Revelo Roundtable #18 - Onchain Sports Betting

In this episode of Revelo Intel’s Twitter Spaces on June 27, 2024, Kirk hosted Euan from Purebet, Padzank from Thales Protocol, Andrew from SX Bet, and Blue from LEVR.bet to discuss the innovations in on-chain sports betting, attracting liquidity providers, the advantages of blockchain technology in gambling and prediction markets, and more! Read our notes below to learn more.

Background

Kirk (Host) – Head of Business Development at Revelo Intel

Euan (Guest) – Contributor at Purebet

Padzank (Guest) – Growth and BD Lead at Thales Protocol

Andrew (Guest) – Project Lead at SX Bet

Blue (Guest) – Founder at LEVR.bet

Exploring On-Chain Gambling and prediction markets

Euan from Purebet shares his background in sports betting, explaining how he made money by exploiting bookmaker prices but eventually faced limitations with traditional betting sites. He turned to crypto, noticing the fragmented on-chain betting market, and created Purebet to aggregate odds and liquidity from different on-chain bookmakers into one platform.
Padzank from Thales Protocol/Overtime introduces himself as the growth and BD lead. He explains that Thales started as a spinoff from Synthetix’s binary options contracts and developed their own automated liquidity architecture. They built an AMM for digital options and sports betting, launching Overtime to provide permissionless liquidity pools and sports AMM products. They recently launched their v2 architecture, enabling live betting on-chain without front-running risks.
Andrew from SX Network describes his project’s goal of reducing the vig (cost) that sports bettors pay from the industry standard of 5-7% to less than 0.5%. SX Network is a peer-to-peer betting exchange built on the SX Network blockchain, soon migrating to a roll-up and offering cross-chain deployment, starting with Arbitrum.
Blue from LEVR.bet introduces himself as the founder, starting in the space by mining Ethereum. His team, with a professional sports betting background, developed a platform inspired by GMX to offer leverage on sports betting by pulling in odds feeds from data providers. They launched a beta test during the NBA finals and are preparing for a full testnet launch. LEVR.bet aims to eliminate the vig, replacing it with a borrow and funding rate, allowing for leverage and live trading during games.

The Blockchain Advantage in Sports Betting

Kirk asks about the key advantages of using blockchain for sports betting compared to traditional web2 counterparts.
Euan from Purebet highlights that blockchain ensures openness and accessibility for everyone, highlighting the ability to design a system that cannot ban or limit users. This contrasts with traditional bookmakers who often ban winning players. For Euan, the core advantage of crypto betting is its open and resilient nature, always accessible and never banning winners.
Padzank from Overtime agrees and adds several points. He highlights global accessibility, where anyone with an internet connection can participate in sports betting or become part of the counterparty pool without restrictions. The on-chain architecture of Overtime ensures transparency and permissionless access, eliminating the possibility of banning or blocking users. He also mentions the advantages of tokenization, allowing for direct incentives, better odds, and partnerships with other protocols, which are not possible for traditional web2 projects.
Blue says that permissionless markets prevent issues like erroneous KYC restrictions and blocking winning players, which go against blockchain’s ethos. He mentions that pooled liquidity is essential for their product, allowing them to offer leverage, which would be difficult without blockchain’s liquidity vaults. Additionally, Blue highlights the importance of on-chain liquidations based on data from a transparent and provably fair oracle, which builds trust in a new marketplace with a new product.

Attracting Liquidity Providers and Ensuring Fair Betting in Blockchain-Based Systems

Kirk asks the participants how their protocols attract LPs (liquidity providers) while offering a fair experience for bettors, given the transparency and lack of house edge in blockchain-based systems. He starts with Purebet.
Euan from Purebet explains that Purebet does not use LPs. Instead, it routes user transactions to the best venues, such as SX Bet or Overtime. By doing so, Purebet helps venues with the best odds gain more volume without having to manage LPs directly.
Padzank from Overtime describes their fully permissionless liquidity pools, where people deposit funds if they perform well. He explains the concept of the “vig” (house edge) and how the house consistently profits over time due to the odds provided by global odds makers. Padzank shares that Overtime’s v2 architecture, launched during the Euro tournament, showed a 10% return for LPs on $900,000 in volume. This architecture ensures profitability for LPs while offering better odds and transparency.
Andrew from SX Bet explains their peer-to-peer betting exchange model, comparing it to DYDX for sports betting with an off-chain order book and on-chain settlement. They initially used bet mining incentives to increase liquidity but have since cut these incentives due to a sufficient network of liquidity providers. In their model, multiple liquidity providers compete, which suits the adversarial nature of Web3 and allows sharp bettors to participate without being banned.
Blue from LEVR.bet describes their hybrid model combining an AMM (Automated Market Maker) with leveraged positions. They charge a borrow rate, replacing the need for vig. LEVR.bet operates similarly to GMX, with a pooled liquidity vault as the counterparty to leveraged positions. Pre-game, LPs take on controlled risk through a risk algorithm, while in-game, users trade positions on an order book exchange. This model balances risk for LPs and offers a dynamic trading environment for users.

