The world lottery market is dominated by a small handful of corporations with International Game Technology (formerly Gtech and Lottomatica) and Scientific Games leading the way. Sometimes the companies form joint ventures as they did with Lotterie Nazionali in December. The JV committed to paying the Italian government €800m upfront for the continued right to sell scratch tickets after approval of the agreement by Italian regulator Agenzia delle Dogane e dei Monopoli.
While major scandals are few and far between with world lottery operators, they do occur as we saw in the 2015 conviction of a former security director for the Multi-State Lottery Association (MUSL) in the U.S.
Many draw lotteries still use a bucket and ball system, many more have made the move to computerized random number generators (RNGs) in order to pick the winning numbers. And while those systems are tested and secure, some players still wonder if they are indeed fair. The same can be said about the doubts of many online casino players. Internet forums are often choked with posts from people claiming that certain software is fixed or rigged or that operators have some sort of magic switch that lowers their theoretical return to player percentage (RTP).
For several years online casino players have had access to something known as “Provably Fair” games at some casinos that offer games for wagering with cryptocurrencies like bitcoin (BTC). The RNG is no longer a mysteriously hidden feature of the game that relies on player trust. Any player can check it using widgets or public checkers. They simply run the same process that delivered the random number to determine their game outcome and see that the results match up.
The BTC blockchain is for all intents and purposes not much more than a decentralized money ledger. But more than 1,000 other blockchains are already in existence. One is the Ethereum (ETH) blockchain. The differences between ETH and BTC are not as simple as the differences between a euro and a dollar. The Ethereum blockchain can operate the rough equivalent of software or computer program on it. One of these uses is what is known as a Smart Contract. Entire operating environments can occur on the blockchain.
One company, Quanta Technology Limited, is using that technology to transform lotteries for the better. Quanta is the world’s first fully licensed blockchain lottery having secured a license from the Isle of Man in August 2017. They received NMi Certification for the blockchain-based RNG, named RanDAO, earlier last year paving the way to licensure under the Online Gambling Regulation Act.
Quanta’s Operations Manager, Nick Wright agreed to answer a few questions for us in order to help operators and players alike understand more about the importance of the ETH blockchain and the changes that are surely coming to the industry because of it.
Lars Jones (LJ): Hello Nick, thank you for taking the time to chat with us. Can you tell us briefly about how Quanta came into existence, where you are at today, and where you hope to go from here?
Nick Wright (NW): Hi Lars, good to talk with you. Quanta was born out of an idea by our founders to take a new and exciting developing technology, and apply the open and transparency benefits of the tech to an established sector such as eGaming.
Quanta is the world’s first legally operating blockchain lottery, designed to operate on a global scale. It’s more than just a game as Quanta is built to be fair for everyone involved.
Quanta has ambitious plans for the future and is working with a host of partners in order to expand its product and technology into new markets.
LJ: Why did Quanta decide to focus on a lottery product rather than the more popular casino games like slots and blackjack?
NW: The lottery market became extremely interesting to Quanta after we identified an opportunity to increase fairness, availability, and distribution of funds to an already mature sector. The opportunity to disrupt the market whilst adhering to the conditions of an Isle of Man Gambling Licence was too good to miss.
LJ: A very bold undertaking. How do you expect to compete with lottery giants like IGT and Sci-Games or do you foresee capturing more niche markets? The big companies seem to lock up government contracts for extended periods.
NW: It will no doubt be a challenge but Quanta has already had some interesting conversations with, what are generally considered, heavyweights in the eGaming sector. We’re looking forward to demonstrating the benefits that Quanta and its technology can bring to the lottery market.
LJ: World Casino News recently reported on Malta’s blockchain initiative, would you like to comment on that? Do you see UKGC following suit?
NW: Malta’s plans are impressive and the market normally experiences periods where one jurisdiction pushes forward with an innovative stance on blockchain and the benefits that it can bring to a business. The Isle of Man Government’s Department of Enterprise are extremely proactive, as is the Isle of Man Gambling Supervision Commission so we feel we have chosen a great jurisdiction to partner with.
Whether the UKGC will follow suit remains to be seen. Personally, I think they will but ultimately only when they are ready and comfortable to do so.
LJ: Some licensing jurisdictions, such a Curacao, don’t seem to do much beyond checking an operator’s financial fitness before issuing a license and then and making sure they are following KYC [know your customer] protocol. How do you see smart contracts changing the way less heavily policed jurisdictions do business?
NW: Jurisdictions will first need to get comfortable with the technology and the benefits that smart contracts can bring to the table. Trusting in the security and the validity of smart contracts could see processing times reduced which would bring benefits to the less well-regulated jurisdictions. AML/CFT [Anti Money Laundering/Combating of Financing of Terrorism] and compliance monitoring services such as those provided by Coinfirm also provide both the operator and regulator with additional comfort when it comes to blockchain.
Furthermore, KYC and identity based smart contracts, such as the technology offered by providers such as Blockpass, will also bring benefits to the less well-regulated jurisdictions.
LJ: So, you seem to be saying that rather than some anonymous, unaccountable, and unregulatable technology susceptible to abuse, smart contracts operating on the blockchain could actually increase security and make it easier for regulators to do their jobs?
LJ: Well Nick, thank you for helping me, and especially our readers, understand a little bit more about Quanta and what’s happening in the industry with blockchain technology. Best of luck with your endeavors, and please be sure to keep us up to date as Quanta breaks more barriers and reaches new milestones.
NW: My pleasure. Thanks for having me.
Forward-thinking regulators in some of the smaller, yet mature jurisdictions such as the Isle of Man and Malta are working on protocols and frameworks so that they can oversee and properly direct blockchain development in the online gaming industry. Think tanks, labs, developers, and entrepreneurs around the world are exploring possibilities and readying their business models to adapt to the disruptive technology. Some, like Quanta, are leading the way.
While the technology already exists to integrate high-level KYC, and AML/CFT into the blockchain running hand in hand with lottery and other game provenance, the larger regulatory bodies such as the Gambling Commission in the United Kingdom are not likely to embrace the technology completely until rigorous standards are established.
In the meantime, preeminent industry organizations such as the Gaming Standards Association (GSA) and GSA Europe are pursuing standards to increase efficiency and take advantage of the blockchain’s secure and transparent flow of distributed information.
When all of these elements eventually come together, providers in the entire online gaming industry could possibly be operating according to model much like Quanta’s.