All the FUN of the fair – an interview with Jez San from Funfair.io

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Jez San certainly hit the headlines back in June when his Funfair.io blockchain-based online casino platform startup raised $26m from an initial coin offering or ICO. The former founder of PKR says that blockchain is by far the most disruptive technology to hit the online gambling space for some time and that its development will inevitably rewrite the rules for the sector in the years to come. Here in a wide-ranging interview with GamCrowd, San discusses his hopes for the new company and where he sees the opportunities for any company interested in utilising blockchain’s disruptive nature within the sector. For anyone hoping to hear more from San, we also have good news: he will be speaking at the next blockchain meet-up taking place in London on September 5 where he will no doubt be able to expand upon his views at length.

GamCrowd: So what was the original spark of the idea for Funfair.io?
Jez San:
The idea for FunFair is to rethink and reinvent online gaming - to disrupt. We identified various problems, some of them are commercial and some of them are trust related. So it’s firstly to create a place where players can actually trust where they're playing. Even if there aren't actually that many times when players have been cheated, there’s a perception, there's a trust issue that if you go into a casino and you talk to people about, ‘why don’t you play online?’ they'll all answer, ‘well I don't trust online, I'll trust my credit card when I do online shopping, but I won't trust to put my credit card into a casino.’ That's a big issue and it's not necessarily that people have been screwed, although obviously some have; it's a perception issue that people just don't feel like they can trust the casino. And they shouldn't need to because, you know, the casino's asking people to make the deposit and actually leave money with them for a long period of time, and no one else does that. You don’t have to deposit money with Amazon or eBay in advance just so that you can bid or something or buy something. Why would you actually need to actually leave your money there? It's just a weird concept. So we thought that we can rebuild the technology so that people don't have to trust the casino. And so that they won't get shafted ever, not in terms of the casino running off with their money and also making sure that the games are fair. So this is effectively taking regulation with technology to the point where the players are extremely well protected. And they're going to definitely get a fair game and they're also not going to have to trust to leave their money inside the casino for a long period of time.

GamCrowd: Can you explain the Funfair product?
Jez San:
This isn't just all about blockchain although obviously blockchain helps us significantly, but this is technology we’ve invented as well, and that the two combine together. The state of the art blockchain technology and our own Fate Channel technology has been the enabler that allows you to build completely fair casino games that no one will ever get screwed and at lower cost so the operators will have higher margins. They can actually pass those margins on to the players, which we prefer, so that the players win more. And so the casinos will end up more competitive than any existing online casino. And then of course, we bring our special touch to it because we’re from the computer games world, so we make the games more fun, more 3D, a more interactive experience. We do all of that without requiring any plugins, without requiring a download or an install or an app store or a play store or anything, we do all that in the browser. That combination of benefits also lets you operate in places where you wouldn’t otherwise be able to operate. It means that we don’t have to worry about cowboy casinos screwing people because they can’t. If they deploy our casino games, we don’t mind how cowboy-ish the operator is, they’re not going to be able to screw the players. The players will always get the fairest possible games and their maximum protection. Then there's the transparency issues, because if everything is on the blockchain, all the transactions and all the bets and all the wins are actually transparent. Not only for the first time can players audit the casino and actually see that it’s paying correctly, see that the odds are correct see that the slot machine are paying the right payouts, all of that any player can do they’ve never been able to do that before.

GamCrowd: What do you think will be the reaction of the regulators to the advent of blockchain?
Jez San:
With this technology, the regulators could see everything in real-time and could continually audit companies if they wanted to, although they won't need to because the games can’t actually cheat. Giving the regulator some tools so that they can understand what they're looking at is the bit that we have to build. But the main point is that this is the most transparent the fairest possible gaming that has ever been built.

