Electronic Money and the Gambling Business at the Internet
by

Miguel

(C) 1995 Miguel Angel Gallardo Ortiz. Cryptologist and University Lecturer
Special Of The Moment
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There are very few industries that are always working in the state of the art of so many technologies as the gambling business is nowadays. It is very well known that Electronics and Computer Science find their limits in the laboratories of many games manufacturers, all over the World.

Now we see a global technological upheaval, fueled by rapid advances in information processing, storage, switching and transmission technologies, that it is beginning to blur the lines between computing, telephony, television, and publishing. Governments already know how important is the Internet, and we quote here the much discussed National Information Infrastructure from the point of view of the United States General Accounting Office (GAO) in "An Overview of Technology Challenges":

"While industry is beginning to build the information superhighway, little is known about how the superhighway will be structured and what services it will provide. Nevertheless, a common vision of its capabilities is beginning to form among policymakers and public interest groups. First, there is an emerging agreement that the superhighway should be structured as a metanetwork that will seamlessly link thousands of broadband digital networks. Second, it should allow a two-way flow of information, with users being able to both receive and transmit large volumes of digital information. Third, it should be open, ensuring equal access for service and network providers. Finally, it should ensure the security and privacy of databases and users' communications, and provide a high degree of interoperability and reliability".

It is very clear for any professional that the information superhighway (we can call it just "Internet") will change our life, and of course, the way we enjoy, playing, gaming and gambling.

Moreover, Casino advertising is already permitted by infohighway bill. Broadcasting & Cable published on August 22, 1994: "The Senate infohighway bill gives broadcasters more than just an opportunity to offer new digital services. There is also a provision that would clear the way for radio and TV stations to earn additional advertising revenue from casinos and gaming establishments". Now, it is possible to visit a lot of Casinos from our home, just connecting our computer to the Internet by a phone and a modem.

Thanks to the Internet, many Casinos, most of them at Nevada, can offer a lot of information by the net. The best sources are the "Frequently Asked Questions about (Casino) Locations", an electronic file edited by Steve Jacobs, as well as the "General Frequently Asked Questions" about Gambling. Hundreds of experts contribute with their answers everyday in order to improve this complex information for the industry, the casinos and gaming establishments, and of course, the people that loves gambling.

Some questions come up occasionally on the net, causing a lot of heated discussions and wasted bandwidth. Many users would appreciate it if you just didn't ask them. If you do ask, they'll probably just say "see the FAQ (Frequently Asked Questions) list".

This is the "Table of Contents" of "General Frequently Asked Questions":

Section S: Spare us!

  • S1 Martingale betting systems - just double your bet until you win
  • S2 The Inevitable Monty Hall
  • S3 How much would you pay to play this game?

    Section G: General Gambling Topics

  • G1 What casino game has the best odds?
  • G2 What are comps?
  • G3 How do you get comps?
  • G4 What is the Casino Host Department?
  • G5 What comps are available?
  • G6 How do I get a casino credit line?
  • G7 How are "markers" used?
  • G8 A walk through on getting comps.
  • G9 Where can I get casino quality chips?
  • G10 Are chip colors standardized?
  • G11 What are matchplay chips
  • G12 What are "pit critters"?

    Other files and sections try to discover if it is possible to gain an advantage at Video Poker and what is the "basic strategy" for Deuces Wild, Jacks or Better Video Poker, for instance. Players take very seriously Mathematics and Gambling Theory in this field.

    Michael Maurer is one of the best experts in Poker. He advices at the net about what to do the first time somebody play poker in a casino or card room. He knows that many people are intimidated on their first visit to a public cardroom. Knowing what to expect and some simple rules of etiquette will help the first-time visitor relax and have a good time. And for real gamblers, David Sklansky, "The Theory of Poker" (formerly titled "Winning Poker"), Mason Malmuth and Lynne Loomis, "Fundamentals of Poker" or Doyle Brunson et al., "Super/System: A Course in Poker Power" are some of the books recommended by this expert in this game.

    About Poker in the Internet, Michael Maurer explains that "IRC poker is a real-time network poker game that allows people from around the world to play poker with each other via the Internet. The stakes are "etherbucks", which is to say imaginary. Each player's imaginary bankroll is recorded from session to session, and rankings of both bankroll and earning rate inspire competitiveness. An automatic program serves as the dealer and controls the action".

