How Smart Contracts Could Revolutionize Online Gambling: FunFair and Virtue Poker Face Off in Merkle Exclusive Interview

Online gambling is estimated to be a $50-300 billion dollar business worldwide. Yet while it’s a huge market, the current centralized model poses problems for players, casinos, and others acting in the space. Both FunFair and Virtue Poker seek to fundamentally change this industry through decentralization. If their bets are right, all parties will benefit from a fairer and more transparent way to play. Find out why this industry is ready for implementation on the blockchain in this Merkle exclusive side-by-side interview featuring Jez San, the co-founder of FunFair, and Ryan Gittleson, the co-founder of Virtue Poker.

The Merkle: What are each of your businesses offering and how are your projects different from each other?

Ryan: Virtue Poker is a peer-to-peer decentralized poker platform built on the Ethereum blockchain. Virtue Poker uses the unique features of blockchain technology in conjunction with P2P networking to provide a safe, honest environment to play online poker. Player funds are never held by Virtue Poker; instead, game buy-ins are held in escrow by blockchain-based smart contracts while they play, and payouts occur in 30 seconds or less. Virtue’s distributed peer-to-peer shuffling algorithm provides game security, since the deck never resides on a centralized server.

Virtue Poker Alpha Interface

Virtue Poker Alpha

Jez: FunFair offers a gaming platform that uses smart contracts between casinos and players to empower casino operators with the ability to offer high-quality, cheat-proof gaming. Our technology lets any casino gain these benefits. FunFair is fully decentralized and highly scalable. Players use their own existing wallets to play, without the need to create another one on our site. Our games run off-chain but settle and manage disputes on-chain. This enables extremely high speed, one hundred to one thousand transactions per second (TPS) for each casino, without our games slowing to the limits of Ethereum’s 15 TPS scale. The tech is node-based, and each casino runs a node, so the more nodes [that] exist, the higher the scalability.

Roulette on FunFair

The Merkle: Why did you both choose to build on the Ethereum platform?

Jez: Ethereum is the only platform proven in use, and its ecosystem and research make it far greater than the sum of its parts. Other blockchains lack the massive ecosystem it offers. It has clear plans for long-term scaling and many smart minds working on the upgrades. For FunFair, Ethereum gives us the power to do both application of a smart contract and payments at the same time, and no other platform supports both this payment layer and smart contract layer needed for our specific goals.

Ryan: Ethereum’s been in use and it’s not just a theoretical project. While a lot of other platforms have promised higher TPS or other core utilities, they haven’t been tested. If you look at operating systems for mobile devices – for example, iOS, Android, and others – the platform with the largest community, with the most members building projects, are the ones that develop most. Ethereum brings that excitement to our community and has the largest global developer pool working on building applications.

The Merkle: Can you tell us a little about how payments are settled on your gambling platforms? What’s going on behind the scenes, and what’s the user experience?

Jez: Our Fate Channels are an advanced form of state channel that not only process payments but power random numbers and execute smart contracts off-chain. When a player starts a game, both the player and the casino bring payments, and their funds are held in real-time escrow in a smart contract. The time it takes to open this channel is critical to a smooth user experience. Whilst other payment or state channels might take minutes to bring funds into escrow, the Fate Channels take seconds to do that. Our Fate Channels also run real-time random number generation within the game, creating a stream of provably fair and correctly ordered random numbers without [the] use of a centralized oracle or private server.  

The Random Number Generator is the biggest way that casinos or players can cheat. Other attempts to do randomness using Oracles cause multiple minutes of excruciating delays while the player finds out if they’ve won the game. Ours are instant, which makes the games both Fun and Fair.

Ryan: Currently, we require players to submit a transaction to Ethereum when they join a table, at the end of each hand, and when a player leaves the table. Our team is looking to integrate a state channel solution such as plasma, to allow players to track the movement of chips within a game off-chain, and only submit a transaction to the table contract when reconciliation needs to occur, when a player leaves the table, or [when] a tournament has ended. This would eliminate the requirement for [a] player to send a transaction at the end of each hand, making the app more cost-effective.

The Merkle: What do you think blockchain enthusiasts are missing when it comes to understanding the future impact of crypto gambling?

Ryan: Those in the industry following various forums in both crypto and online gambling are the first to understand our value propositions and use cases for our project. There are many people [who] have purchased tokens but haven’t interacted with usable Ethereum DApps, and once they’re able to see how DApps [like Virtue Poker] work, they’ll understand the impact we can make. One of the biggest [benefits] of using a decentralized computing resource such as Ethereum is reducing operational costs. Using Ethereum rather than centralized servers lets us pass more savings back to players, and it is cheaper to send transactions using cryptocurrencies such as Ether versus using traditional withdrawal mechanisms commonly found on existing online poker sites.  

Jez: What we’ve been building is quite different from existing casino technology, and it’ll take some time for [people] to appreciate the value. This solution of fairness and transparency isn’t just for casinos or players, but also benefits the other parts of the gaming ecosystem. Affiliates send new players to the casino by doing local marketing in exchange for a revenue share, and our transparent model helps them know they’re being paid quickly and accurately for the players they bring to a casino’s site. The same system also rewards game developers so they’re paid more fairly based on the actual use because everything is more transparent in the FunFair platform.

The casino operator also benefits since fair games build trust, and there are no games running on private servers, [so] casinos stand to save a lot of operating costs. The casino isn’t paying for a mass of Remote Gaming Servers (known as RGS) on some offshore island, and they benefit from increased profits while gaining more trust from their players. Regulators win too because they have full auditability and transparency in real time, rather than the monthly or quarterly basis they use now.

