SP8DE - THE BLOCKCHAIN OF GAMBLING

Introduction
blockchain-based platform capable of supplying unbiased public randomness for developing and running distributed casino applications. Sp8de is designed to suit the purposes of all the actors comprising the online casino landscape and as such represents the new breed of digital institutions, a distributed intermediary. the blockchain technology was the subject of close attention by gambling enthusiasts. Recent news from The Merkle [4] show how popular online Bitcoin betting has become. In aggregate the wagers put on online Bitcoin casinos in February 2017 have reached nearly 3 Bitcoin per minute. The price of Bitcoin at the end of February was about US$1,200 while now it is US$5,900 (approximately 292% growth) which means that as of today almost US$715 million worth of Bitcoin was gambled in February alone.

In Figure 1 we show how an investment of US$1 would have developed from 2010 until 2017 if it was invested into the giants of the online gambling industry as compared to the same dollar being invested in Bitcoin. Apart from the fact that this investment in BTC would have provided US$70,502 as compared to only $US7.37 when invested in the index, one major observation can be made: the shaded areas show that as the Bitcoin blockchain technology was becoming more and more popular (that is the price of Bitcoin was rising) the traditional online casinos have also gained steam. However, when we look further in Figure 2 (Google Trends search for “Bitcoin Casino” and “Online Casino”) we see that the popularity of online casinos has been relatively stable and slowly declining since 2004. Only since the beginning of 2016 when the Bitcoin casinos have started to gain wide popularity did the online casinos see slight increase in interest. In addition, the search “Bitcoin Casino” has skyrocketed since May 2017 when it surpassed the search term “Online Casinos”. Furthermore, we know of the existence of at least ten relatively sound blockchain-driven casino projects that have entered the industry through a successful TGE and are still being developed. Although somewhat broad2, this overview points out to an important pattern which holds a lot of relevance for the future of the gambling industry.

Currently, online casinos seem to be only weakly affected by the growth in the interest in Bitcoin gambling and the blockchain-based casinos that at the moment appear to at least complement traditional online gambling. However, this is happening at a staggering pace and the tendency shows a possibility of blockchain-based gambling taking over online casinos. If the current pace of technological advancement of the blockchain industry is sustained, soon there will be no benefits left for the consumers in the more traditional online casinos.

The Blockchain and the Casino
This backbone of blockchain technology renders it an obvious candidate to consider in developing online
gambling applications as, arguably, trust considerations and the need for transparency are - and always used to be two major cornerstones of the gambling industry [6], [7], [8], [9]. In particular, blockchain has the potential to provide transparency to all transactions, drastically reduce the house edge, nearly eliminate transaction costs, ensure anonymity of participants and ultimately, create the trust among players and other industry participants. This rapidly evolving technological stack offers immense potential for improvements in the online gambling space, however, it also carries multiple new pitfalls that are scarcely (if at all) researched and poorly understood. To understand the benefits the blockchain brings, one needs to delve deep in the economics of casinos (the institutional viewpoint). Appreciating the challenges requires an overview of the mechanics of the blockchain technology.

Economics of Gambling
Classic casinos reduce security and search costs, facilitate standardization by using chips and having
house rules and, most importantly, realize economies of scale by bringing together people united by the shared desire to gamble. Following this line of reasoning, online casinos while performing the same functions as their classic brick-and-mortar counterparts. The advent of the cryptocurrency casinos came as a result of their anonymity feature as well as absence of any regulatory oversight. As many other applications of the blockchain technology in its early days, the major considerations behind setting up casinos on the blockchain were idealistic, impractical or outright shady in nature. The anonymity and laissez-faire regime, however, are not the features that fit best into our line of reasoning: indeed, the decentralized infrastructure does not imply any server maintenance costs: the protocol is autonomous; the bets are fair: the protocol code is public; its workings are imprinted into the immutable ledger forever and can always be verified by anyone.

The Mechanics and Issues of On-Chain Casinos
The blockchain revolution allows for greatly enhanced transparency and efficiency of transactions, levels the playing field for online game development and greatly reduces overhead costs erasing the necessity
of maintaining relationships with trusted third parties, bringing the concept of online casinos to a completely
new level.

While being clearly beneficial in some aspects, the net benefits of blockchain to the general public willing to put their hard-earned funds on stake are less clear-cut. The reason is that, unfortunately, while being secure and trustless, not a single blockchain protocol can compete in terms of efficiency with centralized systems, such as those that are used by the off-chain online casinos nowadays.

Here we have approached the cornerstone topic in on-chain casino design. The immanent importance of this
topic can only be matched by the extent of controversy associated with it. Before delving deep into complexities of probability theory, let’s summarize what has been said so far .

The uprising of the casino industry from the early days of humanity until the very end of the XX century can be portrayed in standard outlines of economic theory: it has been a long quest towards erasing the transaction costs by the means of centralization and institutionalization of the gambling process.
The problems that have remained unresolved included poor transparency, high overheads incurred by casinos to maintain lucrative buildings and other required infrastructure that translated into high house edges; and, finally, the need to travel to a “physical” location.
An additional problem was that of inclusion: indeed, not everyone could participate in the development of new games. Some of these problems have been partially resolved by the slow migration of casinos online. Nevertheless, those of poor transparency and large house edges have also remained. In general, these are the problems that are inherent to the legacy financial system; the one based on intermediation and trust.
Therefore, it comes as no surprise that numerous projects have embraced the challenge to move the gambling process on-chain. This, however, turned out to be an ambitious aspiration with numerous pitfalls and seemingly unsurpassable technological barriers. While resolving the issue of inclusion, transparency (from the gambler’s perspective) and excessive house edges, blockchain gambling exacerbated those of high transaction fees and anonymity. It also brought new challenges along with it how do we resolve the issue of slow settlement
Finally, we addressed the sinle most important problem: the generation of the distributed randomness.

