Latest BitLotto Winner: “Where Did All These Bitcoins Come From?”
Bitcoiner JoeyJoe wrote a post on the BitcoinTalk forum asking for help in figuring out why someone just “randomly” sent him 40.5 bitcoins — an amount worth about $275 USD.
BitLotto takes a novel approach to running a lottery. One special property of Bitcoin is that it provides a revolutionary accounting concept — triple entry. BitLotto takes advantage of triple-entry because it gives a full public accounting of every BitLotto ticket purchase and of each payout that is sent back to the winning ticket buyer.
The winning ticket is chosen based on a derivative of the numbers from the weekly Mega Millions multi-state lottery that is offered in the U.S. The algorithm that chooses the winning BitLotto ticket uses the Mega Millions winning numbers and determines the ticket with the closest match based on each ticket’s transaction hash. This algorithm can be used by anyone to manually verify which ticket is the winner.
Because of this, BitLotto has no ability to misreport the number of tickets sold or to manipulate the results as to which ticket was the winner. The winnings are sent only to a Bitcoin address from the winning ticket purchase — something that is publicly verifiable from Bitcoin’s blockchain.
Using Bitcoin in this manner makes it possible to operate a lottery with very little overhead. BitLotto pays out 99% of the ticket sale gross proceeds, keeping just 1% as the fee for operating the system.
There is one caveat — because the winnings are returned only to the Bitcoin address for the winning ticket, tickets must not be purchased unless done so while running the Bitcoin client locally and keeping a wallet secure. Because of the way most eWallets work, using an eWallet to make a BitLotto ticket purchase would only cause someone else to receive the payout if that ticket were to win.
While this month we know that JoeyJoe was the winner, all but one of the previous winners of BitLotto have opted to remain anonymous (technically, pseudonymous - Editor). Not even BitLotto knows who the winners are. If BitLotto’s jackpots were to become large enough, however, it is likely that there would be an incentive by tax authorities to perform network analysis to try and determine the identity of the winner so as to assess taxes against the winnings (or perhaps even to confiscate the winnings as participating in BitLotto may or may not be allowed by the laws in certain jurisdictions).
The monthly BitLotto ticket purchases cost 0.25 BTC (an amount just under $2 USD at current exchange rates). BitLotto also runs a 0.05 BTC (about $0.35 per ticket) weekly lottery, BitLotto Jr. though that offering is fairly new and weekly ticket sales are low yet.
There are other Bitcoin-powered lotteries though BitLotto is the only one that uses the blockchain with triple-entry verification. Ironically, JoeyJoe had built a lottery site of his own though there are significant differences between the two services. Thus far, it appears JoeyJoe’s luck has been better with BitLotto!
Josh Strike, operator of the Bitcoin-only Strike Sapphire online casino (@StrikeSapphire), posted an article in Casino Meister. For the post, the operator opens the books — showing total drop, customer counts, deposits and the bottom line (a net loss). The service is not accessible by those in the U.S. due to online gaming regulations. Excerpts:
I thought I’d share the results of my little experiment. Keep in mind this doesn’t include the external costs — I spent 3 years programming it on my own time, then about $7k before opening it, plus $15k in for the initial float, and I’ve dropped $8K on servers and other bills since it opened.
[The deposits per member metric has] a lot to do with Bitcoin’s instant deposits and withdrawals, and the fact that there’s no minimum deposit. Players can deposit as little as $0.05.
I just need to be able to take other payment methods, to reach a bigger audience.
Bitcoin’s “Hockey Stick” Growth Attributed To Novel Gaming Service
Eleven months ago Bitcoin’s trajectory was nearly vertical as each day brought a higher price and the daily transaction volumes on the Bitcoin network were seeing new record levels each day as well. But then suddenly the ascent stopped and what followed was a long slide back towards earth.
In the months that followed those June 2011 highs the exchange rate had dropped by more than 90% from the earlier highs and the transaction volumes had dropped as low as 68% from the peak. While the exchange rate is still down considerably with bitcoins trading around $5 USD now the daily transaction volume has shot back up and is once again breaking new records.
