Azuro has recently announced the mainnet launch of their decentralized betting protocol on Gnosis Chain and the first frontend bookmaker.XYZ has connected to the protocol, but with hundreds of new web3 projects popping up every week, why is this news important?

Betting today is broken and is built on negative incentives that put the bookmakers and players at odds with each other. It is common in the betting industry for players to be treated unfairly by having their accounts restricted or winnings withheld for winning too often. Bookmakers go to great lengths to ensure they have the upper hand over the players and use extensive cumbersome KYC procedures in an attempt to delay or refuse large withdrawals. With no single overarching governing body to protect the players, they are often left without a solution and often have to reach out to 3rd party mediators for dispute resolution.

In the same way DeFi disrupted traditional finance, Azuro aims to decentralize and democratize the betting industry. The use of smart contracts creates a level playing field for both players and bookmakers and allows for a trustless, transparent, and permissionless betting experience that is simply not possible in web2.

Previous efforts have been made by reputable web 3 projects to build on-chain betting, but all attempts have failed to reach a critical level of adoption up to this point.

The Past

In 2015 Augur, a decentralized prediction market, became the 1st ever ICO on Ethereum selling 8.8 million REP coins and raising over $5.5 million. This was an exciting time for blockchain and the betting industry but sadly the hype was short-lived as the project subsequently failed to deliver a quality user experience (UX).

Even after 5 years of working on improving the UX, they had still not managed to design a solution that could scale.

This led to other teams such as Polymarket having a crack at prediction markets by trying a different approach as well as pivoting away from sports betting to focus on politics or cryptocurrency-related outcomes. However, none of these projects really managed to deliver a compelling product, provide a good UX and attract enough users to their platforms. Stefan George the co-founder of Gnosis and investor in Azuro summarized it well:

“Early projects like Augur, Gnosis, and Polymarket lacked a critical understanding of sports betting, which is still the biggest market for applying the solutions that these teams were building.”

A hybrid team of sports betting veterans and Web3 pioneers

The Azuro team has a history of working directly in the traditional betting industry with experience in online betting, sports media, and gambling industry payments. The wealth of knowledge that the team brings to the project is unparalleled and will be key to the success of the protocol. Spotting the differences between early Web3 prediction markets and a traditional sportsbook led the team to rethink the current peer-to-peer design and come up with something radically new.

The main problem with a peer-to-peer design stems from the fact that you are reliant on market makers to create the market, price the market, and seed initial liquidity before there is anything for players to bet on. The design is inefficient and leads to little to no markets & a lack of liquidity behind them. Prediction markets currently are closer to betting exchanges such as Betfair, which although popular with bettors, betting exchanges make up only ~1% of the total market with the majority favouring sports books.

The Present

Azuro took inspiration from the AMM architecture used by DEXs (such as UniSwap) and adopted their peer-to-pool approach. This design can scale easily and allow for virtually an unlimited amount of liquid betting markets at any point in time. This also meant that the role of the market maker could now be split up into two separate roles:

1. A Liquidity Provider, who seeds the initial liquidity behind the markets

2. A Market Creator, which is a combination of Odds Feed Providers and Oracles that create markets & price markets.

Unfortunately, due to the specific use case, Azuro couldn’t simply use an existing AMM design. One of the key issues with a Classic Liquidity Pool (as utilized in e.g. Uniswap V2 and V3) is that it requires the existence of two assets X and Y in the pool at all times.

With Azuro, it would not be this straightforward, as that clarity doesn't exist in sports betting where the liquidity in the pool gets allocated to multiple betting markets, and until those are resolved — it is unclear what amount of $ they will return to the pool. Therefore, they needed a design that could handle a more complex requirement for liquidity provision, which led to the creation of an all-new liquidity pool design – The Liquidity Tree.

bookmaker.XYZ The First Truly Decentralized Sportsbook Is Live In June 2022 the Azuro protocol was officially deployed on Gnosis Chain, an Ethereum sidechain with 5-second block speed and fees at a fraction of those on Ethereum, with 500 transactions costing approximately $0.1. Shortly after the first betting site bookmaker.XYZ connected to Azuro.

More details are available HERE

What NFTs bring to Betting

One of the main problems of previous Web3 prediction markets’ was the lack of traditional betting features such as multipliers/parlays which allow players to add multiple bets to one slip for a larger return. These are one of the most popular types of bets in traditional betting, and other solutions have failed to provide them.

The current betting UX on prediction markets is much closer to trading than it is to sports betting, where players buy fungible ERC-20 tokens representative of certain outcomes and sell them to realise a profit/loss depending on the result. This of course is not the desired UX and Azuro will use NFTs to provide critical features like accumulator/parlay bets and multiple outcome bets.

Being able to mint bets as NFTs allows for secondary markets for bets as collectibles, bet cashouts (selling bets to other players before the outcome has been decided), and gamification. Metadata associated with the NFTs can be used to reward players for betting on specific events (think sign-up bonuses), create leaderboards, and also improve liquidity provision for future events/markets.

Democratizing the Betting Industry The Azuro protocol will be managed by a DAO that will soon be opening up to token holders allowing them to vote on future changes to the protocol, including adding new features, how and where to spend the treasury (e.g. how much money is contributed to combatting addictions, supporting education, sports for children, etc.), how problematic markets are resolved (e.g. alleged fixed games or other).

However, the day-to-day management of Azuro is not the main intention of the DAO. Azuro aims to democratize the betting industry and shake off the bad reputation that has come from years of unfair treatment of players. Players and bookmakers are often at loggerheads with each other and with no committee at hand, the resolution is often unjust. The DAO will be at hand to help resolve these matters fairly and unbiasedly.

For the DAO to operate Azuro will be releasing a governance token - $AZUR. Azuro was always intended to be a pure token project to democratize the industry itself through open community ownership and governance and therefore actual, sufficient decentralization.

Even More, Features Coming To Azuro There will be many more developments from Azuro and more updates to the protocol to provide an unrivaled UX. Plus, in the coming years as the team aims to expand beyond sports betting and into the metaverse.

Updates to the protocol will bring a richer betting on-chain experience bridging the gap between traditional UX and decentralized betting by providing accumulator/Parlay Bets, an NFT bets marketplace, additional events & markets, and Live/In-Play Betting.

Azuro aims to be the first to supply the ability for games to provide betting as a key piece in in-game economies by plugging into Azuro and tapping into its liquidity. Furthermore, Azuro’s liquidity pools will soon be open for anyone to lock in their money and become the “house” and earn substantial yields generated from the revenues of the pools (and thus completely uncorrelated to the broader crypto or financial markets).

Azuro is also currently working on an SDK to make building on Azuro as simple as possible for frontends, so the ecosystem can grow to fulfil its mission as the base layer for decentralized betting.

To try out the first betting front-end built on Azuro head to - bookmaker.XYZ Follow the links below to join Azuro’s communities and stay up to date with their progress.

Twitter | Discord | Telegram | Website

May 2020

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