A feature of bitcoin is not having to trust anyone and therefore not being able to be cheated by anyone. So it is appropriate that bitcoin gambling operators are pioneering ways to provide trustless provably fair gambling where it would be impossible for them to cheat the customers.
The most common method is not dependant on bitcoin and is just as easy for government currency operators to implement. First let us give the non-technical definitions for a couple of words in the limited sense in which the words are used in this article.
Hashes: A long string of characters derived from other data. This is a mathematical problem that is extremely difficult to solve but if it was solved it would give you the data it hashes. If a solution is presented it is easy to backward test it to see if the solution is correct or not. So hashes are hard to solve but easy to verify a solution for.
Seeds: Extra data (a string of characters) applied to the hash which modifies what it hashes.
Provably Fair Casino Games
Take a card game that requires a random shuffle such as blackjack. The idea is to stop the casino deciding what the card will be or knowing what the card will be before it is dealt. The online equivalent of no dealing from the bottom of the deck.
The provably fair way to do this is
Step 1: The site shuffles the deck as normal.
Step 2: The site provides you with a hash of the shuffle.
Step 3: You provide a random seed, manually or automatically generated in your browser (client side, not on the sites server) that the site cannot see or predict.
Step 4: Your seed changes the shuffle to something neither you nor the site can have known.This is the online equivalent of cutting the deck to the dealers shuffle.
Step 5: After the hand is dealt the initial deck is laid out and you can check that the deck started out as the hash the site provided indicated and the final deck is laid out so you can check that the initial deck was changed in accordance with the seed you provided. If these are both the case then there was no funny business and you have just played a provably fair hand! A more detailed and technical explanation can be found here.
The same applies to games that require a random number such as roulette. This can all happen in the background without you realising it or you can use third party online tools such as quickhash and if you are cryptography and code literate you can check it for yourself by following these instructions. If that is not your idea of fun then you could rely on independent trustworthy experts that have done the verification for us.
But then we are back to trusting someone which is what we are trying to avoid. Provably fair gambling is brilliant to have happening in the background but is too complicated to be useful for the masses especially since you do still have to trust the operator (such as allowing you to withdraw). But this is a less that 2 year old application of the technology so we can expect awareness to grow and usability in improve with time.
Provably Fair Sports Betting
Fixed odds sportsbooks have always been provably fair in that they do not determine the result of the bet and if they pay you the odds they said they would they must be fair.
On the other hand totalizers could be cheating their customers by not paying out the advertised % of the pool to the winners as only they know how much was bet and how much gets paid out. Bitcoin solves this problem by allowing bets to happen on the blockchain therefore allowing anyone to check how much was in the pool and match that against how much was paid out. We detail this in Trustless No Account Betting.
Provably Fair Sites Could Still Rip You Off
A site with provably fair games could still take your funds or sell your IP address and log in details to hackers, such incidents occur more often than rigged games. Value provably fair games but also follow these common sense tips to Avoid Bitcoin Gambling Scams.
I would rather bet with a known and trustworthy casino such as BitCasino that do not yet provide provably fair games than an unknown and shady casino that does. Luckily we have BitStarz an all round high quality and trustworthy bitcoin casino where all the games are beautiful and provably fair.
Soon enough cryptography and multiple signature architecture will provide us with end to end trustless gambling services, oh and they will also have a 0% house edge as we explain here. A great example of how bitcoin and bitcoin values are changing the online landscape and soon the world! Thanks Satoshi.