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Articles January 18, 2021

Sports Innovation Challenge: Decentralizing Sports Wagering with Ethereum Blockchain


The Inspiration Behind the Innovation

The legality of sports betting has slowly been changing since a 2018 U.S. Supreme Court decision made it a state issue. But even with the tide turning in wagering’s favor, gamblers are still forced to turn to shadowy (legal and illegal) options to place a bet. Maybe they call a questionable offshore bookmaker to wager on a game, or text a friend in Vegas, or reach out to their own personal bookie. The 2020 pandemic only made betting more complicated.

In light of these circumstances, CapTech’s Chicago Black Sox innovation challenge team — aptly named after the eight players on the 1919 Major League Baseball team accused of throwing the World Series for a gambling syndicate — set out to bring more transparency to the wagering process with an app designed to let users place a wager on a trusted medium via smartphone.

The Chicago Black Sox focused on peer-to-peer wagering, setting out to shift power away from bookmakers and place it in the hands of the player community with a decentralized, transparent, and self-regulating app.

How the Solution Works

The team's app is comprised of five key elements: 

    • Ethereum: A platform that allows users to create and execute smart contracts.
    • Smart Contracts: A collection of code and state that is stored on the blockchain, and when run produces the same result for everyone.
    • DApp (Decentralized Application): An application whose back end is a decentralized network and whose state is stored on that network.
    • Ether: The digital currency used for transactional value on the Ethereum platform.
    • Digital Wallet: A collection of Ethereum account(s) that allows users to connect them to DApps, as well as view their balance, transaction history, and more.

The Chicago Black Sox envisioned an intuitive interface that would allow users to create, view, and interact with their wagers, one that could be written in any language and utilize any platform. At the center of any wager is the smart contract, which is where the transactions live. A third-party service, known as a blockchain oracle, provides the smart contracts, serving as a sort of bridge between the blockchains and the outside world.

In the team’s app, code is ultimately stored on the Ethereum blockchain, and when a wager transaction is placed, the smart contract runs and creates a contract account as the escrow. When there’s finally a winner, the smart contract receives a transaction with the winning criteria, then automatically pays out to the winner — which is anonymous, immutable, and public.

For the uninitiated on the technology, Napster ® serves as a simplified comparison in functionality, notwithstanding its inherent moral issues. In the case of Napster®, peer-to-peer music sharing cut out all of the middlemen (though lack of control of copyrighted material was its tragic flaw and led to its downfall). The idea behind our team’s app is similar; by removing the middleman/bookie, bettors avoid transaction fees, too.

Additional Applications and Considerations 

While sports betting serves as the starting point for the solution, the team also thinks the app would evolve for users to make wagers that aren’t necessarily sports-related. In fact, wagers could be entirely inconsequential. For example, two friends could spontaneously wager on a push-up competition, with the app paying out the winner.

On the technology side, the team also considered how soon blockchain technology might be adopted. Various industries are ripe for leveraging the concept. For example, energy companies could use it in conjunction with net metering efforts and the healthcare industry could utilize it to pass health records from doctor to doctor securely — and ensure patients don’t outlive those records.

Five years ago, the idea of cryptocurrencies and digital wallets seemed to be concepts that lived in a distant future. With more and more Decentralized Applicatons (DApps) being created to run on computing systems like Bitcoin or Ethereum, it’s easy to wonder when they will become more mainstream — and when a major company might be willing to take the leap. That company would have to be willing to be a pioneer, of course.

“To make it work would definitely take trial and error,” said team member Neal Desai. “Maybe it will it be a big bank or start-up, but there will be a first —and then everyone else will be playing catch-up.”

The Team 

  • Bryan Barrett (Management Consultant)
  • Joe Crocco (Management Consultant)
  • Neal Desai (Management Consultant)
  • Amanda Harvey (Customer Experience)
  • Elliot Stoner (Systems Integration)
  • Vik Thakur (Management Consultant)