Managing Oracle Risks in On-Chain Betting: Strategies from Purebet, Overtime, SX Bet, and LEVR.bet

Kirk asks about how the participants handle oracle risks when piping in odds for on-chain bets.
Euan from Purebet explains that they rely on the underlying platforms they integrate with, like SX Bet and Overtime, for oracle data. They have observed improvements in how these protocols fine-tune their oracle settings to minimize discrepancies, reducing arbitrage opportunities that previously existed.
Padzank from Overtime highlights that they use Chainlink oracles to bring odds on-chain from reliable sources like Pinnacle. They focus on the speed of updating these odds and managing risks by setting fixed risk parameters for each game, which limits potential losses from any incorrect odds data. He mentions that recent upgrades in their architecture have improved the efficiency and accuracy of their oracle data, tightening risk management and reducing arbitrage opportunities.
Andrew from SX Bet discusses that, as an exchange, they do not handle the odds directly; instead, they rely on market makers who use their own odds feeds. This creates a competitive environment where different market makers can offer varying odds based on their strategies. For market creation and settlement, SX Bet aims to decentralize this process by incentivizing validators to create and report markets using multiple data sources, integrating this critical function into their network.
Blue from LEVR.bet explains their approach, which includes using multiple data sources to ensure redundancy and prevent downtime. They aggregate odds data from top casinos and standardize it to ensure seamless switching between data sources if needed. They also handle game status signals and in-game time segments, which are crucial for their leveraged positions and borrow rates. This aggregation helps prevent market manipulation and ensures fair pricing and liquidation processes.

Strategies for User Growth and Market Engagement

Kirk asks the participants about their strategies for user growth and attracting more traders and market makers to their systems.
Euan from Purebet shares that they recently launched Purebet v2 in Beta, which includes more markets and features, a referral system, a designated market maker system, and a free bet token that can be given out as a USD equivalent. They are also working on a seamless betting feature that allows users to bet without needing Solana in their wallets by integrating account abstraction and no-wallet systems, targeting both crypto and non-crypto users. Their main growth strategy includes online advertising and referral systems, acknowledging the challenges of traditional advertising due to regulatory constraints.
Padzank from Overtime highlights two key venues for growth: user experience and developer experience. For user experience, they are focusing on full account abstraction architecture with Biconomy, social login with Particle Network, and fiat on-ramping through OnRamper. This setup aims to make their platform globally accessible and user-friendly, mimicking traditional sportsbook experiences. For developer experience, they provide a fully on-chain architecture that allows developers to build their own sportsbook applications tapping into Overtime’s liquidity. They also offer token incentives for wallets using their products, enhancing growth through third-party front ends.
Andrew from SX Bet explains their growth strategy focuses on having the best odds for sports betting, which attracts users through odds comparison sites like Odds Jam. They have phased out token incentives, relying instead on their value proposition. SX Bet is also launching a rollup on Arbitrum Orbit for better security and building a cross-chain app to cater to different EVM communities, ensuring users can access superior odds without leaving their preferred chains. They adopt a hub-and-spoke model where liquidity resides on the SX rollup, appealing to both professional market makers and casual crypto-native bettors.
Blue from LEVR.bet outlines their phased approach to growth. They plan to start with incentivized testnets for various sports, targeting crypto-native sports bettors and DeFi traders. By removing vig and replacing it with borrow fees, they aim to offer the best odds, attracting users through value. Early growth will be driven by token rewards to incentivize liquidity in their vault and market making. After achieving product-market fit and establishing liquidity, they will expand to a more retail-oriented format, abstracting blockchain technology for a smoother user experience, and eventually target professional bettors by showcasing the product’s high functionality and unique features.

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Show Information

Medium: Twitter (Audio)
Show: Revelo Intel Twitter Space
Show Title: Revelo Roundtable #17 – Onchain Sports Betting
Show Date: June 27, 2024