How it all works

8Bet.io is a Provably Fair gaming platform that is 100% return, zero margin and is entirely player-powered. This is how it all works.

Provably Fair

Provably Fair is a model that ensures the outcome is entirely random and no-one can influence the results of a game. The principle is widely adopted by many of the most advanced and leading-edge online gaming sites and is seen as superior to the archaic methods of requiring players to simply trust that some human auditors have reviewed and tested the code at some stage!

8Bet’s provably fair model is based on the Bitcoin blockchain, and the entire process of drawing results is open and transparent, with open-source code that anyone can view and follow step by step to confirm that the results were entirely independent, random, and impossible to influence by any party.

The 8Bet Lottery results are generated as follows:

1.  At the start of the game (before any tickets are sold) a server seed is randomly generated by the server.

2. This server seed is then hashed using SHA256 and the seed hash is then published on the game for all to see. Because this hash is public from the start of the game, the original random server seed can not be modified in any way.

3. Players then buy tickets for the game until the time of the draw.

4. At the time of the draw, ticket buys are closed and the game waits for the next block to be mined on the Bitcoin blockchain. When this happens, the game takes the block hash from this next block.

5. The server seed and the block hash are then joined together and this concatenated server seed + block hash is hashed using SHA256. This hash is then used as the RNG seed for the random number generator.

6. The lottery results (6 lottery numbers) are then randomly generated by the well-known Mersenne Twister random number generator.

Using this method, anyone can follow the process through,  even using their own code to confirm that the results were indeed fair. And use of the Bitcoin blockchain as part of the RNG seed ensures that not even those who have access to 8Bet source code or servers could influence the result in any way – a truly independent and fair result every time.

100% Return to Players

The question most often asked when people hear that 8Bet operates on a 100% return model is “how is this going to make any money ?!”.

Well, the short answer is – it isn’t. In a typical house-edged gambling operation, the margin or house edge is the profit taken by the house – a portion of every bet staked that goes to the house instead of back to the players (see more about the debilitating effect of the house edge in our post about why gambling today is flawed).

But 8Bet has no house – it operates as a global cooperative, where the players themselves perform or fund all of the functions for the operation of the platform. See more about how staking, marketing, engineering, support and infrastructure are powered by the cooperative player community in our post on the idea and principles behind 8Bet.

The returns on 8Bet games are fully transparent and a full breakdown is shown in the game pays section on each game.

 

Why we switched to Bitcoin Cash, days before our online lottery launch

Our team had been supremely focused in the final weeks approaching our  December ’17 target launch date – final polishing of the UX, running and rerunning math models, rigorous application testing, and squashing bugs like a crew of possessed exterminators.

Our platform is a player-powered, exclusively-crypto, provably fair, zero margin (100% return) online gambling platform (more about the philosophy and principles in this post).  When we’d started work on the platform, there was only (really) Bitcoin. Well, it wasn’t that long ago, but Bitcoin was still by far the de facto standard crypto currency for transacting. And so it was the default choice as the native currency for our gambling platform (using mBTC or milliBitcoin – 1/1000 of a Bitcoin). We were supporting other cryptocurrencies as a means of depositing of course (using services such as ShapeShift) but these all converted to mBTC going into the users’ balances.

However, in these final weeks approaching launch, the Bitcoin (Core) scalability issues starting coming to a head, and most significantly for us transaction fees shot up to over $20 (they were in cents when we started this initiative!). We tried to dig our heads into the sand and focus on our product, hoping the Bitcoin ecosystem would sort itself out by the time we were ready to launch (figuring this situation also can’t be good for bigger operations than us, right ?).

But it didn’t sort itself out…

And so there we were, mere days before our planned launch, with a very difficult decision to make: launch as planned with our entire system built with Bitcoin as it’s native currency – or bite the bullet and make the call to switch.

Our resistance to change was natural – it would be a massive and hitherto unconsidered change to the core of the system, almost a “back to the drawing board moment” merely days before we were scheduled to launch. More than just the technical and software changes, our games were designed on Bitcoin as the native currency, and so the payouts and mechanics would have to be reconsidered depending on the cryptocurrency that might be chosen instead. Then there were the exchanges and inter-currency movements to be considered. Most importantly, the risk of throwing the team into disillusionment was a very real one – as these changes almost certainly would mean postponing the launch and missing the launch date we had all been so focused on hitting.

