We all love a bit of a gamble, especially those of us who are active participants in the crypto markets. Turns out, we are not alone in this. As you may know, the gambling industry is huge, estimates suggest that the global gambling industry as a whole was worth $456 billion as of 2020 with the industry seeing consistent growth year after year. A major sector under the broad umbrella of gambling is the betting markets. More specifically sports betting.
Betting has been around for centuries. Harry Ogden was the first bookmaker according to the history books. He set up shop in 1790 and the game has been evolving ever since. Fast forward to today, the rise of online betting has completely changed the face of the industry. Customers now have access to a multitude of betting options with just a few clicks. So far, in 2022, the online betting market is worth $320 billion. Seeing the huge demand for online betting, the team at Betswap saw some gaps in the market that they could fill by bringing the same online betting environment onto the blockchain.
Before getting into why Betswap is necessary and how it works, it is important to understand how betting in itself works.
Basics of Betting
A bet is a contract on some future cash flow based on the outcome of a given event such as a football game or a horse race. The cash flow that a bettor receives is determined by the underlying money they put and the odds at which they put the money. The odds in this case act as the price of the contract.
There are two broad entities that run betting markets. A bookmaker or sports trading exchange. A sports trading exchange is essentially the market that connects buyers and sellers to each other. Bookmakers on the other hand give out public odds at which they will be willing to accept any amount of bets. So in a sportsbook (i.e. with a bookmaker) the bettor bets against the house and the bookmaker will mark up the odds in order to have a house advantage. Conversely, a sports exchange connects bettors and bookies in an order book market through two types of bets. One is a back bet which allows you to put money behind a team/person essentially betting on the assumption of them winning. The second is a lay bet, this allows you to be the bookie by being able to bet on an event that is not going to happen. The exchange simply takes a small fee for facilitating the transaction which acts as their source of revenue.
There are 3 different types of ways odds will be presented to a user. Fractional (British, 5/2), Decimal (European, 3.5), and Moneyline (American, +250). The only important thing to take out of this is how much will you profit in the event that you win the bet, and are the odds fair or marked up.
To understand your profit it’s fairly simple, suppose the odds are in decimals as 1.8. This means if you put $100 and win, your profit will be $80. Understanding the fairness of the odds is very important. To do this, you have to calculate whether the probability of each outcome adds up to a 100% or not. Suppose you are betting on Liverpool vs Man City, you will have win, draw, and loss odds presented to you. Let’s say the probability of a Liverpool win is 45% the probability of a draw is 5% and the probability of a Man City win is 50%. In this scenario, the odds are fair because all the probabilities add up to 100%. However, imagine there is a sportsbook where all else remains equal but they have Liverpool’s odds of winning at 48%. In this case, the total probability of all scenarios is 103% and the bookmakers have marked up the odds in order to create a house advantage.
Problems with Betting
Now that you understand the general premise of how betting works. Let’s look at some of the problems that online betting faces today.
The first major hurdle is regulation. Many countries are still against online betting which means the citizens of those countries have to often either leave the country to make bets or use other technical methods to circumvent the regulations. Even amongst the countries that have adopted it, the regulation is so different from country to country that it becomes very difficult to operate in more than one country.
A related problem with regulation is the transfer of payments issues. Sometimes when a bettor wins big it becomes difficult to claim such large amounts of money. There is a lot of trust required in such scenarios and there are many cases where people have gone rogue and some bettors never received any of the money that they won. Apart from this, dealing with international transfers and traditional banks will add another layer of complexity for users.
Another major problem is that sportsbooks have a monopoly over the market. As we said before, it is on sportsbooks where bookmakers can create house advantages, being a monopoly means marked-up odds become the norm. To make matters worse, whenever a sportsbook spots a smart bettor who consistently makes money regardless of the house advantage, they are met with bet limits. This means that smart bettors will win much less and the house will lose much less from the smart bettors. A reason for having these limits is that the bookmakers do not offer a very high depth of liquidity. This thin liquidity in the books has a ripple effect on many other aspects of the industry which worsens the user experience.