Competitors’ Review
Blockchain are entering the gambling industry by either aiming to create a platform for online casinos or by simply placing a specific game or a variety thereof on-chain. As noted above, among the issues which are solved by simply creating blockchain-powered versions of the games, three main problems remain yet unaddressed:

Transaction Settlement Time: it takes significantly longer to settle a transaction on-chain than off of it as each block requires time to be mined.
Transaction Fees: the fee for each transaction can become prohibitively high and preclude small bet sizes.
Provably random: the generation of randomness on-chain is a challenging as miners can see and modify block headers before everyone else.

The Mechanics of Sp8de
Sp8de is the new-generation blockchain-based gaming platform aimed at all the participants of contemporary casino ecosystem. We call it “new-generation” as Sp8de satisfies all the aforementioned conditions of a ‘proper’ blockchain casino. We build Sp8de on top of the blockchain called Cardano. The Cardano project itself is a monumental work that embraced the best practices and most far reaching innovations in the area of cryptocurrencies and packed them into a single state-of-art system. It is being developed and maintained by a large team comprised solely of PhDs in the field of programming and cryptography, and experienced engineers. In what follows we will illustrate how Sp8de provides an environment for the design of gambling applications which are characterized with:

Close-to-absent transaction fees and Proof-of-Stake powered scalability that is beyond the reach of any other on-chain casino protocol currently in existence
A mechanism to generate decentralized provenly uniform randomness at arbitrary time-spans
Provides rich Smart Contract functionality that allows for creativity in game design that is bounded solely by the fantasy of the developer (and the demand for the resulting product of course)

Sp8de utilizes Cardano to design its ecosystem and thereby solves the problems normally associated with the
on-chain casinos described above. Here is how:

Transaction fees and scalability
Random number generation
Flexible and finance application-tailored scripting language

The Sp8de Protocol
Before delving deeper into the mechanics of the SP8DE protocol itself, we opt to give a brief overview of
the Cardano blockchain and, in particular, the Ouroboros protocol that underpins it. As mentioned above,
Ouroboros is the first provably secure POS protocol. All POS protocols rely heavily on the miner selection
process whereby a participant is selected at random to sign a block of transactions. In essence it is a POW
system without the anchor to the real world – that of processing power. A precondition for an effective
POS protocol is the ability to select the next ‘miner’ (or minter using the POS jargon) randomly with the
uniform probability which is proportional to one’s stake in the system. The uniform nature of the probability
distribution is an essential element: if it can be skewed or biased by any protocol participant, the security is
compromised rendering the protocol useless.

At the heart of Ouroboros is the so-called Follow-The-Satoshi (FTS) procedure. Its essence is simple:
assuming input of the uniform randomness, FTS is guaranteed to select a stakeholder with the uniform
probability proportional to the number N of coins (or satoshis) one possess relative to the total number of
coins in the system. In short, FTS does the job: it possess the qualities required to make an effective POS
protocol. But, as always, there is a catch: FTS assumes input of ‘proper’ randomness. But where does it come from Before answering this question, let us lead your through the mechanics of FTS procedure itself: it will prove useful later on.

Ouroboros employs the Fair Coin Tossing (FCT) procedure to generate randomness. This procedure is a
known result in the field of academic and applied cryptography. It was first coined over 30 years ago and
its mechanism is well studied and understood and is, thus, very efficient. The idea is that multiple entities
participating in the protocol exchange ‘messages’ (the so-called commitments) that are encrypted by the
sender and therefore are not known up-front by the receiver. When opened (by exchanging the keys) and
combined, these messages produce an output that cannot be known a priori and neither can be manipulated
by those participating

With the Sp8de protocol set up and running, we can start actually deploying the applications that represent
some gaming logic implemented using Cardano’s smart contract scripting language. These applications run on
Sp8de blockchain and get settled with every new heartbeat of the protocol or less frequently depending on
the actual application.

The efficiency constraints are, of course, inevitable when it comes to application that would require extremely
high-frequency outputs (such as once every 5 seconds). We cannot claim that all the issues with such applications will be resolved before the protocol is deployed. We can state, however, that Sp8de is in the best position to solve them.

Token Distribution
The entire token distribution will be 8,888,888,888 of which 3,655,555,558.4 (41.125%) will be in the form of token sale and 3,455,555,552 (38.875%) will be given as a jackpot to those who have participated in the “token sale” rounds. The remainder of the tokens 1,777,777,778 (20%) will be vested with the team for the purposes of marketing, advisory, and further development of the project (see the Token Proceeds Utilization section for further details on the use of the proceeds from the token distribution). There is a one year vesting period that applies to these tokens. From Table 2 it becomes clear that the SPX tokens received per ETH are decreasing after each sale while the tokens distributed are increasing following the Pre-Sale stage.

Jackpots

Everyone who participated in the token sale will be eligible to receive tokens during the jackpots. Table 3
outlines the jackpot distribution schedule

Distribution Schedule
The token distribution begins on Monday, January 08, 2018 and ends on Sunday, March 11, 2018 and is
scheduled as in the manner illustrated in Table 4 below. The Pre-Sale lasts for 24 days while each Sale phase will be seven days followed by a Jackpot that is distributed entirely within a single day after every Sale. A graphical illustration of the entire SPX distribution can be seen in Figure 2 below