Turns out, the re-think exercise wasn’t as complicated or contentious a decision as we thought it might be. The problems with Bitcoin were clear and indisputable. With our situation all mapped out, it was crystal clear that our product would not survive with Bitcoin’s high fees and long confirmation times. The decision was unanimous – we had to switch.

There were two major areas where Bitcoin would fail our product, and these were so fundamental to the user experience and the core financial models of our system, that there really was no choice. Our first gambling product launched on this platform is going to be a provably fair, 100% return online lottery. Players buy tickets for the equivalent of a few dollars of fiat in the crypto of their choice for the chance of winning a significant and growing jackpot.

From the perspective of what our product offered our users, the two areas Bitcoin would fail us would be:

* given a typical transaction value of a few dollars (the price of a lottery ticket) fees of over $20 made no sense of course. Even using services like ShapeShift (via their API) to offer users deposits in any other crypto still involved having to convert to Bitcoin (as this was the native currency all users’ balances were held in. And things still didn’t get much better for the bigger spenders, who might deposit larger amounts, enough for several tickets or to buy into several upcoming draws – the overall percentage cost to fees was still unacceptably large. This is especially painful when we’re trying to provide a product with 100% player return – this differentator is rather pointless when fees would eat such a significant portion of the return. Then the fees on the way out (withdrawing funds) would further chomp into the return to players, doubling the troubling.

* secondly, confirmation times of an hour to several hours were a non-starter. With multiple online lottery draws every day, it is important that we allow purchasing of tickets to the very last moment before the draws. Clearly having players waiting more than a few minutes for their deposit to confirm while the clock is ominously ticking down for the upcoming draw just wasn’t an option.

Both of these issues (high fees and long confirm times) were also killers for internal movement of funds. When a jackpot isn’t won, the jackpot rolls over to the next draw, creating a bigger jackpot. In order to have the full jackpot win amount at a single address that could be publicly examined on the blockchain (confirming the full win amount was available to be paid to the winner) we have movement(s) of funds at the end of each draw. Taking a big fee hit broke our 100% return model, and we simply couldn’t wait an indeterminate number of hours between the end of one draw and the start of the next (we’d designed and tested this to be no more than a few minutes, before the troubles).

The king was dead, time to find his successor. Long story short, Bitcoin Cash came out clearly ahead of the competition – lowest fees and reliable confirmation times. Check and check. We would (re-)base our platform on Bitcoin Cash as the native currency, and only offer Bitcoin as an alternate coin deposit method (converting to BCH along with the other altcoins) to fund users’ BCH balances. This meant our platform and model now worked fast and efficiently for the majority of cryptocurrencies, and only those who consciously insisted on using BTC would suffer its issues.

With the decision made, we powered on with the technical, software and game changes. Of course, our engineers responsibly chose to make the native currency configuration more flexible as part of this change (as opposed to simply search-replacing BTC with BCH 😉 ) so we could adapt more flexibly to crypto market changes in future.

All of this meant our previously planned December launch will be postponed to January. We made good headway with the changes so far, and after the big push we’re all having a slow-down and chill-out for the holidays – back to it on 2 Jan and looking forward to launching on BCH shortly after!

Better Gambling – the idea and principles

We’ve explained in detail already why we think gambling today is flawed.

There is a fundamental conflict of interests, pulling in opposite directions – with the house looking to maximise profit, and the players seeking a true gamble – with a fair chance of winning. However, because the house sets the rules, gambling offerings remain a universally player-disadvantaged scheme, openly rigged so the house always wins.

But if gambling (in all forms) is part of the human condition, then surely there’s a better way to *truly* gamble value, a way to satiate that hard-wired risk/reward tickle without the house edge exploiting this in a perpetual fleecing racket ?

This is the question we asked ourselves, as engineers, designers, mathematicians and gamblers – can we imagine a better way to gamble ?

Clearly, we ruminated, in a perfect gambling world the thorn of the house edge would have to go. There is simply no place for it, constantly siphoning player funds out of the ecosystem. With no house edge then, there is no incentive for a house to belong in this gambling-perfect ecosystem – so away with the house.

Without the house and its edge, we can imagine gambling games of chance with a true, 100% return, even-money, perfectly fair chance of winning.

But the house performs some fundamentally important functions and services, right ? Without a house in the picture, who will perform these functions ?

The easy and short answer is: the players. After all, they’re all that’s left in this house-less ecosystem!

