“A decentralized ‘smart contract’-based platform pricing provably fair fixed odds bets at the minimum possible edge, returning profits to token holders through deflation.”

By Colin McCrae

EdgeFund proposes the creation of an entirely decentralized bankroll of blockchain tokens, accessible solely via betting functions written in smart contract code which would allow fixed odds bets to be accepted and paid out without the need for any trusted central authority. The bankroll could be used by game operators who want to offer large payouts without risking their own funds. The smart contract code would protect its bankroll of tokens from bankruptcy by dynamically calculating the lowest possible platform edge it can charge for each bet based on the Kelly Criterion. The smart contract code would be publicly viewable and provably fair, with the outcome of bets determined by decentralized random number generation.

Game operators have freedom over the bet size, payout odds and total house edge, profiting on every bet from the difference between the total house edge and the platform edge. This profit (along with any user winnings) is returned to the game operator by the smart contract after every bet, regardless of the bet outcome. The platform will enable any number of fixed odds betting games to be built on top of it. Native platform tokens will become more scarce over time on average due to accumulation within the smart contract bankroll, in effect distributing profits to token holders through deflation.

Key Features

The EdgeFund platform will function as follows:

We will create a shared decentralized bankroll of platform specific native tokens, locked inside a smart contract.

This bankroll smart contract will only be accessible via betting functions. Game operators will send bets via these functions and are free to specify the bet size, payout odds, and total house edge (or win odds). This will be based on the games being offered to their users, and the users bet sizes.

The lowest possible edge the platform can charge is dynamically and autonomously calculated for each bet inside the smart contract based on the Kelly Criterion. This protects the smart contract from bankruptcy due to a sequence of losing bets.

The platform processes all bets on the blockchain, returning any winnings (plus the difference between the total house edge and the platform edge) to the game operator after each bet is resolved. The game operator can then pass on any winnings to the user, keeping its profit on every bet regardless of the outcome.

The smart contract bankroll takes the risk, ensuring game operators make a return on every bet.

Game operators can build any number of games that link to our platform. These games can offer payouts using the shared decentralized bankroll without the game operator risking any of their own funds.

Every transaction is executed by open source smart contract code on a public blockchain, making the platform provably fair for all parties interacting with it.

The native tokens will be of fixed total supply to ensure value is retained over time.

The small platform edge leads to a long-term accumulation of tokens in the shared bankroll, causing the remaining circulating tokens to become more scarce through deflation.

We believe that this platform will be attractive to fixed odds game operators and their users, as well as token holders looking for increasing value. It will allow licensed start-ups across the world immediate access to liquidity they would struggle to achieve on their own. As the platform grows, larger game operators will find they can make more profit at less risk by using our bankroll to underwrite large bets from their users. The more games built on the platform, the more valuable the bankroll becomes, and the smaller the platform edge becomes. This represents a significant step forward for game developers: for the first time, anyone will be able to develop and deploy a fixed odds betting game as easily as any other application.

“EdgeFund fundamentally changes the online betting landscape for game developers, opening up unparalleled liquidity at literally no risk.”

Why EdgeFund?

EdgeFund believes that it can solve the problems that existing blockchain-based betting platforms suffer from:

A fixed platform edge. Fixing your platform edge at an arbitrary percentage means that another platform can copy your smart contract code and redeploy the same code with a lower percentage edge (assuming this does not violate the Kelly Criterion, in which case you risk bankruptcy).

Fixing your platform edge at an arbitrary percentage means that another platform can copy your smart contract code and redeploy the same code with a lower percentage edge (assuming this does not violate the Kelly Criterion, in which case you risk bankruptcy). Limited odds available. Virtually all smart contract platforms only offer a fixed selection of odds at which bets can be placed at. A fully flexible platform should accept any odds assuming the bet meets the Kelly Criterion.

Virtually all smart contract platforms only offer a fixed selection of odds at which bets can be placed at. A fully flexible platform should accept any odds assuming the bet meets the Kelly Criterion. Fixed maximum and minimum bet limits. Bet limits should be calculated dynamically based on several factors including the current bankroll, blockchain fees, and the bet specifics.

Bet limits should be calculated dynamically based on several factors including the current bankroll, blockchain fees, and the bet specifics. Centralized random number generation. Use of a centralized random number generation system (such as Oraclize at random.org) accessed via an API can be problematic. As with any centralized system, the users need to trust the provider to be honest. It would be difficult to prove if the provider influenced the result in their favor. Additionally, if the provider’s URL is hard coded into the smart contract, the platform would cease to work if the URL changed, was shut- down, or otherwise intercepted.

Use of a centralized random number generation system (such as Oraclize at random.org) accessed via an API can be problematic. As with any centralized system, the users need to trust the provider to be honest. It would be difficult to prove if the provider influenced the result in their favor. Additionally, if the provider’s URL is hard coded into the smart contract, the platform would cease to work if the URL changed, was shut- down, or otherwise intercepted. Centralized control of bankroll. If the developers or platform owners can update or change the smart contract code then the platform is fundamentally centralized, and requires trust in those individuals.

If the developers or platform owners can update or change the smart contract code then the platform is fundamentally centralized, and requires trust in those individuals. Iniquitous payout of profits. The payment of profits to investors and owners creates a drag on the smart contract and means that the platform can be copied without such payouts. The ultimate solution is to ensure that all benefits go to token holders, such that copying the platform is not profitable. The cryptoeconomic incentives should always work to create network effects that benefit the decentralized platform’s growth and survival.

The payment of profits to investors and owners creates a drag on the smart contract and means that the platform can be copied without such payouts. The ultimate solution is to ensure that all benefits go to token holders, such that copying the platform is not profitable. The cryptoeconomic incentives should always work to create network effects that benefit the decentralized platform’s growth and survival. A split bankroll across several smart contracts. Splitting the bankroll over several smart contacts means you cannot offer the lowest possible platform edge, as bets are not backed by all available funds.

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I am currently working on EdgeFund, an open-source platform which offers a decentralized shared bankroll on the Blockchain. To learn more about EdgeFund, please visit our website. Join our Telegram group to chat to the team and follow us on Twitter!