While the daily transaction volume had been steadily growing at a casual pace since October, there’s been a development in the past weeks that has had a significant impact. The ten-day-old service SatoshiDice.com has been growing at a blistering pace.
The daily totals with the exact numbers haven’t been compiled yet but extrapolations of hourly data show there to be nearly four thousand blockchain transactions resulting from Satoshi Dice for the most recent 24-hour period.
Each wager by a player causes a response from Satoshi Dice as even losing bets earn a payout (the service returns a fraction of what the house earns from each wager). As a result each wager can be responsible for two transactions occurring on the Bitcoin blockchain.
The vast majority of Satishi Dice transactions are for just a single wager but a player can instead combine multiple wagers into a single transaction. Thus there isn’t an exact 1:1 ratio between blockchain transactions sent to Satoshi Dice and the number sent in return.
Wagering on Satoshi Dice occurs without any account needed on any website — the service simply sends a new, return transaction with the full payout when the transaction was a winner or the fractional bit awarded for each losing bet.
Because the payouts include coin from the wager transaction that made the bet, the site can provide payouts immediately and doesn’t need to wait for payments to confirm which is a process that would otherwise take from twenty minutes to two hours, depending on various factors.
Another difference is Satoshi Dice’s novel approach towards determining the winners. At a basic level, the concept of the game is that for each wager a “dice roll” occurs and a number from 0 to 65,535 is the result. Each wager is evaluated to determine if the number rolled is below the wager’s threshold. For instance the “less than 16,000” wager will payout if the roll is any number up to and including 15,999. Other online wagering services would employ a random number generator (RNG) to ensure the roll values are unpredictable and statistically random. PokerStars, for instance, uses a third party auditor to assure players that the output of the RNG used truly is “cryptographically random and truly unpredictable”.
Satoshi Dice’s method uses an alternate form of cryptography, where the cryptographic secret used for the roll is not revealed until a period (from 24 to 48 hours after the wager occurs). To ensure that the secret was not altered, a hash of each secret is published in advance and as a result the integrity of each roll can be verified once the secret is revealed.
There has been a concern expressed that the particular method that Satoshi Dice uses in performing the roll appears to be an approach that is unique and possibly not one that has been verified to be a statistically true RNG. The operator of a competing wagering service was asked about Satoshi Dice’s method and the response was: “It’s probably not equally distributed and worse than something designed to be a PRNG like Mersenne, and almost certainly less random than a real RNG.”
Another area of concern is with the amount of resultant activity on the Bitcoin blockchain. Each of the thousands and thousands of nodes on the Bitcoin network receive and relay each of the transactions and store them on disk once they are included in a mined block. A doubling in the transaction workload then will mean a near doubling in the amount of storage. The Bitcoin blockchain and index is already over 1.7 GB in size. If the blockchain growth rate accelerates, the priority for resolution of the known scalability issue might be raised by Bitcoin’s developers.
There are also levels at which the Bitcoin network maxes out though these are limits set arbitrarily and would likely be increased when the limits might start approaching which would restrict Bitcoin’s future growth. If the use of Satoshi Dice grows much more than an order of magnitude greater than its current level that would likely trigger some attention on the topic.
Even with Satoshi Dice being no threat to the Bitcoin network, there is the matter of transaction fees causing the payout amount to be misrepresented for a fairly decent portion of all wagers. Though the Bitcoin network will pass along most transactions even without a fee, most players are using a client which will either require a transaction fee or will strongly encourage the player to include a fee. When a fraction of a percent of odds can mean the difference between coming out ahead and losing money this transaction fee can become a significant drawback. For the smallest wagers on Satoshi Dice, even the sub-penny transaction fees typical with Bitcoin can extract more from each wager than what the house earns on odds. Additionally, every transaction sent by Satoshi Dice back to the player includes a fee as well, reducing the house’s take. Asked about this topic, the operator of a competing online wagering service suggests that “in practice this is not efficient for large-scale betting where you have thousands of small bets [like this] taking place.”
Efficient or not, players appear to not mind. Getting a payout in a matter of seconds after placing the wager provides the speedy reward that keeps the players in the zone.