The team at Betswap encountered these problems first-hand and decided that the optimal solution for this market would be to create an alternate platform which harnesses the power of a blockchain.
Betswap.gg is a decentralized betting exchange that connects bettors and bookmakers through an order book. They do not create a house advantage through marked-up odds, they simply take a fee on every transaction. The only type of betting currently available is back betting and lay betting. It allows users to either choose between being the bettor or the bookmaker, or users can simply play both sides. The options for bettors are either placing pre-game bets or in-game bets.
While sports betting is the primary feature, it doesn’t stop there. Users will also be able to take part in P2E betting, fantasy sports, social betting, as well as creating betting liquidity pools.
However, creating a peer-to-peer decentralized betting marketplace is not easy. There are a lot of hurdles that one has to go through. To understand how the team at Betswap made this possible I will break down their protocol into 3 core technical components and dive deeper into each component.
The three layers of Betswap:
- Smart Contracts
- Labels & operators
Oracles are a very important component of crypto. It’s a tool used by most protocols to feed real-world data into smart contracts and on-chain applications. For Betswap, oracles prove to be an integral part of the protocol. There are 4 main oracles that are used by the protocol.
The Market Oracles are used to regularly update the smart contracts with things like new sports, teams, leagues, and matches.
The Feeds/Odds Provider Oracles are used to receive the official fixtures & matches, the odds, as well as results from the fixtures/matches.
The In-Play Oracles work hand-in-hand with the ABLP (more on this later) to facilitate the smooth execution of bets after a game has started. Since it would be inefficient to update odds every few seconds, the ABLP allows users to put in-play bets within an “acceptable range” of odds and this acceptable range will be determined by the authorized in-play oracles which will keep updating the data as the game progresses.
Betswap accepts bets in multiple different stablecoins which are typically pegged 1:1 with USD. Betswap would require the rates on their platform to be similar to the rate across the broader crypto ecosystem. This is where the DEX Exchange Rates Oracle comes in, it essentially tracks prices of stablecoins on popular DEX’s such as Uniswap and Sushiswap allowing exchange rates on Betswap to be uniform with the general exchange rates in the market.
The 4 oracles mentioned above play a crucial role in feeding important data into the 7 different types of smart contracts that make up the core of the Betswap platform.
Starting with the Automated Betting Liquidity Pool (ABLP). This can be thought of as Betswaps version of an AMM which is specific to betting markets. Liquidity Providers (LPs) can provide liquidity using authorized stablecoins and each sport will have its own ABLP so LPs can choose which sport they would like to provide liquidity for. The ABLPs are only used for in-play bets which is why LPs can provide liquidity through the concentrated liquidity method (i.e. within a certain range of odds) and the odds provided from the feeds/odds providers’ oracles as well as the in-play oracles will be used here. The LPs are rewarded when the bettor loses the bet. All the active positions of the LP where the bettor loses will be distributed to that LP minus 1.5% which will be the fee taken by the protocol.
Closely linked to the ABLP is the Betting/Matching smart contract. This is the contract which facilitates peer-to-peer betting. It matches users through back (buy) & lay (sell) bets in an order book. If there aren’t sufficient lay bets in the order book then the protocol will use the ABLP to match orders and if there isn’t sufficient liquidity in the ABLPs then the protocol will use a back bet vs back bet cross-matching function.
The Markets smart contract receives all the information from the market oracles. This contract stores all the data related to sports, leagues, teams, and matches. The feeds/odds provider oracles relay detailed data about the matches pertaining to things like results, time start, time end, initial odds, and in-play odds. All this data is also stored in the market smart contract.
The Liquidity NFT smart contract is fairly simple. Whenever a user creates an LP position in an ABLP, they will automatically be sent an NFT to represent their position in that pool.
As the name suggests, the Governance smart contracts are responsible for handling the governance and DAO procedures. The mechanisms are adapted from Compound Finance’s Governor Bravo wherein a user stakes the native token for a wrapped version of the token. These wrapped tokens represent governing power which can then be used to vote on different proposals. Things that can be voted upon through governance include modifying the protocol fee (1.5%), the list of authorized stablecoins, enabling/disabling stablecoin exchange rates, a list of authorized oracles, and staking rewards.
