How to Prevent eSports Fraud with Blockchain

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If you are into online gaming then you must have heard of blockchains. The cryptocurrency industry and companies that support them are exploding. Today, most gambling sites accept deposits in Bitcoin and blockchains are the building blocks of the system that manages cryptocurrencies. From that initial use, blockchains now permeate many commercial and administrative endeavours, mainly because of the speed and security they bring to transactions. In this article, we look at fraud prevention in eSports using blockchains.

Some Basic Concepts

Some readers may not have a clear idea about eSports and blockchains, so we start with some basic information about them.

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What Is eSports

What began as a competition for bragging rights between friends playing video games on the same console has transformed into a multi-million-dollar industry. Professional players situated at remote locations compete in structured tournaments on the most popular video games, while millions of fans watch the event live online. The players are paid huge sums; the prizes for the winners are growing beyond imagination and the betting turnovers will soon overtake that in traditional sports.

With the expected exponential growth in eSports, it is essential that the systems are fair, secure and fraud proof. Software designers, eSports betting operators and regulatory authorities are looking towards blockchain technology to ensure this.

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What Are Blockchains

Blockchains are data storage structures that work differently from conventional ones. The data to be stored is sent to a set of high-speed processing computers that perform a set of transformations. The data is then sent to a block that comes with a given storage capacity. When fresh data is to be added to the same block a similar set of processes takes place. After the block is saturated with data a new block is created, which is connected with the previous block. A connection of such blocks forms a blockchain.

The technical structure of blockchains is beyond the scope of this article, but we would state certain properties that are relevant to the later discussion.

  • All interested parties can access the data immediately
  • The structure allows faster access and manipulation of data
  • The multiple computers and storages ensure fool proof security

How Blockchain Technology Prevents Fraud in eSports

We now discuss important applications of blockchain technology in eSports that help in prevention of fraud. Companies engaged in offering other forms of online gambling services also employ these techniques.

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Prevents Manipulation

When data is recorded in a blockchain, it is visible to all the network participants. This eliminates the need for different components of the eSports system to enter the same data again. The single-entry system promotes consistency and thereby prevents possibilities of fraud.

Data once entered cannot be altered and therefore agencies attempting to perpetrate fraud cannot tamper with the blockchain. If by error, the blockchain is fed incorrect information, then the correct information can be additionally entered. However, both the original incorrect data and the revised correct data will be visible and this helps tournament organisers establish trust among gamers.

Storage in Multiple Locations

Many computer systems participate in the process and the blockchains are stored at multiple locations. If with the intent to commit fraud, someone is able to hack in, and this is next to impossible, and remove the blockchain from one location, it can always be recovered from another site automatically and instantly. The system will not break down.

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Automatic Transactions

The growth in eSports betting means processing of increasing amounts of data and awarding prizes to greater numbers of winners. Smart contracts allow the eSports operators to set specific conditions on the blockchain that trigger automatic transactions. Several conditions can be pre-set allowing the correct amount of prize money to be awarded to the right participants, automatically as soon as the video game tournament gets concluded. Since this is done without any manual intervention, scope for fraud is completely eliminated.

Identity Verification

One of the major sources of fraud at eSports betting sites is the presence of bogus players that engage in money laundering and other illegal activities like affiliate scams, bonus misuse, multi-accounting and chargebacks. This happens because the conventional authentication tools and identity verification processes are not powerful enough to totally prevent security breaches through identity theft and card fraud. These frauds affect eSports businesses in two ways. They eat up the revenues making the operations unviable and they damage the operator’s reputation.

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Blockchains have enabled administrators to create more secure registration and authentication processes and provide them with high-end verification solutions. These include:

  • Device fingerprinting
  • IP analysis
  • Stringent KYC checks
  • Moderating sources of incoming traffic
  • Implementing security questions and answers
  • Detection of suspicious activity and users.

Better Compliance

eSports betting operators function under a licensing regime. The regulatory authority imposes a host of procedures and controls in order to ensure the protection of players’ interests. These include protection of personal data, IT security compliance, securing financial transaction processing through encryption, management of bonuses and fairness of gaming.

These days regulations are getting tighter and fines for non-compliance are getting bigger. When eSports betting platforms were small, the traditional tools were sufficient to comply with the jurisdictional requirements. However, these tools could not cope as eSports grew in size and operators began to face the risk of getting on the wrong side of licensing agencies.

Blockchain technology has enabled online gaming software providers to develop tools needed for good compliance programs. It has become easier for eSports betting operators to detect cases of fraud early on and to conform to the various regulations. This will minimise the risk of criminal action and help the operator to maintain a healthy reputation in the industry.

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Summarising the Issues

We have seen the many ways that blockchain technology can be used to prevent fraud in eSports betting, which leads to many direct and indirect benefits to operators and players.

  • Customer protection
  • Minimised disputes
  • Reduced regulatory fines
  • High-end security
  • Enhanced reputation

Blockchain technology is an evolving field and eSports betting is sure to gain greater benefits in coming years.