There is something deeply exhilarating about picking a side, investing in it, and knowing it will result in either the thrill of the win—or the crush of defeat. It makes us feel alive to know that our skill and luck are being tested, and that there is no neutral outcome. It seems strange when we lay it out logically, but that heightened sense of danger speaks to something at the center of our being. Whether we are trading, sports betting, or even playing cards with friends, this formula of risk and reward holds true.
What throws a cold, wet blanket over this feeling is when we play by the rules, we win, but instead of a reward we are left with nothing. Many traditional organizations for trading and betting, be it the stock market, a physical casino, or a race track, are regulated, with each party protected by law. You play by the rules, and you either win or lose. However, with the explosion of online-based markets, be it an exchange, a sportsbet platform, or an online casino, there are more and more ways to become separated from your money—regardless of whether you’ve actually lost. Scams are abundant, and they can be extremely difficult to spot. And with so much scammed money to be made, the incentive to be more and more sophisticated is strong.
So what can be done? Do we have to give up the joys of online contests and resign ourselves to only those physical exchanges, casinos, and other platforms in our area? Or is there a better way to have the best of both worlds?
Why Does “Online” Facilitate Scams?
So why then does the online nature of trading and betting platforms increase the risk of being scammed? There are three key reasons:
Jurisdiction
Online platforms can be headquartered nearly anywhere in the world, and international law enforcement varies wildly. Certain countries may have purposefully lax laws in order to attract scammers and other shady businesses that can bring in economic benefit to the country. Some of these countries are tiny, with very small GDPs, so this type of growth can make a difference. And by not cooperating with extradition or international crime investigations, these small countries can wield a lot of power.
Legitimacy
As mentioned above, online platforms can look incredibly legitimate for very low costs. Imagine a physical stock exchange or a casino that was trying to look legitimate. It would require a massive investment, and by the time it was done it may as well have finished the process to be legal. With online platforms, it is much more about graphics, layout, and social engineering than it is about real investments. The end result is a platform that is indistinguishable to the average user.
Anonymity
Platforms who scam their users can afford to be much bolder about this if they know they will never personally face their victims, whether physically or even digitally. Platforms can hide behind shell companies, and owners can be completely disconnected from the venture through clever banking and organizational structuring.
Enter the Smart Contract
With these major hurdles, it seems that we are back to enjoying only the physical areas around us. However, recent years have given us a glimmer of hope. The emergence of Web 3.0—and specifically, smart contracts—can potentially remove all three of the “scam enablers” mentioned above.
A smart contract uses blockchain technology to essentially lay out the rules of an agreement, including the consequences of given actions, and then displays this information on the chain so that any involved parties can see the details and know they have not been changed. Further, if the parties agree to an arrangement that involves money and contingent actions, they will first lock up the token of choice for the smart contract to control, distributing the funds according to the details of the contract. This makes the smart contract a completely independent and dependable third party, acting autonomously and impervious to bad actors. There are no take-backs from either party, and at this point the platform location, legitimacy, and anonymity don’t even factor into the equation. The parties care about who will win and lose, and the smart contract will facilitate the results of the contest, whether it be exchange trading, betting, or any other type of agreement.
Unleashing Full Potential
Now that we have this technological super power, what should we do with it? Obviously we can use it for anying from exchange trading, betting, and any risk/reward case where both parties agree on the rules, and how they’ll be measured. Two fascinating use cases, both unthinkable without smart contracts, are LunaFi and Polkadex.
LunaFi is a Web 3.0 sports betting platform that offers everything you could hope for in terms of standard features, with many different types of betting, organized smart contracts watching it all, and data oracles providing the facts needed to process the contract. What makes LunaFi unique is its option to either bet or become the house. In other words, the platform’s smart contract is so transparent to all, it is comfortable with you picking a side before betting, and reaping from any rewards that come your way. Just imagine walking into a physical casino, going to the roulette wheel, and telling the operator that you’ll provide liquidity and take a share of the winnings… This is simply impossible traditionally, but is not only possible with smart contracts, it makes perfect sense that players should be able to participate on both sides of the table.
Polkadex is an orderbook trading platform, similar to others but with a few special tricks as well. Most notably is its ability to not only allow for peer-to-peer trading, but for its users to safely delegate their assets to third parties and special algorithms, taking a chance on their expertise to generate profits for your wallet. Again, the risk of delegating assets to a third party, feeling safe about their managing it appropriately, and returning any yields is just about impossible in a non-smart contract world.
Takeaways
Our ingrained nature of waging risk against reward will likely continue to be a major draw. While many people have been scammed out of countless money, there is a solution to taking away the typical scamming dangers we face today. Smart contracts may be the unsung hero of this decade or beyond, making “trustless” a key term that will change the way we interact with each other and with money itself. We will continue to see new use cases like those pioneered by LunaFi and Polkadex, and as a result we can experience the joy of fewer and fewer scams. After all, in order to experience the thrill of the risk/reward, there can’t be additional risks coming out of nowhere to unbalance this wonderful game.