Web3 in Sports Betting
When we set out to build Frontrunner, we observed three major problems in sports betting:
- High house edge, or vig, that makes every bet less favorable (winners pay on average 9.1% of their total wager amount)
- Lack of wager liquidity and flexibility
- Restrictions through wager limits, slow payouts, and slow withdrawals
These problems have existed for as long as sports betting itself. They present a connecting thread: the sports betting industry is rife with opaque and unilateral practices designed to put most bettors at a sizable disadvantage.
This isn’t surprising. Why?
Bookmakers profit when bettors lose.
This adversarial dynamic doesn’t need to exist though, and Frontrunner is changing it from anti- to pro-bettor.
Evolution of Sports Betting
Sports betting has always evolved with technology. Increased connectivity throughout the 19th and 20th centuries allowed it to evolve from local horse betting to a coast-to-coast service. The internet then brought it into the digital era. Online sportsbooks became the norm, and bettors gained access to a far larger number of sports and exotic wagers. Yet through all these modernizations, the bettor/bookie dynamic hardly changed which is why the problems still remain today.
The Stock Market for Sports
In late 2019, we began to explore a stock market-like format for sports betting: a sports prediction market. This format would tackle each of the three major problems. Instead of a bookmaker setting all the odds and sitting between all bets, a central limit order book would. The exchange would be completely peer-to-peer and liquid, allowing each market to set its own live odds through no-downtime and no-limit public trading. And since our revenue wouldn’t be contingent on users losing money, we wouldn’t need to limit their ability to succeed. However, even with this new format, both user and operational accessibility proved to be problematic.
DeFi Meets Sports Betting
Meanwhile, DeFi was growing in popularity, emerging as a solution to democratize global finance and proving how accessible and valuable decentralized exchanges could be. DEXs were furthering the mission of Robinhood by making it even easier for retail investors to become involved with finance and discover new forms of investment and income. It revolutionized the role of liquidity in finance through AMMs. Today, more than $100B of total value is locked in DeFi protocols, indicating just how much of a market there is for it. And since all of this was decentralized, the trust and power dynamics ubiquitous in traditional finance were completely removed from the equation. It became apparent to us that the natural next step in the evolution of sports betting would be to merge it with DeFi.
A Decentralized Sports Prediction Market
As with many legacy industries, the sports betting industry’s use of outdated infrastructure and centralized paradigms has stifled its ability to innovate. This has resulted in the stagnant betting experience with the problems we see today.
DeFi is the answer.
With DeFi, individuals don’t need to trust a middleman bank to broker trades nor handle funds; they can create their trades directly on a blockchain and bring their wallet containing their funds anywhere they go with no institutional friction. Their trades and funds are anonymously, transparently, and securely managed by themselves, and at each step, they maintain complete control.
Because of these benefits, the marriage of DeFi with sports betting is incredibly compelling. The very same innovations we see DeFi pushing in the world of traditional finance can be applied in the world of sports betting.
Here’s what sports betting looks like when combined with DeFi:
- Bettors place bets directly to the blockchain where they are processed and matched
- Betting odds are set and updated not by a centralized bookmaker, but through trading activity
- Payouts are handled quickly and automatically
- Funds are stored and managed entirely by the trader through their own wallet
But the benefits don’t stop there. Innovative app-specific blockchains like Injective are paving the way for DeFi functionality to continue to expand. Injective’s support for a variety of market type primitives including futures and binary options has set a new standard for accessibility and performance in DeFi. With the help of Injective’s zero gas fee protocol and native decentralized order book support, Frontrunner is bringing sports betting into the future.
Sign up and make your first trade today.
About Frontrunner
Frontrunner is a decentralized sports prediction market where users can buy shares of sports propositions and trade them like they would stocks. Unlike traditional sportsbooks where users place a bet and wait, Frontrunner gives users full control over their portfolios, allowing them to dynamically buy and sell positions as the odds change. By leveraging the power of free markets and the blockchain, we create transparent markets and liquid positions to reduce counterparty risk and fundamentally change the way that people invest in their sports knowledge and beliefs.
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