Distributed apps (dapps) on the blockchain are a perfect fit for sports betting. Compared to centralised sports books and exchanges they offer a number of advantages:

No counter-party risk. This is the key advantage. If the dapp is implemented with a well-written smart contract, nobody — not even the dapp developers or operators — will have the ability to steal or freeze your funds.

This is the key advantage. If the dapp is implemented with a well-written smart contract, nobody — not even the dapp developers or operators — will have the ability to steal or freeze your funds. No geographic restrictions. Jurisdictional and payment roadblocks have always been a huge pain for bettors. With a dapp, anybody anywhere in the world can participate.

Jurisdictional and payment roadblocks have always been a huge pain for bettors. With a dapp, anybody anywhere in the world can participate. Low fees. Since dapps can be written and deployed with very low overhead, significant savings can be passed on to customers.

However, there is a large range of possible choices to be made in the design and implementation of betting dapps, as discussed in the points below.

Liquid currency

In order for customers to enjoy the lowest possible fees, they’ll need to bet and get paid out in the most liquid asset available. On the Ethereum network this means ETH. Not only is ETH by far the most liquid, we can be certain Ethereum network users own it since it is required to pay gas fees.

If the dapp uses its own special betting token, users are required to pay conversion spreads and exchange commissions when they buy in and when they cash out.

SportCrypt uses ETH as its betting currency and doesn’t require any special tokens to use.

Partial trades

The simplest way to design a peer-to-peer betting system is to find two participants who are willing to bet exact corresponding amounts. However, it’s rare that things match so nicely in practice. Ideally, an offer should be able to be split between multiple participants, in whatever amounts they desire.

SportCrypt implements this splitting. A whale (somebody who places a large bet) can be matched with a bunch of smaller traders. Each trader can take as much or as little of an offer as desired.

Fixed-odds

This point is somewhat a matter of opinion, but let me explain the alternative and why I believe fixed-odds is the best system.

In some types of betting, most notably horse racing, odds are calculated using a system called “parimutuel betting”. In this system, the bets on each team are collected in separate pots. Once the event starts, no more bets are accepted. After the event is over and the winner is known, all the money is distributed to the winners proportional to how much they contributed to the winning pot.

Although conceptually simple, parimutuel betting has several disadvantages. Most importantly, when you make a bet you cannot know what the payout will be (unless you know for certain you will be the last person to place a bet), so it is impossible to calculate your advantage (or “edge”). Secondly, with parimutuel systems all betting needs to stop when the event starts since otherwise the winning team’s pot would get flooded with bets.

By contrast, all trades on SportCrypt are fixed-odds bets. This means that the odds of a trade are known and agreed upon beforehand by the parties involved, and they cannot be changed after the fact. Of course, if you choose you can make new, offsetting bets at different odds (see below). The consequence is that, independent of other betting activity, you can accurately estimate your advantage prior to placing the bet.

Set your own odds

In a typical sports book, if you want to bet you need to accept whatever odds your bookie is offering. A peer-to-peer betting system allows you to examine the odds offered by other users and, if none are acceptable, post your own offer with your own odds.

SportCrypt is entirely peer-to-peer and at the protocol level users choose their odds using implied probability pricing. This is explained in detail in our whitepaper, but you don’t need to understand that to use SportCrypt since the UI shows you the equivalent in normal american odds too (we’ll put in options to show decimal and fractional odds if requested).

Close out positions

In conventional sports books, after placing a bet you always need to wait until the event concludes before you either win or lose your entire wager.

With SportCrypt, you can sell off your position at a profit or loss before the game even starts. For example, if a star player on the opposing team announces they will not play, the posted odds may shift in your favour, giving you the opportunity to cash out your wager at a profit.

Similarly, if you place both buys and sell offers on the same event, you can earn realized profit when other users take opposing sides on your offers. This realized profit is instantly credited to your balance and can be withdrawn or used as collateral for new positions, all before the game is even played.

In-game trading

As described above, you can trade in and out of positions before a game starts. Because of SportCrypt’s fixed odds system, you can also do this while the event is in progress. Being able to trade at half-time and TV intermissions, or even during live game play, adds a new level of excitement to the trading experience.

Even if you don’t find in-game trading exciting, it is useful to have the ability to take profit or cut losses. For example, if your team is up big during half-time you may want to cash out some or all of your winnings, just in case things go south. Or, if you are losing you can salvage some of your bet by selling your position to someone who doesn’t mind owning a long-odds bet.

As long as there are willing market participants, bets can take place at any time.

Collateral flexibility

This point is somewhat technical, and you don’t need to worry about it for betting or simple trading.

Market makers are market participants who simultaneously enter offers in opposite directions, hoping to make a profit from the difference in prices (this is considered realized profit and is instantly added to your balance). In some systems, each of these offers will lock up some collateral. For example, let’s say a market maker wishes to make two markets by creating a 1 ETH buy order and a 1 ETH sell order in each market. In a simplistic system you would need 4 ETH of collateral to do this.

SportCrypt requires collateral only as large as your largest offer: in this case 1 ETH of balance would be enough to maintain all these offers. In the event that one of the orders is taken and the collateral consumed, the other offers will be auto-cancelled. Actually in this case the other offer in the same market would still be valid since the position that was created by the trade is also valid as collateral (you can always sell off an existing position, even if you have 0 balance). Furthermore, note that the offers are not actually cancelled, but instead just suspended. If you deposit more money, or the other side of your market is purchased, your orders will come right back into effect since their collateral was replenished.

Again, this isn’t important for the average trader, however a well-designed system for market makers results in better market depth and liquidity, which in turn benefits everybody.

Anonymous

For various reasons, certain dapps require you to sign up with an email address and/or provide other identifying information. In order to respect your privacy, SportCrypt doesn’t use any sort of login or account. Just install MetaMask, deposit funds, and start trading.

Open source smart contract

This honestly should go without saying, but in order to trust a smart contract you need to be able to read its code and then make sure that the address you are interacting with actually corresponds to that code.

SportCrypt’s contract, test-suite, and supporting libraries can be downloaded from our github. Our mainnet contract has also been verified on etherscan so you can compare it with our published open source code and ensure no backdoors are present.

Accountable oracle

I’ve saved the most contentious point for last. In order to trust a dapp, you need to be sure that the events are correctly graded. By convention, the term for a party who does this is an “oracle”.

Like all currently deployed mainnet systems, SportCrypt uses a centralised oracle. In other words, we determine which side of the bet pays out. Note that this is the only special privilege we have in the smart contract (we have no way of stealing or freezing funds).

Although centralised, our oracle has a few design features to keep us accountable. First of all, if we incorrectly grade a single bet, we need to incorrectly grade every bet on that event. Furthermore, the grades are permanently embedded on the blockchain, providing irrefutable evidence of any oracle misbehaviour.

Being an oracle is not a responsibility we take lightly, and we are committed to building a reputation as a reliable oracle. We have plans to implement a “multi-sig” oracle in the future, and are closely following research into decentralised oracles such as the Augur project.

Conclusion

There are many aspects to a sports betting system that should be considered when evaluating a platform. Many of them are common to trading systems in general, and some are sports-specific. I hope this article has covered some of them in enough depth to help your evaluation.

Naturally we think SportCrypt fares the best among the current competition, although there are some areas where other systems might be better, for example parlay bets (which aren’t a good fit for fungible asset exchanges), or many-outcome events (where parimutuel wagering may be preferable).

Learn more about SportCrypt

The concepts described in this article are fleshed out in much more detail in our whitepaper.