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Sports Betting Built On Solana | Nigel Eccles & Varun Sudhakar

By Lightspeed

Published on 2024-02-22

Discover how BetDEX is transforming sports betting with blockchain technology, offering competitive odds and solving key industry issues on Solana.

The notes below are AI generated and may not be 100% accurate. Watch the video to be sure!

Introduction to BetDEX and the Monaco Protocol

BetDEX is revolutionizing the sports betting industry by leveraging blockchain technology on the Solana network. Co-founded by Nigel Eccles and Varun Sudhakar, BetDEX aims to address longstanding issues in the sports betting world through its decentralized betting exchange. The platform is built on top of the Monaco protocol, an open-source and permissionless infrastructure that allows for transparent and efficient betting markets.

Nigel Eccles and Varun Sudhakar bring a wealth of experience to BetDEX, having previously worked together at FanDuel from 2015 to 2018. Their background in the sports betting industry has given them unique insights into the problems faced by both bettors and bookmakers. With BetDEX, they are leveraging blockchain technology to create a more fair, transparent, and efficient betting ecosystem.

The Problems BetDEX Solves

The sports betting industry, despite its massive size—estimated to handle over $2 trillion in bets annually—is plagued with several issues that BetDEX aims to address:

  1. High fees: Traditional sportsbooks often charge fees as high as 10-15% on bets.
  2. Discrimination against winning players: Many platforms limit or ban successful bettors.
  3. Counterparty risk: Users often face difficulties withdrawing funds or risk losing money if a betting company disappears.
  4. Lack of transparency: Traditional betting platforms operate as black boxes, with little visibility into their operations.

BetDEX tackles these problems head-on by utilizing blockchain technology to create a transparent, non-custodial betting platform with lower fees and no discrimination against winning players.

How BetDEX and the Monaco Protocol Work

At its core, BetDEX operates on top of the Monaco protocol, which functions as a decentralized limit order book for sports betting. This structure allows for a more efficient and fair betting environment. Here's how it works:

  1. The Monaco protocol serves as the backend infrastructure, handling bet matching and settlement.
  2. BetDEX acts as a front-end interface, allowing users to interact with the protocol easily.
  3. Market makers provide liquidity by setting odds and placing bets on the protocol.
  4. Users can place bets directly through the BetDEX interface or interact with the protocol programmatically.

The use of blockchain technology ensures that all transactions are transparent and verifiable. As Varun Sudhakar explains, "The whole backend is fully open-sourced as well, and anyone can take a look at it, anyone can see the code. No one needs to trust us that the wagers are getting remitted properly. Settlement is occurring as it should, etc. It's all just there on-chain."

The Role of Market Makers in BetDEX

Market makers play a crucial role in the BetDEX ecosystem by providing liquidity to betting markets. These are typically institutional trading firms or gambling syndicates that set initial odds and provide depth to the markets. As of the podcast recording, BetDEX had between $500,000 to $1 million in open liquidity available at any given time.

The team is actively working on onboarding more market makers, with several institutional players set to join in the coming months. This increased liquidity is expected to improve the competitiveness of odds and the overall user experience on the platform.

Competitive Advantage: Fees and User Experience

One of BetDEX's key competitive advantages is its fee structure. The platform charges a total of 3% on net winnings per market, split between the Monaco protocol (1%) and BetDEX (2%). This is significantly lower than traditional sportsbooks, which often charge between 7-10% on straight bets and up to 40-50% on parlays.

Moreover, unlike some traditional exchanges that implement "premium charges" for successful bettors (which can go as high as 50-60% of winnings), BetDEX maintains a flat fee structure for all users. This commitment to fairness and transparency is a core part of the platform's value proposition.

Building on Solana: A Strategic Choice

The decision to build BetDEX on the Solana blockchain was a strategic one, driven by Solana's commitment to high speed and low transaction costs. Nigel Eccles elaborates on this choice:

"With Solana, I never see a day where like, tally would be like, yeah, I know it's like, you know, $2 transaction, but that's still pretty good, right? Like it's like, that's never, it's always going to be considered a field case. If it can't stay sort of fast and cheap."

This focus on scalability and cost-effectiveness was crucial for BetDEX, as previous attempts at blockchain-based betting platforms (such as Augur on Ethereum) faced significant challenges due to high transaction costs and slow speeds.

The Challenges of Building on Blockchain

While building on Solana offers many advantages, the team acknowledges that creating a Web2-like experience on a blockchain presents significant challenges. Nigel estimates that building a Web2 experience on a blockchain is about three times harder than building on a traditional database, both in terms of cost and time.

