Skin Gambling needs to Come Out of the Shadows

This article is contributed by Bryce Diafuku, CEO of MintDice.

They say you can lose your shirt by gambling - but now you can lose your skin, too.

Like it or not (and many gamers don’t), modern titles revolve around virtual goods - from weapon enhancements to character power-ups - which can be either earned or bought, often in surprise loot boxes.

But those goods, or “skins,” don’t just have value in-game. Valve’s Steam Community Market allows players of titles like Counter-Strike: Global Offensive to buy and sell items with each other. And the addition of an API allows third-party sites to also utilize those skins.

Cue “skin gambling.” In the last couple of years, we have seen the emergence of unofficial betting websites that allow players to use their skins as currency with which to play online casino roulette, dice and coin-flip games.

While the world has fretted over whether simple loot boxes should be regulated as gambling, a real virtual goods gambling trend has exploded, with hundreds of unregulated new operators, booming search interest, business reaching into the millions - and a host of problems.

The confluence of video games and gambling, if managed effectively, could kickstart a green-field revolution and a legitimate growth opportunity for new-wave gaming. But, first, it is going to have to clean up.

1. Stop the scams

Google “skin gambling” and you’ll soon see what a murky world it is today, plagued by several high-profile scams.

For instance, two YouTubers posted videos showing viewers how they could reap big winnings by playing CS:GO Lotto, failing to disclose that they, in fact, owned and controlled the site.

The emerging industry needs to show its trustworthiness. Bitcoin-based casino sites have faced similar problems, and are currently trying to tackle them through technologies like provably fair algorithms, which take sole control of outcomes away from the operator, and initiatives like the Crypto Gambling Foundation, which evaluates operators’ underlying code in order to verify fair and transparent practices. A similar “kitemark” scheme, enforcing provably fair approaches, could help signpost skin gamblers to the largest, most reputable services.

2. Plug in esports

Skin gambling relies on video games. To take it to the next level, a no-brainer would be to bet on the outcomes not just of virtual casino games but of those video games themselves.

So far, a few skin gaming services have launched which allow players to bet skins against the results of esports tournament matches. But it remains an under-utilized correlation.

That is understandable. The likes of basketball and baseball have long been sportsbook staples, with informed watchers able to build up strong knowledge on relative team strengths and likely outcomes to confidently bet on a match. But, in esports as yet, insufficient insight has been amassed on individual titles and teams to create an incoming customer base - leaving skin gambling finding proxies, instead, largely in the game-of-chance space.

But I think that problem is ready to be solved. Esports is reaching a level of maturity - with several long-running franchises and consistency of teams on the “field” of play - that the growing pool of data available makes it possible to discern the talent on display, to make informed calls on potential outcomes.

When esports becomes more noticeably bettable to skilled watchers, its combination with skin gambling will be rocket fuel to the latter’s growth.

3. More efficient pricing

When does a Rocket Pop gun offered for $1 actually yield $0.80? When fluctuations caused by price inefficiencies kick in.

In skin trading, risk mitigation means intermediary platforms don’t give sellers fair market value - after taking fees to absorb that risk, they may give a seller just $0.80 of that $1. Unfortunately, in the skins game, there can be wide discrepancies between the ask and buy prices of items, especially given the number of intermediary platforms in use. What’s more, big swings in the perceived value of items mean that gun could be worth $2 in a couple of months.

All of this volatility and unpredictability does not create the solid foundation for a skin gambling business.

There are few perfect solutions for this, but a possibility for exploration lays in blockchain. Putting skins on the blockchain could take the control away from centralized providers. Instead of Steam owning CS:GO skins, users would own them via private keys, with no transaction costs because there would be no intermediary authority to manipulate things.

Summary

Skin gambling today is like an iceberg. Above the surface, we can see the tip of an enormous opportunity peeking in to the light.

Beneath, the majority of the trend is mired in the darkness.

I hope that the practice can realize its full potential, taking a place alongside traditional gambling and new crypto-gambling.

Time will only tell whether it can come out of the shadows.

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