become known as the decentralized “world computer”, allowing anyone to create programs that execute without the possibility of censorship.

Literally anything can be created on Ethereum and some fascinating use-cases are already beginning to emerge, not least for the Ethereum casino market. Last year, a protocol named Augur was launched to allow users to create “prediction markets” across any topic they chose. These prediction markets have covered politics, stock prices, Oscar winners and of course, major sporting events. Those creating the market are rewarded with a percentage of activity that takes place inside it, and those participating can buy and sell their positions within that market as they please.

The benefit of these prediction markets is several fold:


1. Transparency

While blockchains are regularly touted by the mainstream media as being the tool of terrorists and those on the dark web, they are in fact, entirely transparent. This transparency allows bettors (in this case) to verify the funds of a prediction market as well as the activity that is occurring within it. Furthermore, those more technically savvy – or who might know someone more technically savvy – are able to audit the prediction market’s code to verify that it will pay out correctly. This is all thanks to Ethereum’s transparent blockchain.


Once the outcome of a prediction market has been validated, payments are made immediately. There is no withdrawal process or manual action needed – funds are simply sent to those who correctly selected the market’s outcome without any potential for censorship. Once a payment has been sent, funds (no matter how large or small) then arrive in the player’s wallet within seconds.

3. Anonymity

Creating an account at a sportsbook can often be tedious and filled with “gotchas” that can result in rightful funds being frozen or even withheld. With Ethereum-based sports betting it’s possible to bet without any need to register or verify identity and winnings are paid out regardless of who you are or where you live. Of course, betting with anonymity raises plenty of regulatory questions and those betting under such conditions should apply a much greater level of due diligence, particularly around responsible gambling.

With so many benefits, why has sports betting not already been revolutionized by Ethereum or Bitcoin? There are a couple of answers to this question that may satisfy the skeptics.

First, the on and off-ramps to Ethereum applications is awkward, to say the least. Accessing the appropriate cryptocurrency for betting on these markets is filled with difficulties and turning those cryptocurrencies back into US dollars or Euros comes with a fee. While volatility is no longer a problem thanks to decentralized stablecoins like DAI, the need to move between the traditional and crypto ecosystems creates too much friction and expense for many. Second, the liquidity of these markets is infinitesimal compared with traditional sports; those looking to find a good price for their bet may struggle – the markets right now are too quiet for the non-professional player.

Regardless of these problems, the technology has proven itself viable and with the little-to-no cost of operation, these blockchain-based betting platforms can continue indefinitely without risk of shutting down. In the meantime, a huge amount of effort is being placed on improving the on and off-ramps to Ethereum as well as the user experience for newcomers. Augur, the platform mentioned earlier, has recently announced its plans to launch version 2 of the protocol in Q1 2020, focusing on “mobile-first” UIs, market-making tools, user growth, and activation as well as “bringing the offline social betting experience online”. While the technology may not be ready for the mainstream betting market, its direction is clear – peer to peer betting is heading towards a blockchain-shaped overhaul.

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Tesla is the football betting analyst and tipster. I'm in this more than 17 years, so you can follow my FREE football betting tips and predictions and make a good decision before you place your bets.