Transparent Gambling Through Blockchain

Brazilian Caixa Econômica Federal should set an example and use blockchain to proof its gambling system is fair

If you, mere mortal, try to start a gambling business in Brazil, you are very likely to get rich. Rich and imprisioned.

As in many other countries, Brazilian legislators and a large part of its population do not understand the difference between what one thinks is good or bad for oneself of what should be good or bad for everyone. So a very large part of the Brazilian society is something like this:

Drugs: NO!
Alcohol (a kind of drug): YES, because I LIKE IT and LOVE TO DRINK IT

A very similar thing happens to the Brazilian general policy regarding gambling: it is a crime because it degenerates people and encourages crime. Unless, of course, that you are the state, in which case there is no problem to degenerate people and you, the state, do not even have to worry about the fact that you are effectively and probably helping crime.

The Caixa Econômica Federal, a company owned entirely by the Brazilian federal government, is the entity that owns without competition the right to explore the lottery in the whole Brazilian territory. Again: shame on you, you criminal, trying to start a sports betting or roulette in Brazil. But not if you are the federal government, in which case you devour the entire minimum wage of your citizen on 1 to 3,268,760 bet (best case scenario).

Well, if it is to rob from the people, let it at least be done transparently.

The Caixa Econômica Federal (CEF) has something around 3,000 gambling branches in Brazil (the so called ‘Agências Lotéricas’).

The last draw of the so called ‘Megasena’, CEF’s biggest lottery game (1 to 50,063,860), had an all-time record prize of R$ 306,600,000 (an amount of approximatley 100,000,000 US dollars). If someone wanted to participate in the betting action, this person should go to one of the 3,000 agencies to have the bets placed.

This last draw had 17 winning bets. And to everyone’s surprise, 3 of them were placed in the exact same CEF agency: so not only a 1 to 50,063,860 happening 17 times, but a 1 to 50,063,860 happening in a ‘1 in 3000’ (total agencies) 3 times.

A lot of numbers, chances, statistics involved, with which not everyone is very familiar with. It did not stop, though, almost any Brazilian to be amazed by the fact that a single small agency could gather in a 3 winning tickets at the same draw!

The CEF then came to public to explain the huge coincidence and to calm the raging population. As it was explained, the 3 lottery tickets were in fact bets made by mistake by the same person, which was responsible for placing bets on behalf of a group to which it belonged. So instead of placing different bets with different combinations, by pure luck the bettor made the mistake of repeating the same (winning) combination not 1 but 2 times!

Another rare and strange coincidence for this contest, in this case not well digested by its non-awarded participants.

The entire CEF lottery runs on CEF’s own computers and datacenters, whose databases are closed, private and ruled entirely by CEF people.

No one knows the content of those databases, the exact way in which they are built and which people has permission to edit them. With this secret and closed design, it is impossible to any gambler or citizen do have the draw audited to make sure that it have been honestly conducted.

So it does not matter if a fact is pure coincidence: at all times people will state that the outliers occurred are the result of the dishonesty of the lottery administrators.

And the biggest lesson cryptocurrencies and the blockchain are daily teaching us is: it doesn’t matter if can’t trust the involved parties as long as the whole process can be entirely transparent.

Instead of storing bets on a private, closed and centered database, why not having them stored in a blockchain?

Blockchain is a technology that allows data to be stored transparently through a decentralized trust protocol. The data is inserted in blocks with timestamp in a chain, in which every block refers to the previous block, making the whole process of defrauding the network very expensive, expensive in a way that the benefit of the fraud does not offset the very cost of accomplishing it.

By placing each bet or set of bets in a block in a blockchain, the CEF would instantly enjoy the benefits of having its entire betting process public, transparent, and therefore entirely reliable to the community. I would even bet myself that moving CEF’s lottery to a public blockchain such as Ethereum’s would lower a lot the entire operation cost, resulting in either higher profits or higher rewards to bettors.

The biggest benefit, however, would be to show everyone that despite the immorality of the monopoly, CEF’s lottery is honest.

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