Though the desire for a dopamine hit may be the main reason Satoshi Dice is seeing so much activity, there is another potential contributing factor. One of the misconceptions about Bitcoin is that it is an anonymous currency. Bitcoin can be used in an anonymous manner, but Bitcoin transactions are traceable. For this reason, there has been interest in mixing services which help to improve anonymity.
What may be occurring then is that Satoshi Dice is seeing some level of participation by those intending to alter the makeup of the coins held in their wallets. Satoshi Dice in its present form makes a poor solution for mixing however the operator of the service has indicated that some features such as alternate payout addresses and a time delay that might improve on this specific use are forthcoming.
Whatever the reasons for using Satoshi Dice’s service, the fact remain this is the fastest growing business to-date in Bitcoin’s short history. In the past couple of hours while researching for and writing this post, the wagering activity has increased at an even greater level. The level of wagers occuring during this 8am - 9am UTC hour caused there to be more transactions on the blockchain due to Satoshi Dice than there were for all other Bitcoin transactions, combined.
Houston, We Have Liftoff!
Ars Technica writer Timothy B. Lee (@binarybits) checks in on Bitcoin on the one-year anniversary of the “Bitcoin Bubble”. Excerpts:
“But since it hit bottom late last year, the cryptocurrency has defied skeptics (including me) who predicted it would prove to be a passing fad.”
“Mobile Bitcoin apps for Android are now available. Unfortunately, [Gavin Andresen] said, “iOS has been a struggle just because Apple for whatever reason has decided they don’t like Bitcoin handling on their platform.”
“Future Bitcoin clients will support multisignature transactions, in which a user’s private key is split up among multiple devices. With this feature enabled, compromising any single device won’t allow an attacker to spend the Bitcoins in a user’s wallet.”
“[Jerry Brito argues] that Bitcoin’s relative anonymity and the lack of intermediaries gives it a crucial advantage for ‘illicit stuff: drugs, gambling, pornography, getting money out of countries where there are restrictions on moving funds. That’s where it’ll establish itself first.’”
“Regulations that tried to ban ‘transmitting numbers that represent some value over the Internet’ could hit startups that offer gift card trading or mobile check cashing. ‘It’s a real challenge for regulators who are working with laws that were written for atoms, not bits,’ [Gavin Andresen] said.”
“Disclosures: The author [Timothy B. Lee] owns some Bitcoins.”
New to Bitcoin? Play SatoshiDICE for free!
SatoshiDICE is a blockchain-based online wagering service that has been so popular that it has affected the service levels for other users of the Bitcoin network. SatoshiDICE now accounts for half or more of all Bitcoin transactions occuring each day. That’s quite an accomplishment for a service that is just two months old.
This week Blockchain.info introduced a feature in My Wallet (photo above) that allows SatoshiDICE to be played without installing any software.
If you aren’t already holding bitcoins but would like to play then available for free from The Faucet is a sample amount of bitcoins. The Faucet, operated by Gavin — the lead developer of the Bitcoin.org open source project, is one source for a few pennies worth of bitcoins.
Here are the steps:
The faucet only pays out once per person, so this is likely a one shot deal for most people.
If you won and would like to share your great fortune, there many ways to donate your bitcoins. If you’ld like to send them to a friend, you can use Coinapult to send your bitcoins to any e-mail address or mobile number (via SMS, in the U.S. and Canada).
If you’ld rather save your bitcoins, feel free — there is no expiration for funds in your wallet.
If you didn’t give an alias when signing up then don’t forget to bookmark your wallet’s URL (or save a copy of the identifer) so that you can use the wallet from your mobile or from another computer at a future time.
Also, don’t forget your password — Blockchain doesn’t know it so there is no method to recover it in the future (unless you provide your e-mail address in the account details).
Enjoy … and good luck!
I was on NPR’s Morning Edition this AM talking with Cyrus Farivar about the legality of gambling using bitcoin. What I find telling is that the casino operators, who are making a tidy profit, are keeping everything in bitcoin and at no point converting to dollars or other currency.