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Bitcoin-based casino rakes in more than £300,000 profit in six months

As various tech companies report their  fourth-quarter 2012 earnings numbers this week, so are two grey-market,  Bitcoin-based casinos -- and one is turning profits in the hundreds of thousands of dollars after only six months of being in business.

Recently, both  SatoshiDice and bitZino released their  financials. If these self-reported earnings are to be trusted (and the companies say they are, given that a Bitcoin block chain can be read by anyone), then running a Bitcoin-based casino yields a tidy profit.

"These tiny startups are hitting some major online casino pain points, they're crushing it on those fronts and as an entrepreneur, I think that's rad -- they are leveraging a disruptive technology to try and kick a large-scale industry in the balls," said Peter Vessenes, the CEO of CoinLab, a Bitcoin-based business, which got  $500,000 (£316,000) of venture capital last year.

SatoshiDice, which has servers based in Ireland, is a pseudo-random number generator game where players choose a number and then bet on the likelihood that a "rolled number" is greater than the one they've selected. If the rolled number is greater, then they win. The house has a 1.9 percent edge -- which is where the profit comes in.

The online dice game has returned profits to the tune of ฿33,310 (£375,626) during 2012 -- an average actual profit of ฿135.96 (£1,527) per day from May through December 2012. During that period, players put down a total of 2,349,882 bets. That's still minuscule by Las Vegas standards, but respectable.

bitZino, by contrast, released its figures in early January and seems to be doing a decent pace of business too (bitZino's bookkeeping only measures June 9 to December 31, 2012). The online casino -- hosted in the US, offering online poker, blackjack, craps, and roulette -- did not publish a profit and loss statement. bitZino did say it had paid out ฿28,986 (£311,000) -- and that 3.2 million wagers were made during H2 2012.

The company's founder, Larry Taad, noted on his site that most of his users "don't keep a balance on our site," preferring to cash out and be paid instantly. "This type of behaviour just wouldn't be possible with any other payment solution."

In an email to Ars, Taad added this was a "unique benefit" of Bitcoin.

"Users don't have to trust us with their funds any longer than necessary," he wrote. "If you compare this to traditional online casinos, which can take weeks to send you your winnings, the benefit is obvious. And of course, it goes both ways: it is also extremely easy and quick for users to add funds back to our site. Frictionless, non-reversible, zero-fraud payments -- you can't ask for a more perfect payment system!".

Still, Taad said his company was not profitable in 2012, but "anticipates a profitable 2013 as we continue to grow."

While Taad does pay for "all business expenses" in Bitcoin, including Web hosting and coffee, he notes he is sensitive to "risk management."

"Even though I am extremely bullish on the long-term outlook of Bitcoin, I still keep my assets properly diversified," he added.
There's no denying Bitcoin is experiencing some level of current success.  "I think it bodes very well for Bitcoin casino operators that they are turning a profit and that people seem to be happy with them," Jerry Brito, senior research fellow at the Mercatus Center at George Mason University, told Ars.

On top of that, some companies (like  WordPress) are even starting to accept Bitcoin despite its questionable legality that's still off-putting to many investors and users. Despite the progress however, Bitcoin observers say the digital currency has a long way to go before it becomes mainstream.

"As long as the legal status of Bitcoin is unclear, I do not think this will have an impact beyond keeping the digital currency alive," said  Irfan Kanat, a doctoral student who has studied virtual currencies (including Bitcoin) while pursuing his degree in information systems at the WP Carey School of Business at Arizona State University.
"Your keys, your Bitcoin. Not your keys, not your Bitcoin." (Andreas Antonopoulos)
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