GamCrowd: Does auditing ability also extend to affiliates?
Jez San:
Yes, there are affiliates always think they're being screwed. Affiliates never trust the payments that they're being given by the casino operator, and like this the affiliate will know in real-time what their players are doing, and actually they'll get paid in real-time too which they've never had before. Now they can see what they are generating in real-time, and they’re getting paid in real-time. Every single person in the ecosystem benefits from the transparency that we’re bringing. Everything is transparent on the blockchain and yet, it runs very fast so that the games are fun. And that’s the important thing; that's why we put it in the name, the games are fun and they're fair. And that’s never been possible before with transparency on the blockchain. People have been able to do it with a black box where, the games are played hidden from the payer, then they can’t provide the transparency or the player protection. The way we do that is, we bring our computer games experience to make the games really beautiful, and they play in a browser without any download or install needed. We’re going to compete on the quality of games as well.

GamCrowd: What will make your slots better?
Jez San:
We're not going to be so arrogant as to say that every game we’re building is going to be better. What we’re trying to do is compete, and do the best possible games we can, while also bringing the transparency, the fairness, and the lower cost of deployment which means higher wins for the player.

GamCrowd: Can you explain the Fate Channel?
Jez San:
The Fate Channel process at the start of the gaming session and the end of the gaming session are the ones that are actually on the chain. And then everything else is processed and cached, and then when the gaming session is over it flushes the cache and puts it back on the chain. But every transaction is stored, though, so the intermediate transactions are also stored. It means we get to have our cake and eat it. But the main thing is that the gameplay is rock solidly fair.

GamCrowd: Who is your initial audience?
Jez San:
The low-hanging fruit for us are the people that already understand crypto and they will already get the benefits, and they'll be able to immediately jump in, so they don't have to you know make a deposit or anything because they already have crypto. We’re not worried about them and their initial market but the bigger market is people that have credit cards, and we'll hit that in two ways. Firstly, as mentioned, any payment processor that already takes credit cards could easily take credit card as in buy FUN tokens instead, which is our native currency inside the games, and they could bridge it both ways. They could do deposits and refunds that way. And those players will still be able to play our games and in fact we could configure the games so that they still display in their local fiat currency. They don’t have to display in FUN tokens necessarily. We can make it seamless for the players although, as I mentioned, that’s not our initial version, but we will do that.

GamCrowd: Will the Fun token hold its value against Ether?
Jez San:
Let me blow your mind for a second, and tell you how the economics works inside this game. We stimulate demand by players buying the tokens. The more players we can get - signing up affiliates and white labels - the more marketing organizations we can sign up that will be accept this token and promote these games. That will stimulate demand for the tokens. And then also on the supply side, there's a fixed number. We already created the token sale, and so there’s some 17 billion of these tokens in existence, and we destroy them as people play. So this is the cool thing, that we call it burning, but literally, FunFair’s income for people playing the games is a small transaction fee for every bet, and it’s burned. All we do, literally any income that FunFair gets we burn those tokens, so they're destroyed. And what that does is reduce the supply, and make the token more scarce. Only a little bit for each bet, but the net effect of increasing demand by having more players and more games for them to play, and reducing the supply by having less and less tokens available, should, the laws of economics kick in, should make the token more valuable.

GamCrowd: What about the volatility of cryptocurrencies? Does that concern you?
Jez San:
To some extent. A token that is on the Ethereum network isn’t affected directly by the Ethereum value itself, because there’s not a direct correlation. So the FUN token will live or die by its own success. And the people will be able to convert back and forth between different cryptocurrencies, or with payment processors also do it with fiat currency. But you know, literally it will live or die by how successful it is and if people play the games then they'll be buying the tokens and then there'll be demand for it. But of course I agree, (generally) they are volatile. But they generally do go up. They go up wildly and down a bit and then up a lot more and you know, but because there’s adoption, and the cryptocurrencies are also limited scarcity, or limited supply and that causes scarcity, which affect their price too. But you know the trend is cryptocurrencies are on the uptake, and people are only realizing now how valuable blockchain and crypto is. And it’s only going to get better.