The team is actively working on abstracting away the complexities of blockchain interactions to make the platform more accessible to mainstream users who may not be familiar with cryptocurrency concepts. This includes addressing issues like gas fees, account abstraction, and creating a seamless user experience akin to traditional betting platforms.

Sports and Markets Covered by BetDEX

BetDEX has been steadily expanding its offerings since its launch. Initially focusing on soccer pre-match markets for the World Cup, the platform now covers a wide range of sports and leagues:

  • Soccer: Premier League, Bundesliga, La Liga, Serie A, and lower-tier leagues
  • Basketball: NBA
  • Tennis
  • Ice Hockey: NHL
  • American Football: NFL
  • Esports

The platform primarily focuses on high-liquidity markets, such as full-time result (match winner) markets. As demand grows, they plan to expand into more diverse market types, such as both teams to score, over/under, and point spreads.

User Acquisition and Growth Strategy

BetDEX's growth strategy focuses on attracting price-sensitive bettors who may not be familiar with blockchain technology. The team is working on simplifying the onboarding process and creating a user experience that mirrors traditional betting platforms.

Currently, BetDEX operates in a non-custodial manner, requiring users to have a self-custody wallet (such as Solflare or Phantom) with USDC and a small amount of SOL for gas fees. However, the team is developing solutions to allow users to deposit via fiat currencies or other cryptocurrencies, making the platform more accessible to mainstream users.

The Future of Sports Betting on Blockchain

BetDEX and the Monaco protocol represent a significant step forward in the evolution of sports betting. By leveraging blockchain technology, they are creating a more transparent, efficient, and fair betting ecosystem. As the platform continues to grow and attract more liquidity, it has the potential to disrupt the traditional sports betting industry.

The team's focus on user experience and their commitment to solving real problems in the industry positions BetDEX well for future growth. As blockchain technology becomes more mainstream and user-friendly, platforms like BetDEX could lead the way in bringing decentralized betting to a global audience.

Addressing the Challenges of Blockchain Adoption

While the potential of blockchain-based betting is enormous, the BetDEX team acknowledges that there are still significant challenges to overcome in terms of mainstream adoption. Nigel Eccles emphasizes the need for the industry to focus on creating user-friendly experiences:

"We cannot, you know, then fall back on users just need to learn how to use, you know, learn, you know, see, pre-asist. And that is never, it's just never going to happen. And it's a cop out on the product designer side to ask him to do it because, you know, no other successful product, like, I always say the car revolution didn't happen when everyone became a mechanic, it became when cars became reliable enough to non-mechanics drive kind of what we need to do in Web 3, which is make it so that, you know, Web2 users can use it, and they don't need to understand the underlying technology."

This focus on accessibility and ease of use will be crucial for BetDEX and other blockchain-based platforms as they seek to attract users from traditional betting markets.

The Potential for Social Betting

The intersection of social media and sports betting presents an interesting opportunity for platforms like BetDEX. While the team acknowledges that creating successful social betting experiences has been challenging in the past, they see potential in this area.

Nigel Eccles, drawing from his extensive experience in the industry, notes that while betting is inherently a social experience, translating that into a successful online product has proven difficult. However, he mentions examples like DABL in Australia, which allows users to share parlays with friends, as a potentially successful approach.

For BetDEX, the focus remains on providing value to high-value customers, but the team recognizes the importance of community building within their user base.

The Impact of Blockchain on Sports Betting Liquidity

One of the key innovations of the Monaco protocol is its potential to create a unified liquidity pool for sports betting. Currently, the sports betting industry is fragmented, with thousands of different books quoting their own prices and maintaining separate liquidity pools.

The Monaco protocol aims to solve this by creating a decentralized infrastructure that allows different books to share liquidity. This has the potential to create a more efficient market with better odds for users and reduced risk for bookmakers.

As Nigel Eccles explains, "One way to think about Monaco is it's a language, a protocol that books can talk to each other and can share liquidity. In a way, it becomes kind of like digital plumbing that allows these 10,000 different books to say, 'Look, I've got a bet for $5,000 on Man United at this price and I want to offset it with someone else.'"

Handling Blockchain Outages

While Solana offers significant advantages in terms of speed and cost, it has faced criticism for occasional network outages. The BetDEX team addresses this issue pragmatically, viewing it as a necessary trade-off in the development of new technology.

Nigel Eccles draws a parallel to the early days of cloud computing, noting that even established platforms like AWS experienced significant outages in their early years. He emphasizes that the long-term potential of the technology outweighs these short-term challenges:

"Course, you know, this is still a new technology. It's not going to be perfect. But it's being built in a way that it's that success doesn't result in a failure case like success, you know, where it's got millions of people using it and conducting, you know, thousands of transactions per second, something that's being built for. That's a much better trade off that, okay, there's going to be some outages in these early years, you know, that we can handle that."

