Westlake Village venture investor Alon Goren is betting that the gambling industry of the future will take place not in casinos, but on the blockchain.
Draper Goren Holm, a capital investment group that counts Goren as a partner, has made an equity investment in online sports gambling platform Degens, which runs on the Ethereum blockchain.
In traditional casinos and gambling sites, of course, players bet against the house on odds determined by the house. On Degens, players set their own odds on sports events and are matched with an opponent who chooses opposite odds. You may bet the Dodgers will win a specific upcoming game and set odds; another player will take the other side of that gamble.
Instead of dollars, bettors trade in virtual currencies Ether and DAI. Both are relatively stable; DAI is an attempt to mimic the valuation of the dollar.
And rather than transferring money through banks or fintech apps, Degens runs on crypto platform Ethereum, using coded “SmartContracts” to ensure payouts are delivered.
Goren explained Degens is promising in that it provides “the ability to transact and trade and work with people no matter where they are in the world without any sort of middleman.”
There is no formal institution overseeing the transactions that take place on the platform. Instead, the blockchain technology publicly validates each transaction while keeping each party’s personal and financial information private. No middleman means low processing fees, too.
A blockchain is a series of pieces of digital information (blocks) that are stored on a public database (the chain). The Ethereum blockchain lets people program that digital information – which can take the form of virtual currencies – to change under certain conditions. So if the Dodgers get walloped, the virtual currency stored on the blockchain will leave your e-wallet and enter that of the other bettor.
Matthew Thompson and a friend founded Degens in a basement in Toronto in 2016. Thompson is now chief marketing officer – the pair remain the company’s only employees. It has no offline presence.
“We built the product for fun. We didn’t know if anyone would use it or if there was value. Turns out there is,” Thompson said.
In three years since joining the market, Degens has transacted $20 million in trades. Like many blockchain platforms, it has a low number of users – about 25 a day, Thompson said, but they do about $10,000 in transactions a day.
As equity holders, Goren said, “We add a lot of value on the marketing side – we make a lot of announcements, we have these conferences and get people a lot of exposure,” all of which are valuable assets during the coronavirus pandemic – what Thompson described as an unprecedented interruption in sporting events, and therefore revenue for Degens.
“Business was basically dead for three months. But … what’s interesting is they’re resuming all these sports at same time. We should do very good volume,” Thompson said....