Now, it turns out that we weren’t just smoking something a bit too strong when we came up with this. It actually isn’t as ridiculous as it sounds for the players themselves to power the entire gambling ecosystem. We happen to live in an age where the perfect storm of technologies now exist to make all of this possible – blockchain, cryptocurrency, and strong cryptographic principles such as Provably Fair.

Let’s examine all of these important functions in a gambling ecosystem, and consider how they might be fulfilled by a player community that has ejected the house:

Fairness: Fairness in the games of chance in the old world was enforced by auditors, regulatory authorities, testing and accreditation laboratories and a bevy of other bean-counting suits each commanding a a fat fee (paid for from the house edge). In the new world we imagine using technology and mathematical principles that are already widely known and in use today. Cryptography can give us Provably Fair games – where it can be mathematically shown that games are perfectly random, tamper-proof, and thus can be proved to be fair. Let technology and mathematics enforce fairness – a perfect system not foul to the human error or influence risks that are present in the old ways. And achieved at zero cost without the army of human checks and balances to pay.

Handling Money: the house handles all the money coming in from players, and going out to the against-the-odds lucky few who win. There’s cash to handle, electronic payment management (credit/debit cards, bank transfers, wires), cheques and so on. Well, to replace that we have cryptocurrency for exchange, blockchain and smart contracts for execution. And all possible at a fraction of the cost, and with almost no human intervention or cost.

House Stakes: when players win big and want to cash out, the house has to cough up from its own stake. This is traditionally done from a small portion of the big pile of cash the house has fleeced of all the other players. For really big wins, typically jackpots, the house sometimes has an insurance policy in place.

However, in a truly 100%-return player-only ecosystem, there is no accumulating pool from the (0%) house edge. While the statistical expectation over the long term is for all games to be 100% return, the reality is that at any given moment that could be greater than 100% (when somebody wins big). For the staking of >100% wins to be done by the players themselves, on an opt-in peer insurance model that earns the staking players the insurance premium could actually work fantastically well – earning players a predictable return on what they stake. More on this later (spoiler alert – it’s brilliant!)

Infrastructure: Internet-based gaming systems (which is essentially where we are going here) need big secure data-centres, lots of servers, networking equipment and storage – right ? All of which takes a major upfront investment from the house. That’s old-world thinking. In the new world we have the cloud, IaaS (Infrastructure as a Service), PaaS (Platform as a Service), SaaS (Software as a Service) and all-encompassing XaaS (Anything/Everything as a Service). On-demand, pay-as-you-go resources provisioned just in time and scaled to demand. No upfront investment. No need for the house.

Engineering and Development: but someone’s got to build all of these great gambling games, right ? And keep them running, improve them over time, make more and better games ? Again, since we’ve only got the players left in this house-less ecosystem, it falls to the players to build the games we want. The open-source bounty model here is an excellent example of how well this can work, as a self-regulating engine the economics of which are perfectly aligned with the wants and value placed on features by it’s users. Bounties for engineering features can be funded by donations from non-engineering players.

A quick word on donations – to run this house-less gambling ecosystem, players ought to be able to donate either their effort (volunteering, performing important tasks to keep the ecosystem running) or their money (in order to pay for the necessities they might not be able to volunteer). The choice of which to donate, and how, is left to each individual player. This will ultimately be self-regulating as well – not enough donations of effort or money, and the ecosystem stagnates and grinds to a halt – indication enough that the players don’t find value in the system worthy of contribution. A good stream of donations and the system flourishes and grows, benefiting all players within.

Marketing: another big black hole that the house edge funds. But what is marketing really , if not just getting word to people who might enjoy and benefit from the product ? Word of mouth could replace big-spending Superbowl ads here, with the community themselves spreading the word. After all, if the product is truly better than the flawed options that exist now, it should be natural and expected that awareness will propagate, driven by the community powering and enjoying it.

Helpdesk and Support: sometimes things just go wrong, or you need the help of another human being to understand or help fix a problem. Community support through forums and other social platforms could fulfil this service, with those community members contributing by helping others rewarded from the donations/bounty pool as well.

So… there we have it – the seeds were truly sown. This might just work. Certainly, we weren’t coming up on any aspects of the ecosystem that couldn’t be powered (often with better results) by the player community instead of the house.

And thus was born…. 8Bet.io. Power to the Players!

Gambling today is flawed

Gambling is very much part of the human condition. We gamble with aspects of our lives every day, risking for the chance of reward in a plethora of forms.

