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Crypto-Currency Online Poker Unfeasible?

Bitcoin and Playing Cards

The rising valuations of crypto-currency, especially Bitcoin, have left investors, speculators, and plain-old hodlers dancing with glee. Yet, even as BTC nears the $20,000 mark, there's one group of Bitcoiners who aren't being well served during the current price run-up: online poker fans who play at sites that denominate games in the digital coin. Several factors related to this skyrocketing price have converged to make Bitcoin poker no longer as easy or profitable as it once was.

What Sites Are We Talking About?

Blue Information Button

Unlike most standard internet poker rooms, which conduct gameplay in USD or some other fiat currency, there are a few that aim to cater to crypto enthusiasts by denominating their games in fractions of a Bitcoin. This allows users to play directly in the virtual currency without having to worry about converting back and forth into other forms of money. Two of the most prominent of these sites are SwCPoker, descended from the original BTC-only online poker room Seals With Clubs, and Nitrogen, a BTC sportsbook that added poker to its menu in 2014. At both of these sites, one chip corresponds to 1/1000 of a bitcoin.

Problems With the Current Bitcoin Poker Ecosystem

The two sites mentioned above rely exclusively on BTC values for all their operations because they eschew the use of traditional currencies. Thus, they're susceptible, to a greater or lesser extent, to the following issues:

1. High Transaction Fees

Bundles of Dollar Bills

An enhanced awareness of Bitcoin among the public at large has been one of the major drivers in the growth of the crypto-currency, but this same factor has led to serious network congestion. Miners fees, which must be paid to keep transaction timeframes reasonable, have surged to unprecedented levels. The average fee used to be just a few pennies a couple of years ago, but lately, Bitcoiners have had to pay as much as $20 each time they wish to deposit money to play poker. Importantly, the miners fees are relatively independent of transaction sizes. Therefore, someone wishing to make a test deposit of $20 to try out the system could have to fork over an additional $20 just to get the money onsite in a timely way. This doesn't even include whatever surcharges purchasers of Bitcoin have to pay to their exchanges.

It's not just depositing users who are affected by such fees; customers who cash out may also be inconvenienced. Nitrogen Sports Poker, on Dec. 14, 2017, added a fee of 0.001 BTC (a little over $18 at the time of this writing) to all withdrawals beyond the first within a seven-day period. SwC hasn't taken this step (yet), but its minimum withdrawal amount is 0.02 BTC, which used to correspond to around $20 near the beginning of the year but is currently equal to about $368.

2. Exorbitant Rake

Surprised Smiley

Despite a few previous attempts to rationalize the rake schedules in effect at crypto poker sites, they have quickly become out of date as Bitcoin soars through the ceiling. Nitrogen actually charges as much as 5 mBTC (~$92) at some stake levels. SwCPoker is better in this department with a maximum rake taken of 0.001 BTC (approximately $18.40): a figure that would be appalling at a mainstream internet poker site but is relatively hospitable compared to its main rival. Update 12/19/2017: Check out the comments below this article for the latest on a SwCPoker rake update.

3. Lack of Microstakes Games

Stacks of Chips

Because Nitrogen Poker and SwCPoker use identical systems of 1,000 chips = 1 BTC and chips subdivided into 100 parts (like how one dollar can be split up into 100 cents), the minimum cash game blinds at these sites are 0.01/0.02 chips. This is roughly the same as $0.20/$0.40 in big-bet games or $0.40/$0.80 in fixed-limit formats. Every experienced player should feel comfortable playing at games slightly lower than $50NL and $0.50/$1.00 LHE, but this isn't the case with novices. Newcomers on limited bankrolls may be looking for $10NL, $25NL, or $0.25/$0.50 LHE. Though this stake inflation is great for pros who like to scoop up cash from adversaries who are acting outside their comfort levels, it's bad for the health of the poker economy as a whole. Poker rooms should be attempting to spread games of the size that casual players wish to enjoy so that they aren't scared off.

This phenomenon is also apparent in tournaments, but it's not as severe. SwC has opted to reduce the buyins of its events, in some cases to as low as 0.05 chips ($0.90). However, Nitrogen has left its tourney lineup pretty much unaltered. The lowest-buyin contests, apart from freerolls, require 5 + 0.2 ($92 + $3.70) to enter. The weekly “Sunday Major“ tourney is a 25 + 1 ($460 + $18.40) occasion that disburses no less than 750 mBTC ($13,795) to the fortunate winners. The expense of this event wouldn't be out of line as part of a series at, for example, PokerStars, but for a tiny room that's a sideline of a bookmaking concern, the amount users must pay to register seems too stratospheric.

Possible Solutions

There are a number of measures that Bitcoin online gambling companies can take to overcome some of the obstacles inherent in dealing with this form of virtual money in the current climate:

1. Adjust the Rake Charts

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This is a remedy that's very easy to implement because it's entirely within the power of the sites to enact by themselves without disrupting their operations at all. While they would see an immediate drop in revenue, none of the BTC rooms we've been talking about exactly has an overabundance of player traffic. They need to remain competitive not just with each other but also with non-BTC poker sites, and charging sky-high rakes just doesn't cut it. If one of these firms cuts the rake drastically, they would most likely be able to steal players from the other as well as from much larger fiat-based poker entities.

2. Change the Value of a Chip

Poker Chip of Uncertain Value

Dividing bitcoins into 10,000 pieces rather than just 1,000 would solve the problem of not being able to spread microstakes games. Each chip would then be worth around $1.85, so the 0.01/0.02 tables would be almost equal to $0.02/$0.04, which is more in line with the minimum stakes at other internet poker sites.

3. Consider Supporting Alternate Crypto-Currencies

Icons of Various Cryptocurrencies

By tying themselves so closely to a single crypto network, SwC and Nitrogen are restricting their own flexibility and scope. It shouldn't be too challenging to add Bitcoin Cash, Ethereum, Litecoin, and other popular altcoins that have lower miners fees. There's no need to redesign the poker rooms themselves to cope with this added functionality; only the cashier software would need to be updated. As long as the sites keep the exchange rates between the different coins up-to-date, they would be able to translate any incoming altcoin deposits into their BTC values and then credit the right amount of chips to user accounts.

When Seals With Clubs opened its doors in 2012, it was the only Bitcoin poker room in the world, and so it could largely do as it pleased. Now there are a couple of them as well as other poker organizations that include crypto coins as deposit and withdrawal options along with regular currencies. In order to compete, SwCPoker and Nitrogen will have to step up their games big time. They do have several unique selling points, like the diversity of game types at SwC and the generous Nitro rewards program at Nitrogen, but this won't be enough if the hassles and cost of using Bitcoin prove unpalatable to the players.

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Play Crypto or Fiat Poker Today

If you'd like to see for yourself what we're talking about, then you can open an account at either of the two rooms discussed above. Check out our SwCPoker review for information on the Krill rewards program and all the many forms of poker the site offers. For a thorough report on Nitrogen, including a chart showing all the benefits of the Nitro rewards system, read our review of Nitrogen Sports Poker. To find out about your other options for online cards, browse over to our U.S.A. online poker page.

Comments

Right after we published this page, SwCPoker enacted changes to its rake schedule. The rake cap at the highest-stakes tables is now just 0.20 chips -- or about $3.60. This is a huge reduction from previously when customers sometimes paid a whole chip (around $18) in rake in a single hand. Lowering the rake so substantially should put SwC in a much better competitive position against other online poker sites.