GamCrowd: What would you say to people that dismiss ICOs as fraud cases waiting to happen?
Jez San:
I think it’s clear there are a few that are fraud cases and a few that are securities violations. But on the whole, many of them are genuine ventures that are receiving crowdfunding to help them startup.

GamCrowd: What do you think the impact of well-funded startups will be on the gambling industry?
Jez San:
Enormous. We received more seed funding at FunFair, from the crowd (with no strings attached) compared to any other company I’ve been involved with. The benefits and transparency of running games on the blockchain, coupled with our own unique technology (Fate Channels) is compelling and attractive for the gaming industry. It offers ground-breaking benefits like fairness, transparency, and lowers the cost of gaming, which should appeal to all.  We can’t see any downsides.

GamCrowd: You have always run your businesses like tech businesses. Do you think the industry is ready for new technologies like blockchain and have realised they are now tech businesses?
Jez San:
Gaming is one of those areas that is slow to adopt new technology, in part because the regulations and monopolies favour the incumbents. We’d love to see regulators and governments embrace new technology, especially as it can improve the player experience and help more people to trust online casinos.

GamCrowd: So what are your plans for using the money you have raised?
Jez San:
The first round financing we received will go mostly into development. We’ll build out the technology, the platform and the launch games. Then we’ll market the platform to other game suppliers and developers so they can bring their games and receive the benefits of running on the blockchain. We’ll help operators launch the games. We’re planning a second round, most likely late September. This money will be more allocated to marketing and establishing new markets, assisting operators, perhaps investing in bankrolls. It depends how much we can raise in the second round.

GamCrowd: Do I have to accept crypto to supply your services?
Jez San:
Initially yes. We prefer customers arrive with crypto. But they can be easily assisted by third-party payment processors to help them make transactions using credit cards, and they can still arrive with their FUN tokens in hand ready to play. It will be made easy because FUN tokens are an Ethereum standard called ERC-20 which means almost every Ethereum coin can be easily and automatically converted to any other coin using smart contracts as mini-exchanges. Also, big exchanges will get easier to use. Raiden will arrive soon, which allows dynamic conversion from one to another. Medium term, we could potentially display player balances in their native currencies and de-emphasize the FUN tokens so they are in the background e.g. they’d play in FUN but the display would show local currency. To do this reliably we’d need currency hedging features, which many people are working on. They call them Stable-Coins. Long term, the advanced features that using crypto brings to people, and the markets that could potentially be accessed with it, and the easy movement of funds will probably win people over and we expect a lot of gaming will be done in crypto currency. It has so many advantages over using credit cards or other methods. For a start, it’s much safer and it works. It’s like walking into a casino and using your cash. No one will turn your bet away because your card was rejected for one of thousands of arcane reasons. If you have the cash, you can use it. And with FunFair’s technology, its safe. You’re not making a deposit and only you hold your funds. The casino doesn’t sit on your money, it stays with you at all times. Players couldn’t be better protected than this. Fair games, and no custody of funds.

GamCrowd: Tell us something about the technology? Do you plan to use other blockchain applications like for AML and KYC?
Jez San:
Yes, we’re excited about new KYC technologies like Civic and uPort, that will allow people to prove their identity which will be required in some markets. As for AML, weirdly, right now, blockchain is better for AML than existing methods. When someone deposits with credit card, you don’t know where their money came from, or how they got it, or whether it was involved with anything bad. But with blockchain, there’s a long paper trail. Data mining of the blockchain reveals where the money came from, and also where it went. Of course, that’s right now. Privacy in all walks of technology is being enhanced. From instant messaging which is now largely end-to-end encrypted, to private transactions which the banks have demanded of blockchain. Most of the work of the Ethereum Enterprise Alliance, led by JP Morgan, Santander et al is about bringing privacy to the blockchain, because it’s just too open and public for them right now.