“Blockchain in Lottery Industry – Bringing fairness to the lottery ecosystem”
The lottery is a type of gambling which involves the drawing of specific numbers to win the large prizes. Many people consider it as a gaming product, but it is a high volume industry which can also be called as a commodity.
One of the lottery directors said, “Lotteries are different from any other gaming product. Lottery players risk a small amount of money against very long odds to win a large prize, with the net proceeds going to the public good.”
The lottery industry keeps a 29% share of the entire global gambling revenue.
Increased from $187.1 billion in 2004 to $284.3 billion in 2014, the global lottery represented an annual growth rate of 4.3% over ten years.
But with the growth of the digital economy, the industry faces challenges like the lack of transparency and fairness.
The world demands more transparency and fairness with the advanced technologies like blockchain.
The distributed nature of blockchain promises the innovation in the lottery industry.
Before we explain how blockchain can be implemented in the lottery, let’s first discover the challenges faced by the industry.
Challenges faced by the Lottery Industry
It is essential to ensure the integrity of the games to avoid the risks of manipulation or frauds. Lottery players doubt the fairness of lotteries and ask the following questions:
- Are the deal and ticket real or not?
- Is the random number generation (RNG) method secure and random?
- Are the prizes paid on time?
- Is the jackpot winner real?
- Is the money accumulated in one pool and used for social causes?
Since the traditional lotteries fail to answer the above questions, lotteries lack fairness in the system.
Here are some of the real cases of manipulation in the lottery industry:
- The 1980 Pennsylvania Lottery Scandal (The Triple Six Fix)
The scandal of Pennsylvania was a plot to rig the Daily Number, a three-digit number. Except the balls numbered 4 and 6, all the balls in three machines were weighted. Therefore, it was sure the drawn number could be a combination of 4s and 6s.
The planned scheme got successful as 666, one of the eight combinations of 6s and 4s, was drawn on April 24, 1980. The fix led to a significant change for the lotteries.
The illicit winnings were never paid out while the chief conspirators were imprisoned.
- Hot Lotto Fraud Scandal (IOWA Lottery Case)
Eddie Raymond Tipton, former information security director of the Americal Multi-State Lottery Association, affirmed to rigging RNG that he and two others used in various cases of state lotteries frauds.
He installed a software code which enabled him to modify RNG and guess winning numbers on specific dates of the year. Because of the altered RNG, he won a $14.3 million jackpot in 2010.
As a result, Tipton was convicted and sentenced to ten years imprisonment in 2015.
Therefore, it is essential to bring fairness to the lottery systems.
Due to the smaller size of the domestic market, users from different countries cannot get involved in the biggest lotteries in the world. They are restricted to participate in smaller local lotteries.
Though new online solutions enable players to purchase worldwide or US lottery tickets, the service charges and risks of fraud and mismanagement are higher.
As of now, the state and law regulations control the way lotteries are carried out in different corners of the world. On an average, not more than 50% of funds gathered from ticket sales are issued to the prize pool.
Also, the lottery participants have no control over how much money should be collected from ticket sales, and lottery winnings are taxed in some countries.
- Distribution of Funds
Lotteries are served as funding for charity and other social projects. But in many cases where countries have high levels of corruption, players can question the fair distribution of funds.
Since there is no way to get information about the distribution of funds, it could be the biggest challenge for the players to build trust in the specific lottery association.
Because the blockchain is a distributed ledger technology with a secure write-forward authentication system, it can add data without the risk of a single point of failure. Every node involved in the blockchain network has a copy of the ledger.
Users can update the information into the ledger without the involvement of a third party. It gives individuals more power and flexibility.
Therefore, the blockchain can be well implemented in the lottery or gambling industry.
How could Blockchain Lottery Platform work?
Technology components involved in the blockchain lottery process:
- Public Blockchain
- Android/iOS App or Web Platform for Players
- Web Platform for Admins to deploy smart contracts
Step 1: Players sign up to the lottery platform
Lottery players need to sign up to the platform to participate in the lottery and become its member.