The betting chips smart contract has a list of authorized stablecoins such as USDT, USDC, BUSD, DAI, & MIM with exchange rates determined by oracles. Users interact with this contract to convert their stablecoins into betting chips to be used for betting on the platform.
Lastly, we have the BSGG Token contract which will be discussed in further detail later on in the article.
The main feature is the market label/operator which serves 2 key purposes. The first one is that it supports allowance. This means that a bettor can grant allowance to any account which allows that account to bet on behalf of them. After the winnings are collected the money can either be kept in the same account, partially sent back or fully sent back to the original account. The second purpose is to solve the problem of the lack of liquidity for bookies. By staking a certain amount of BSGG tokens, an account can get access to the protocols B2B features, this unlocks something called the Liquidity Coverage Ratio (LCR) which is essentially a way to ensure that bookies have no problems with fund withdrawals. At 100% LCR an account can get full coverage and at 50% LCR the user can cover 50% while the platform will cover the remaining 50%.
To summarize this overview, this setup allows Betswap users to maintain their anonymity while having faith in the fact that there will be no issues with receiving funds due to the instant settlement of transactions. All of this can be done without worrying about restrictions and the different regulations in different countries. By bringing betting on-chain, Betswap not only simplifies but significantly improves the betting user experience.
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As mentioned previously, BSGG is Betswap’s native token. In terms of utility, it plays a vital role in the social betting feature. Professional bettors can come to the platform and set up a subscription wherein average users use their BSGG tokens to copy the professional bettors. The Professionals will keep a certain amount for themselves as a fee and the excess is kept by the users as profit.
Other than this the main purpose of BSGG is to gain exposure to the protocols upside. The first way is through buybacks. As the protocol accumulates exchange fees, 30% of it will be used to periodically buy back BSGG from DEXs as a way to maintain steady buy pressure on the token. The other use case is staking BSGG. Through staking, users can get access to staking rewards, exclusive features, as well as a proportional redistribution of the fees generated by the protocol.
Once Betswap gets more mature and receives meaningful adoption, the BSGG token will then become the primary governance token. Holders of the token will be able to vote on different proposals and will be able to play a hands-on role in the success of the protocol.
The distribution is as follows:
The emission schedule for the token is as follows:
The Betswap team has 7 core members.
Starting off with 0xMAVIC. He has a background in aeronautical engineering and has worked as a risk manager on sports betting exchanges. He has also helped build several startups within the crypto space. He is now working full-time on BetswapGG.
The next member is 0xMaxGG who is proficient in investing in high-growth verticals and managing funds. He has previously worked as a financier, venture capitalist, and individual investor. He is now bringing his expertise to Betswap.
The third anon member is 0xBCGG. He is an OG in this space and has been working with blockchains for a long time. Previously he co-founded a well-known blockchain development company and is now bringing his technical strengths to Betswap.
Martin Clarke is responsible for Betswaps product visions & strategy. He previously worked in a similar capacity at the betting giant Betfair.
Muhammed Iqbal is the head of the UI/UX design team. He has over 18 years of experience working in fields like marketing, UI design, and brand development. A bonus is that he is also an NFT artist.
Manish Sharma is the project manager for the Betswap programming team. He has extensive experience working within the sports industry and is an expert in every kind of project management software.
Last but not least, we have Shivam Jaiswal who is one of the lead developers at Betswap. He is skilled in many different languages and has a proven track record of success as an experienced solutions engineer.
The popularity of betting cannot be disputed, but it is the improvement of the user experience that stands out to me when it comes to Betswap. The permissionless and decentralized nature of blockchains proves to be the perfect solution to all the bottlenecks faced by traditional online betting platforms.
Not only that, but it is a protocol whose usage is somewhat agnostic to market conditions. Every crypto project’s usage and success are very correlated to the broader crypto market performing well. However, betting is a year-round activity and one which will also be used by non-crypto native participants. Therefore, I believe the future for Betswap and on-chain betting as a whole is exciting.
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