Yet games that incorporate gambling for real money are fundamentally flawed. The odds are stacked so overwhelmingly against the player that it is not much of a gamble at all – it is really just a facade for systematically draining money from players to the house under a thin guise of a real gamble.

Consider the maths of it all, as a closed system.

There are two main parties in gambling: the house (casino, lottery etc.) and the player. 

Ultimately, all of the money put into the system is from the collective pockets of the players, in the form of bets (or wagers, or ticket buys – all amounting to the same thing). The house takes a portion of every player bet, and puts it into its own pocket. The rest (of the players’ money) from the bet is returned to the player in “winnings” or payouts. But really, it is just the change that is left over after the house takes what it wants.

This portion taken by the house from each and every bet is called the house margin, house edge, the keep or the hold. This amount is immediately removed from the ecosystem, taken as profits or distributed to any of the other sub-parties related to the house – financial institutions (banks, credit card companies), regulatory authorities (government departments, auditors, licence regulators), gaming technology and service providers, or to marketing the gambling product to attract yet more eager players.

Take for example, the Powerball lottery – where the house edge is a staggering 50%. Fortune Magazine gives us a rundown of where that money goes:
* 50% is returned to the players, in winnings
* the retailer of the ticket takes 5%
* another 5% goes to administration
* and 40% goes to taxes of some sort (state general funds, education, elderly, property taxes).

The problem with this model is the churn. The whole system isn’t a single-cycle one – players don’t just buy one ticket ever, and so they don’t lose *just* half their money to the house. What is actually happening with churn is that the total player bankroll, or sum total of funds in all players’ pockets is halved per cycle. For each and every cycle.

For the Powerball lottery at a house edge of 50%, let’s see how this plays out with collective $100M to start with:

Cycle NumberTotal Spent on TicketsTotal returned in Wins/JackpotPercentage of original starting bankroll
1100M50M50.0%
250M25M25.0%
325M12.5M12.5%
412.5M6.25M6.3%
56.25M3.125M3.1%

So it takes just 5 cycles for almost 97% of the players’ total bankroll to leave the ecosystem entirely, in the form of fees, taxes, admin and profit, leaving just 3.1% in the pool to possibly be returned to players in the form of winnings. So in it’s simplest form, if a lottery ran on a twice-weekly cycle, and the full set of players bought tickets with their full bankroll for each draw, they’d all collectively be left with just over 3% of what they started with in just 2.5 weeks!

Of course, the reason these heavily house-advantaged games continue to thrive is that the players don’t just stick with their starting bankroll from Cycle 1 – instead they continue to reach deeper and deeper intro their pockets introducing more external money to the ecosystem and ending up only further bolstering the coffers of the house.

The margins may look a lot better on casino games (slots, roulette and other table games), but their house-advantaged effect is still as effective in draining player pockets as the lottery games examined above.

Public figures such as this study by the University of Nevada, Las Vegas  (stats to Oct 2017) which largely concurs with this one from the excellent Wizard of Odds show that average hold on slot games in your typical casino would sit around 7% – a far cry from the 50% hold of lottery games. While this might seem like a much better deal, that devastatingly effective tool of the house called churn comes into play once again.

The typical lottery player might buy just one, or maybe a few, tickets per lottery draw, and they’re done. However, a slot player would play several spins (tens if not hundreds) on each slot machine, and perhaps move between machines – for a total of several hundred to maybe thousands of spins per visit to the casino. Smaller margin per spin, but a few orders of magnitude more spins per visit makes the slot games just as effective as the lottery ones.

In numbers then – consider a player with a $100 bankroll playing slot machines with “only” a 7% house edge:

Cycle NumberTotal Spent in BetsTotal Returns in Wins/JackpotPercentage of Original Bankroll Remaining
1100.093.0093.0%
293.0086.4986.5%
386.4980.4480.4%
480.4474.8174.8%
574.8169.5769.6%
669.5764.7064.7%
764.7060.1760.2%
860.1755.9656.0%
955.9652.0452.0%

So we see it takes just over 9 cycles for half his bankroll to be wiped out. What does this mean practically ? Well, 9 cycles totals about $685 in churned bets. So if you assume $5 per spin, that’s around 137 spins of the slot machine. Take an average of 4 seconds per spin, and that’s 9 cycles (and half his bankroll) gone in under 10 minutes!