The global betting and predictions market is expected to reach over $92 billion by 2023 as new players, nations and states embrace the industry. Huge economies such as the United States have long banned gambling, but in 2018 some states legalized the practice, adding $1.5 billion to the recorded global figure of online betting revenue by the end of 2020.
With many more states set to follow suit, the gaming industry could surpass the predicted figure – $100 billion in annual revenue being the goal by the end of 2023.
In light of the explosive rise in sports betting during the pandemic, numerous decentralized betting protocols have been developed in an attempt to steer users and players towards blockchain-based prediction markets. On Wednesday, Azuro, a decentralized DAO of betting and prediction markets, announced a successful $3.5 million seed funding round led by top VCs and angel investors ranging from DeFi, GameFi, traditional betting markets and other blockchain-related fields.
The seed investment round was led by three companies, namely Gnosis, Polymorphic Capital and Flow Ventures. Other investors in the round included Ethereal Ventures, Arrington XRP Capital, AllianceDAO (aka DeFi Alliance), Delphi Digital, Meta Cartel Ventures, Merit Circle, and Clever Advertising.
Since the launch of decentralized prediction platforms in 2017, the space has rather stagnated despite player demand and the crypto ecosystem skyrocketing to a market capitalization of $3 trillion. Although many attempts have been made to make them work, most of these platforms have failed woefully in providing the fundamentals that web2 betting companies have capitalized on, including an array of events, deep liquid markets, competitive odds and multiple betting options. Additionally, current blockchain-based betting solutions suffer from single liquidity providers, product depth, and poor UX for their players.
The latest capital injection into Azuro aims to address these issues by launching a transparent, trustless and decentralized platform. Currently, Liquidity Providers (LPs) in prediction markets must manually start markets, set quotes, and seed liquidity in each market they create. This means that LPs hold all the betting risk while having little incentive to do so. This has led to the massive outflow of capital and liquidity from decentralized prediction markets – as happened with Gnosis, an Azuro partner.
Additionally, prediction markets are ineffective for bets with 3 or more outcomes. Most are forced to stick to YES/NO markets, which is grossly insufficient, especially for sports and related betting with more than two outcomes. Finally, most of these platforms face regulatory pressures and geographical constraints, which could impact the growth of betting markets, or even see them shut down.
Unlike its competitors, Azuro is building a new protocol to improve liquidity provision and minimize betting risk for LPs on the platform. The platform uses a “pooled liquidity structure”, similar to DeFi protocols, which means that LPs will not have to manually create markets and will not be exposed to the systematic risks of the betting market. Instead, the risk is spread across all protocol betting markets, and therefore significantly reduced for LPs.
Additionally, the funds will be used to build a user-friendly UX architecture that enables the full depth of the betting product available on centralized sports betting and a classic interface, similar to traditional betting markets. Unlike most decentralized prediction markets today, Azuro will also allow users to easily configure multiple betting options, switching from the “Yes/No” binary that is currently widely used in decentralized prediction markets.
The Decentralized Betting Governance Protocol
Over the past year, DAOs have become standard in the crypto industry, allowing platform participants to vote on proposals made to improve or upgrade the protocol. Similarly, Azuro plans to launch its DAO to reduce outside influence from regulators and authorities.
According to a release, the platform holds the liquidity as the core infrastructure layer with player and customer interactions built on top of it. This approach “outsources much of the direct-to-consumer effort and relieves Azuro of most of the regulatory, KYC, legal, and operational lift,” the statement continued. Azuro divides the role of traditional bookmakers into smaller roles that are much more achievable for smaller participants. Azuro connects these participants in an elaborate dance thus giving players a better experience in a decentralized way.