The Role of Arbitrage in the BetDEX Ecosystem

Arbitrage betting, where users take advantage of different odds across multiple platforms, is a common practice in the sports betting industry. BetDEX acknowledges the presence of arbitrage bettors on their platform but views this as a natural part of the betting ecosystem.

Unlike some traditional bookmakers who may limit or ban successful arbitrage bettors, BetDEX's decentralized nature makes it difficult to discriminate against these users. This openness to all types of bettors, including sharp and arbitrage bettors, is part of BetDEX's commitment to creating a fair and transparent betting environment.

The Future of Prediction Markets

While BetDEX primarily focuses on sports betting, the team recognizes the potential for broader prediction markets on blockchain platforms. However, they note that sports betting remains the dominant market in terms of volume and user interest.

Nigel Eccles shares his perspective on prediction markets: "The focus on prediction markets is a very US phenomena, an inter-definition. So for example, if you look at the UK market, UK, you can take bets on literally anything. There's been bets on next-prime ministers, there's been bets on the US elections, there's bets on new stories, pattypaw famously makes bets on the next pope, stuff like this. The thing that you've discovered though is that things outside of sports is just a smaller market, right?"

While BetDEX may explore prediction markets for events like US presidential elections in the future, their primary focus remains on the much larger and more consistent sports betting market.

Transparency and Trust in Blockchain Betting

One of the key advantages of building a betting platform on blockchain technology is the increased transparency it offers. All transactions and settlements on the Monaco protocol are visible on-chain, allowing for unprecedented levels of verification and trust.

This transparency extends to the code itself, with the entire backend of the protocol being open-source. This allows anyone to inspect the code and verify that bets are being settled correctly, eliminating the need to trust a centralized authority.

The Potential for Institutional Adoption

While BetDEX currently focuses on retail users, the team sees potential for institutional adoption of the Monaco protocol. Traditional sportsbooks could potentially use the protocol to hedge their exposure and manage risk more effectively.

This could lead to a more competitive betting landscape, with books able to offer better odds to their customers by leveraging the shared liquidity pool provided by the Monaco protocol.

Challenges and Opportunities in User Experience

Creating a seamless user experience that rivals traditional Web2 betting platforms remains one of the biggest challenges for BetDEX and other blockchain-based betting platforms. The team is actively working on solutions to abstract away the complexities of blockchain interactions, such as managing wallets and handling gas fees.

As Varun Sudhakar explains, "We're working a lot on trying to basically abstract the way the complexities of the chain and make it much easier for the masses to come in, right? Like we're going after people who are price sensitive betters. And most of them are probably invariably have not, I've ever heard about the blockchain, right?"

This focus on user experience will be crucial for BetDEX as they seek to attract users from traditional betting platforms and grow their market share.

The Role of Solana in BetDEX's Success

The choice of Solana as the underlying blockchain for BetDEX and the Monaco protocol has been crucial to the project's success. Solana's high throughput and low transaction costs enable the creation of a betting platform that can handle the high volume and rapid transactions required for a seamless betting experience.

Moreover, Solana's commitment to maintaining these performance characteristics as the network grows aligns well with BetDEX's long-term vision. This gives the team confidence that they can continue to scale their platform without facing the performance issues that have plagued some other blockchain-based betting platforms.

The Potential for Cross-Chain Integration

While BetDEX is currently focused on building on Solana, the team remains open to potential cross-chain integrations in the future. As the blockchain ecosystem evolves, there may be opportunities to leverage other networks or layer-2 solutions to further enhance the platform's capabilities.

However, the team emphasizes the importance of maintaining a focus on user experience and product quality rather than getting caught up in blockchain tribalism. As Nigel Eccles states, "We come out as technologists, like we want to design a really good product that works for consumers. That happens to be Solana is the platform we're building on, the level of the sort of religious affiliation with the single blockchain is ridiculous, because normies don't care and it focuses us as product developers has got to be choosing the best blockchain that delivers the consumer user experience."

Conclusion: The Future of Blockchain-Based Sports Betting

BetDEX and the Monaco protocol represent a significant step forward in the evolution of sports betting. By leveraging blockchain technology, they are addressing longstanding issues in the industry and creating a more transparent, efficient, and fair betting ecosystem.

As the platform continues to grow, attract more liquidity, and refine its user experience, it has the potential to disrupt the traditional sports betting industry. The team's focus on solving real problems and their commitment to creating a user-friendly experience positions BetDEX well for future growth.