They sign up to the blockchain lottery system with the following information
- Wallet Address
- Email Id
- Phone Number
After the successful sign-up, players can get alerts and notifications related to ticket openings on a regular basis.
Step 2: Admin announces the ticket openings and deploys the smart contracts
Admin announces the ticket openings on the platform and the notification is sent to the users. They also deploy smart contracts, which contain pre-defined rules for the lottery game to bring fairness and transparency to the ecosystem.
Smart contracts ensure what information should be shared with which stakeholder in the system, providing privacy and disclosure of data.
Since the players can buy the tickets with cryptocurrencies, their identities remain anonymous. The transactions stored on a public blockchain allows traceability and makes it easier to resolve disputes/scandals related to lotteries.
Step3 : A Random number is generated and recorded on the blockchain
Since the random number generator is based on the blockchain, the algorithm relies on recent random blockchain transactions. It pulls a specified amount and order of numbers to generate each winning number sequence.
Because nobody is aware of the next transaction in the blockchain, the lottery platform adds an extra layer of randomness to the selection process.
Once the random number is generated and matched to the player’s ticket number, they are awarded and money is automatically sent to their respective wallets.
The funds to be distributed to players are defined in the smart contracts.
Therefore, the decided commissions and funds are paid out to every player on the platform.
Moreover, the smart contract code is available publically on the platform; players can check the rules defined in the contracts to confirm if the funds are distributed in a fair way or not.
Step 4: Players can trace back the history of records of transactions
Since the transactions are recorded on the blockchain, players can trace back the history to know who had won the jackpot and if the commissions and wins are paid out as defined in the smart contracts.
Here’s how blockchain can bring enhancement to the lottery industry
Improve fairness with the smart contracts
A smart contract is a digital agreement between the parties in which computers enforce terms and bring transparency to any transaction. With an online gambling/lottery blockchain in place, rules which are legible to all parties can never be altered.
Since no centralized authority is there to govern the game, there will be no concerns related to winnings. The player’s funds can directly go into the contract without the interference of intermediaries.
Privacy and Accessibility
The use of cryptocurrency for gambling has become a popular solution for casinos, either as an alternative to fiat currency or as the primary payment system.
With cryptocurrencies, users can gamble anonymously, without the need to submit copies of the documents.
Also, cryptocurrencies can make online gambling accessible as it offers a low entry barrier to new players and enables them to avoid gambling regulations applied to fiat currency.
As all of the records are stored on the blockchain, players can have a transparent and traceable view of the saved transactions. Due to the traceability offered by the platform, they can reach to the roots of disputes if any occurs in the future.
Examples of lottery companies implementing blockchain
Firelotto is the decentralized lottery platform backed by Ethereum and its smart contracts without any human intervention. Offering two types of lottery games: a draw lottery and instant win game, the platform is a licensed crypto-exchange which allows players to buy tickets with cryptos and fiat money.
Kibo is the smart contract enabled gaming Ethereum platform. They have introduced the blockchain technology to bring a new level of availability and transparency in the lottery market. It aims to connect the players from any part of the world.
Quanta is a fully licensed blockchain lottery platform developed on Ethereum. Designed to transform the conventional lottery, it not only offers credibility and safety to players and operators but also enables people to participate in the lottery regardless of border or economic status.
Whether its a ticket sale, a jackpot win, commisions, or investment, every transaction goes through the blockchain. Every block in the chain has a record of the transactions, so a hacker would have to change every single block to manipulate or compromise the lottery number which is impossible.
Therefore, a blockchain based lottery platform ensures no foul plays and lottery scandals in the ecosystem.
The team of blockchain experts at LeewayHertz has deployed over 80 smart contracts and built 5+ dApps on the blockchain. You can contact us and discuss your business requirements if you want to develop a blockchain-enabled lottery platform.