The crypto-poker wars are upon us, and prominent players and industry figures alike are being called upon to take sides. So far, it’s shaping up to be a two-way battle between CoinPoker and Virtue Poker, but depending on how the next few months go, we may see more contenders joining the fray.

CoinPoker is the first to have gotten the ball rolling, launching a play-money test of its software last week, followed by a “pre-ICO” (Initial Coin Offering) which sold out in just six days. CoinPoker will use its own cryptocurrency CHP, based on Ethereum, and there will ultimately be exactly 500 million CHP in existence. It was the first 100 million of these which were made available in the pre-ICO, at a price of €0.05 apiece, meaning CoinPoker raised €5 million in capital in six days. Not bad, for a company with nothing more than a few recognizable names and a play-money proof-of-concept. Three subsequent ICO rounds will be held in 2018, in which another 275 million CHP will be sold for Ethereum (ETH) at progressively higher exchange rates to encourage early adoption.

Virtue Poker will follow suit in two weeks’ time, though its ICO will follow a different model than CoinPoker’s phased approach. Rather than fixing the launch price of its currency (VPP), it will collect monetary commitments from investors and then gradually lower the USD-to-VPP ratio. This will continue until either it has collected the $25 million it wants to raise, or the price per VPP falls to the point where the monetary commitments equal 5 million VPP. When either of these criteria is reached, the auction will conclude and all investors will be given VPP equal to their commitment divided by the price at its conclusion.

Two peas in a pod

Cryptocurrency and poker seem like a natural fit in many ways. For one thing, poker players in general are sick of government interference in their chosen hobby, and one of cryptocurrency’s appeals is to move money into a space beyond government control. There’s therefore an ideological synergy, as well as a practical one, in that going after payment processors is the traditional way for governments to crack down on online poker, when the sites themselves are located overseas and out of reach.

The decentralized nature of cryptocurrency technology is also appealing to those with concerns about insider cheating (such as the Ultimate Bet superuser scandal) and the randomness of the deal. Crypto technology like Ethereum’s “smart contracts” allows game logic, including the shuffling of the cards, to be handled by the players themselves, without any one player having access to secret information (such as hole cards) unless granted permission by the other players. Hypothetically, this is more secure than the traditional model, in which a centralized game server handles these things, but the downside is that it makes detection of player-side cheating (collusion, botting, etc.) much harder. CoinPoker and Virtue each have their own way of trying to work around this, but in the end it’s impossible to have it both ways; either someone, somewhere has enough information to detect collusion (and therefore the potential to abuse that information) or they don’t.

A brief review

We’ll have to wait to see what Virtue Poker’s client is like, but I’ve tried out CoinPoker’s play money games and the “by players, for players” philosophy is apparent in the software. The caveat is that “players” here is understood to mean “serious, mostly professional players.” The look is clean, simple and functional, with almost no embellishment. Though simple in functionality, it’s rich in features, even at this early stage of development. Some examples include: multiple deck options for easy reading at a glance; automatic tiling or cascading of tables; options to run the board twice or three times in cash games; and even the possibility to propose a straddle, which is very unusual in online poker.

There’s still plenty of room for improvement, of course. I found the sound effects confusing, particularly the lack of a “check” sound coupled with the fact that the “your turn” alert sounds less like an alert and more like what you’d expect from a check. As a result, I frequently found myself momentarily confused about whether I’d been checked to or was first to act. It’s also impossible to just type a bet in without first selecting and deleting the existing bet amount, which is annoying. But these are minor issues which will no doubt be resolved based on player feedback before real money play arrives.

The real issue is more apparent in actual play. Having played a few orbits of both Hold’em and Omaha, I can say with confidence that you’ll never find play money tables so tough at any conventional site. Naturally, this is because of the demographic the site itself and the ICO in particular will attract, namely well-educated people with an interest in both poker and investing in cryptocurrency. This is not the demographic one wants to have at one’s poker table.

An elephant in the room, but no whales

Clean, functional software, game security, low rake and easy, instantaneous money transfers are all huge selling points for a poker site, but there are two factors which dwarf all of these from a professional’s point of view: steady traffic and soft games. The poker game itself is only a product for those playing recreationally; for a poker professional, the real “product” is the weaker opponent, and the card room – whether live or online – is simply the sales floor. If there are no easily beatable players, there is no product, and no amount of convenience and good service will change that.

Not every crypto investor is a poker player, of course, and it’s entirely possible that speculating on CHP and VPP will prove to be the gateway drug which gets some fresh meat blood in the game. Failing that, however, it’s going to be a serious marketing challenge for CoinPoker and Virtue to find a way of conveying their unique selling points to a recreational audience. The even larger hurdle will be to convince those players to open a cryptocurrency wallet and learn how to use it; moving money on and off the sites may be trivial for those already immersed in the world of crypto, but it’s a scary leap for the everyman who’s used to depositing with his credit card or a conventional payment processor.

Two elephants, actually

There’s also a troubling incentive structure at play for the people involved in building these services, which makes it less likely that such efforts will be made in earnest. To make money, a conventional poker site needs to be able to solicit deposits and then convince players to play until a significant fraction of those deposits has been collected as rake. Here, everyone involved with the projects will collect a significant amount of cryptocurrency just through the ICOs; both some percentage of the new cryptocurrency and the funds collected during the ICO are earmarked for the team.

Of course, people deserve to be compensated for their labor, and a significant amount of work is going into building these services. There’s also some incentive for the teams to want their service to succeed, as they can still generate additional profit through rake, and their personal reputations will be affected by the results as well.

However, there’s no getting around the fact that there’s a moral hazard at play when a significant chunk of investment capital is being pocketed up front, and kept even if the business fails on day one; it’s not conducive to ensuring the company founders will stick it out through tough times. If producing a sustainable ecosystem proves to be too tough a challenge and the services are not generating enough rake to pay stable salaries, there’s a danger that everyone involved will simply shrug and walk away, having been paid up front and now facing the prospect of doing a lot more work for a relatively small chance of additional reward.

But crypto fever is in full effect these days, and such concerns won’t stop investors from flocking to ICOs with their wheelbarrows of money. After all, what could be more appealing to a gambler than an opportunity to gamble on people wanting to gamble while they gamble?

Alex Weldon (@benefactumgames) is a freelance writer, game designer and semipro poker player from Dartmouth, Nova Scotia, Canada.