Navigating the Blockchain Landscape: A Technical Perspective.
Blockchain technology is a decentralised digital system that allows for secure and transparent transactions, which at a top level sounds great, but how and what change could it make to an Operator? Gaming eminence explores this topic with Kåre Kjelstrøm, CTO and CPO of Concordium Group who run a blockchain platform. In our interview we discuss how decentralisation, as implemented through blockchain technology, can be applied in the online gambling industry. The potential impact of blockchain on compliance with know-your-customer (KYC) and anti-money laundering (AML) regulations, and then we ask the hypothetical question of how a gambling industry with a two-year timeline for transitioning to blockchain-based payment methods could be technically implemented with minimal disruption to business operations.
GE) Decentralisation has become synonymous with Blockchain technology. Looking through the eyes of Concordium, what does decentralisation look like in the online gambling industry?
KK) Through blockchain technology, a gaming site can choose to publish proof-of-funds for transparency increasing the trust from gamers that prizes will indeed be paid out and that funds are available as advertised. By doing so, legitimate gaming sites with real funding will distance themselves from fraudulent or under-funded gaming sites and raise the bar for a trusted gaming environment.
In essence, when used right, a blockchain can take away the need to trust a third party and function as an escrow. A gaming site could thus choose to lock in wagers on the chain for betters, thus ensuring their integrity and making it transparent by way of smart contracts how and when funds will move from better to gaming site and vice versa. A gaming site could even choose to allow multiple crypto token types to be used directly in games without the need to exchange them to supported currencies or jetons. This would remove any exchange fees that could otherwise be imposed on a better.
GE) KYC and AML measures are critical for operators as it relates to different regulatory authorities to ensure they avoid fines and potential risk of losing their licences. At this moment in time can implementing Blockchain technology create an impact for operators and if so how does that look from a practical perspective?
KK) Most blockchains allow for full anonymity, which leaves for example a casino owner in the position of having to implement KYC procedures to allow gamblers to enter, or risk being in violation of regulations.
Concordium requires users to perform an identity-verification check based on a government issued identity such as a passport or a drivers license in order to start using the blockchain. The check results in a digital identity, which is stored on personal devices controlled by the user, opening up for self-sovereign identification to applications such as gaming sites. With the a priori identity, Concordium users would need to provide significantly less information to a gaming site to go through a KYC check; and once performed, the KYC check could even result in the issuance of a credential that could be given back to the Concordium wallet for subsequent use against other sites. In essence, with a self-sovereign wallet such as Concordium's you'd be able to go through a KYC check once, keep the result and use it against other sites at your own self-sovereign control.
At the time of writing, Concordium's identity layer supports the government issued identity and support for other credentials is currently under implementation with an ETA of Q1 2023. A number of applications are currently building against the ID layer and will proceed to go live in the coming months.
Seeing how closely linked to money laundering gambling is, identity lowers overall risk while also allowing casinos to enforce (voluntary) blacklists that people with gambling dependency issues may list themselves on.
GE) Let’s say hypothetically the gambling industry by law had 2 years to transition from traditional payment methods to blockchain technology. Looking at this from a technical infrastructure point of view, can you break down for us what your timeline approach would be to achieve this whilst ensuring minimal business disruption?
KK) It's an interesting thought-experiment!
Assuming we’re only discussing the online gaming industry, for each gambling institution you need to ensure the implementation of KYC procedures wherever they’re not already present.
So, this would look like using a wallet such as one we have created at Concordium and adding any additional KYC checks, then integrating with multi-chain decentralized exchanges to allow crypto liquidity for select chains. That way a user would be able to prove their identity with the Concordium wallet, prove they've been through KYC and leverage existing crypto liquidity they may own for fast adoption.
You need to implement the ability to use cryptocurrency as a wager in all games, but before you can even get to that step, there’s a prior step in selecting which chains, which crypto, which DEXes, and so on. Through DEXes and bridges, users will be able to go from FIAT coins to crypto currencies, which is needed in order for new users to get the crypto they'd need to gamble.
The entire process should be rolled out in parallel with existing procedures and once in place, a grace period should be allowed, before waging with FIAT coins can be disabled. It's debatable how long such a grace period should be, but 6 months should be adequate given there's a body in place to educate existing gamers on how to move into a crypto-focused gaming industry. Adoption takes time, but can be shortened with a proactive stance.
About our contributor
Kåre Kjelstrøm is Concordium’s Group CTO and CPO. Kåre holds an MS in Computer Science from the University of Aarhus and joined Concordium from a hyper growth American pre-ipo startup where he managed the Core Infrastructure group. Kåre built a global organization, created high performance teams, and launched offices in Denmark and Lithuania. He was previously a manager at Uber running Core Storage building highly scalable distributed ledger and storage solutions, initially from Denmark and later on from Toronto, Canada; here he doubled as the Site Lead bringing all of Uber’s Toronto operations under the same roof. In an earlier capacity, Kåre was a cofounder of the consulting company Silverbullet where he helped drive the digital transformation of the Danish Public Sector with a focus on PKI secured service to service communication. Visit https://concordium.com/