While challenges remain, particularly in terms of mainstream adoption and creating a seamless user experience, the potential of blockchain-based betting is enormous. As the technology matures and becomes more accessible, platforms like BetDEX could lead the way in bringing decentralized betting to a global audience, potentially reshaping the multi-trillion dollar sports betting industry in the process.

Facts + Figures

  • BetDEX is a sports betting exchange built on the Solana blockchain, aiming to address issues in the traditional betting industry.
  • The sports betting industry is estimated to handle over $2 trillion in bets annually.
  • Traditional sportsbooks often charge fees as high as 10-15% on bets.
  • BetDEX charges a total of 3% on net winnings per market, split between the Monaco protocol (1%) and BetDEX (2%).
  • The Monaco protocol is an open-source, permissionless infrastructure that allows for transparent and efficient betting markets.
  • BetDEX currently has between $500,000 to $1 million in open liquidity available at any given time.
  • The platform covers a range of sports including soccer, NBA, tennis, NHL, NFL, and esports.
  • BetDEX currently does between 500,000 to a million dollars a month in matched volume.
  • The team aims to reach 20 million plus more per month in matched volume.
  • Building a Web2 experience on a blockchain is estimated to be about three times harder than building on a traditional database, both in terms of cost and time.
  • Traditional sportsbooks can charge up to 40-50% fees on parlay bets.
  • Some traditional betting exchanges implement "premium charges" for successful bettors, which can go as high as 50-60% of winnings.
  • BetDEX maintains a flat fee structure for all users, regardless of their success.
  • The platform currently operates in a non-custodial manner, requiring users to have a self-custody wallet with USDC and a small amount of SOL for gas fees.

Questions Answered

What is BetDEX?

BetDEX is a decentralized sports betting exchange built on the Solana blockchain. It aims to address common issues in the traditional betting industry such as high fees, discrimination against winning players, and counterparty risk. BetDEX operates on top of the Monaco protocol, which serves as a decentralized infrastructure for sports betting, allowing for transparent and efficient betting markets.

How does BetDEX differ from traditional sports betting platforms?

BetDEX differs from traditional sports betting platforms in several key ways. Firstly, it operates on a blockchain, providing increased transparency and security. Secondly, it charges lower fees (3% of net winnings) compared to traditional sportsbooks (often 7-15% or higher). Thirdly, BetDEX does not discriminate against winning players or implement premium charges for successful bettors. Lastly, its decentralized nature reduces counterparty risk for users.

Why did BetDEX choose to build on Solana?

BetDEX chose to build on Solana due to its high speed and low transaction costs. The team believed that Solana's commitment to maintaining these characteristics as the network grows was crucial for building a scalable betting platform. Previous attempts at blockchain-based betting on networks like Ethereum faced challenges due to high transaction costs and slow speeds, which Solana's architecture helps to mitigate.

What sports and markets does BetDEX cover?

BetDEX covers a wide range of sports including soccer (various leagues including Premier League, Bundesliga, La Liga), NBA basketball, tennis, NHL ice hockey, NFL American football, and some esports. The platform primarily focuses on high-liquidity markets such as match winner bets, but is expanding into other market types like both teams to score and over/under bets as demand grows.

How does BetDEX handle market making and liquidity?

BetDEX relies on institutional market makers and gambling syndicates to provide liquidity to its betting markets. These entities set initial odds and provide depth to the markets. As of the podcast recording, BetDEX had between $500,000 to $1 million in open liquidity available at any given time. The team is actively working on onboarding more market makers to improve liquidity and competitiveness of odds.

What challenges does BetDEX face in terms of user adoption?

The main challenge BetDEX faces in terms of user adoption is creating a seamless user experience that rivals traditional Web2 betting platforms. This includes simplifying the process of interacting with blockchain technology, managing wallets, and handling gas fees. The team is working on solutions to abstract away these complexities and make the platform more accessible to mainstream users who may not be familiar with cryptocurrency concepts.

How does BetDEX handle blockchain outages?

While Solana has faced criticism for occasional network outages, the BetDEX team views this as a necessary trade-off in the development of new technology. They draw parallels to early challenges faced by cloud computing platforms like AWS. The team believes that the long-term potential of the technology outweighs these short-term challenges and are confident in Solana's ability to maintain high performance as the network grows.

What is the future vision for BetDEX and blockchain-based sports betting?

The future vision for BetDEX involves creating a more transparent, efficient, and fair betting ecosystem that can compete with and potentially disrupt traditional sports betting. The team aims to continue improving the user experience, attracting more liquidity, and expanding their market offerings. They also see potential for institutional adoption of their protocol, which could lead to a more competitive betting landscape overall. Ultimately, they envision blockchain-based betting becoming mainstream, with users able to enjoy the benefits of decentralized platforms without needing to understand the underlying technology.

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