The gambling service Satoshi Dice, created by fireduck and then quickly sold to Erik Voorhees in April of 2012, became one of the largest and most notorious gambling services in Bitcoin history. Satoshi Dice, also known as SatoshiDICE has no affiliation with the Bitcoin creator Satoshi Nakamoto. At one point the service became so popular, it could be seen that the large majority of Bitcoin transactions published to the Bitcoin Blockchain were directed at the service.
Rise to Popularity
Although the service was not an original creation of Erik Voorhees, it was his takeover of the project in 2012 and subsequent marketing and development that shepherded it to popularity.
To provide proof as to fairness, Satoshi Dice used a system of nonce hashing to determine a winning bet. Each bet transaction was hashed, along with a secret number, and the random resulting hash bytes were used to determine payouts.
Satoshi Dice was created with a novel concept of betting to provide an experience of betting that promised fast, simple and fair gambling. A variety of vanity addresses were created with the simple premise of sending to the one marked with the appropriate odds. No other interface was required. Bets were honored more quickly than competing services by accepting bets without confirmations, which was accomplished by using the bet funds as inputs the winning payouts.
Chaining the funding of winnings to the placement of the bet meant that a double spend attempt that attempted to claw back a bet payment would then also invalidate the winnings payment. To avoid clawing back losing bet payments, risk analysis on the Blockchain was performed to minimize the cost of losing bet fraud: only bets judged likely to confirm would pay out without a confirmation.
The service's popularity attracted heavy criticism of its on-chain mechanics. The use of single Satoshi payments to message losses created large increases to the cost burden of full node operators. The mixing of gambling and settlement on the chain added additional non-pure currency uses for the chain, which is discouraged to make the chain functionality well bounded. The obvious association of the chain with gambling was seen to draw fire from regulators.
In August of 2012 Erik Voorhees listed Satoshi Dice on MPEx as a dividend paying stock. By January of 2013 Satoshi Dice announced they had processed fifteen million dollars in bets and taken five hundred thousand dollars in commissions. The Stock soared to nine million dollars in market value.
In May of 2013, Satoshi Dice started to face legal pressure from the US, and blocked U.S. IP addresses from its web interface. Two months later in July of 2013 Erik Voorhees found a buyer of his share of the site and a new operator, settling for one hundred and twenty-six thousand bitcoins, or around twelve million dollars at the time of sale.
In 2014 the new operator of the service responded to longstanding calls to reform the service's abuse of the Blockchain by offering off-chain bets.
Erik Voorhees's legal troubles with the site did not end with his sale. U.S. investigators stayed on the case and in June of 2014 formally charged Erik Voorhees with an unlawful public share offering on MPEx. Voorhees was forced to buy back the shares and pay more than $50k to settle the case.
The new operator of the site was shielded from this scrutiny but in 2014 and 2015 interest slowly waned in the service. Eventually in 2015 Satoshi Dice again offered an investment opportunity to earn profit by providing the house with bankroll funds.
- Website: https://www.satoshidice.com