The Merkle: How are FunFair and Virtue Poker planning to gain a larger audience outside the crypto community? For example, you need MetaMask installed to run FunFair on a desktop; this step isn’t as easy for someone outside the crypto community. What are your plans to address this?

Jez: The crypto-savvy are our initial market; we make it easy to link to decentralized exchanges like AirSwap and 0x to exchange their ETH or cryptocurrencies [for] FUN tokens. In a future phase, we will partner with payment processors to accept player credit cards and convert fiat into our token, FUN. Also, FunFair is even easier to use on mobile than desktop, where MetaMask is not required. Since about 60% of online gambling is done on mobile, we’re already here. For example, if you run FunFair on mobile, you can use Cipher Browser without needing to install MetaMask. Hopefully, we’ll soon support [other mobile wallets like] Toshi and Status. Eventually, we should be able to run on any wallet in any Ethereum-enabled browser.

Ryan: Integrating a decentralized exchange into our native application will make transferring between our token and Ether more seamless, improving the user experience for those who already own cryptocurrencies. Beyond that, the bridge from fiat to crypto is different by country. Our strategy is to build brand recognition, starting with poker players. We’ve partnered with three of the top poker players in the world, including Phil Ivey, Dan Colman, and Brian Rast.  We will live stream high stakes games with our Team Pros on Virtue Poker to further connect with the global online poker audience. In addition, we will employ a content marketing strategy to better illustrate our core value propositions to the online poker [world] so players can understand the benefits a decentralized gaming platform has to offer.

We’re also rewarding players, like by letting them interact with our platform for free by providing them with a small amount of tokens upon account installation to interact with our platform. We’ve also noticed there’s already a buzz in the space. On Two Plus Two, the most popular online poker forum, many players have already expressed interest in a decentralized poker platform and using cryptocurrencies to play online. Over the next 12-18 months, we expect to see continued organic growth. And since existing poker rooms and casinos are already accepting crypto as payment, the awareness among players is growing.

Jez: We should also mention another problem with mainstream casinos accepting crypto: [it] places even more risk on players. Their ability to accept crypto doesn’t move the fairness bar forward, and players will take on more risk because there are no chargebacks in cryptocurrency. They lose all the protections they have with credit cards by making a deposit to an often anonymous company who could easily run away with their funds or make it hard for the player to make a withdrawal.

Ryan: That’s true, and players also end up paying higher fees. America’s Card Room, for example, charges a 5% fee for players who want to cash out using Bitcoin. So while the casinos are making money, the players are losing even more in this case.


The Merkle: It sounds like both of you are in agreement that this industry is ready for a massive transparency overhaul, with smart contracts and cryptocurrency payments as key factors. What are you doing to ensure your projects are ready to run?

Ryan: Virtue Poker will launch their Alpha on the Rinkeby test network in mid-May and will be launching our Beta by fall 2018. Right now we’re formulating and finalizing our off-chain solution to limit the number of transactions we need to send so we can keep gas (transaction costs) low for everyone. Also, our token sale starts on April 25 at 10 AM EST, so we’re gearing up for that.

Jez: We’ve been on the testnet for the last year; we go into Live Beta on the mainnet in a few weeks. That will be the first time players can use real money on FunFair. We’ve focused on the technology to eliminate cheating, protecting both casinos and players using FunFair.

We’re building Fate Channels that work by doing “dispute resolution” as an automated way to detect and correct cheating whilst punishing the cheater with a fine. Both casinos and players execute the same smart contract, so if either party tries to fake the random number generator or somehow dismantle and alter the code to gain an advantage, [our system will immediately detect it and punish them]. Having this mechanism helps remove [the] incentive and ability to cheat in the first place. We think games powered by FunFair will be the safest form of gaming and that [it] will instill trust from the players in a market where many players often doubt they’re getting a fair game, and for the first time we can use technology to guarantee it.

The Merkle: How are you auditing your code to make sure everything works properly, especially since you have games running one type of code and smart contract transactions running Solidity on Ethereum?

Jez: We’re doing multiple audits starting with a private one, followed by beta testing. We’re also going through multiple rounds of public audits and intend to have one of the Ethereum core developers also audit our code.

Ryan: Consensys Diligence has audited our smart contract code. We also have a former Ethereum core developer reviewing our code, and will launch a public bounty program prior to launch. We’re keeping stakes low on initial deployment on our first few games as well to make sure everything is working right before we launch the full platform by November 2018.

The Merkle: Okay, let’s raise the stakes. When do you plan to go on mainnet?

Jez: May 2018 for the Live Beta, and soon after for the first casino operator, and then bring in additional casinos throughout 2018.

Ryan: We’re targeting October to November 2018. I also think this is the year we’ll see more decentralized applications launch on Ethereum.

The Merkle: What’s special about your industry versus all the other theoretical use cases for Ethereum and other blockchain projects?

Jez: Many of the projects [being] pitched right now are for dream scenarios or situations where we don’t even know what size the market might be. We’re aiming to disrupt an existing market already worth many billions; we know how big the potential market is and how to take a piece and expand it over time. We know what our prize is if we get it right.

Ryan: There is already significant overlap between the online poker and crypto communities. Our platform addresses concerns around gameplay fairness and fund security, and we feel these value propositions will provide significant value to online poker players. We are excited to see adoption of blockchain-based gambling apps continue to grow over the next few years.