    "The game uses the Internet Relay Chat, or IRC, to arrange communications amongst the players and with the dealer. IRC is normally a sort of global cocktail party, with thousands of people from around the globe engaged in small pockets of conversation on various "channels". Within each channel, anything one person types appears on the screens of all the other people tuned in to the channel (although one person can also "whisper" privately to another). The poker channels are unusual in that an automaton is always present to supervise a poker game. However, the chat aspect of the channel is preserved, so that the poker games can become quite social".

    There are many other games, like BLACKJACK, CRAPS, ROULETTE, SLOTS, LOTTERY, RACES, PONIES, DRIVEL and so on.

    But the point here is electronic money for gambling. The infrastructure for electronic-payment systems already exists, like credit cards technology. Traditional forms of payment simply don't work in the Internet. "BYTE" published an article in June 1995 about "Cash on the Wirehead" by Andrew Singleton, surveying six different commercial systems from Cybercash, Digicash, First Data/Netscape, First Virtual, Open Market and Wave Systems. "This list does not include what may well become the two biggest guns on the payment-services battlefield - the joint ventures announced by Visa/Microsoft and MasterCard/Netscape. Neither is due to be available until late this year, and neither is well defined at the present. But the six services examined here are close enough to real-world deployment that a realistic evaluation of their implementations and prospects is possible".

    As an example, in May 1995 the Corporate Profile of CyberCash, Inc. claims that this company was founded in 1994, and the CyberCash(TM) payment system facilitates the purchase of goods and services on the Internet by providing a secure environment for transactions between consumers, merchants and their banks as well as between individuals. With CyberCash the Internet is safe for instantaneous and spontaneous financial transactions.

    In the CyberCash system, consumers receive client software free of charge that directly communicates with CyberCash servers, which in turn are linked to the banks' own private networks. CyberCash's initial services, scheduled for delivery in early 1995, will enable safe credit card transactions. These will be followed shortly by safe debit card and electronic cash services. For these services, consumers will be charged small transaction fees, comparable to the price of a postage stamp.

    In addition to its benefits to consumers, the CyberCash system provides to the Internet an effective and efficient sales channel for merchants and banks. For both merchants and banks, the guarantee of safe credit and debit card transactions significantly reduces the risk of fraud normally associated with these types of transactions. For merchants specifically, safe credit and debit card transactions have the potential to reduce the high cost of credit card transactions via telephone or mail. The bankcard associations consider these Card Not Present transactions riskier and more expensive and consequently charge merchants a higher processing fee.

    In addition to lower risk, banks that offer the CyberCash system to merchants and consumers have the added opportunity of maintaining and strengthening these relationships - an attractive prospect in an era in which customer interaction with banks is being replaced by contacts with a variety of other competing financial and non-financial institutions.

    Perhaps the most exciting aspect of the CyberCash system is in the area of electronic cash. The CyberCash system enables financial transactions with the advantages of both checks and hard currency and the disadvantages of neither. Like checks, this hybrid can be used at a distance, but like cash and unlike checks, its validity can be verified instantaneously. In other words, the hybrid offers the convenience of checks with the reliability of cash. CyberCash further enhances this hybrid instrument by making it usable across the Internet.

    Basically, we can explain the mathematical fundamentals of electronic money with Cryptology, the Science for "Secret Writing and "Information Integrity". According with DigiCash, if a user wants the bank's signature on x, but does not want the bank to find out what x is. This can be achieved with a blind signature protocol, as follows:

    1. The user chooses a blinding factor r independently and uniformly at random, and she presents the bank with xr^e (mod pq),where x is the note number to be signed.

    2. The bank signs it: (xr^e)^d = rx^d (mod pq).

    3. The user divides out the blinding factor: (rx^d)/ r = x^d (mod pq).

    4. And finally, the user stores x^d, the signed note that she will pay with later. Since r is random, the bank cannot determine x, and thus cannot connect the signing with the subsequent payment.

    Dr. David Chaum is Managing Director of DigiCash bv, a firm pioneering electronic cash payment systems, and is Chairman of the European Union Project CAFE, which combines integrated circuit card and software only electronic money. In an article that appeared in Scientific American, August 1992, with the title "Achieving Electronic Privacy", Dr. Chaum wrote: "To see how digital signatures can provide all manner of unforgeable credentials and other services, consider how they might be used to provide an electronic replacement for cash. The First Digital Bank would offer electronic bank notes: messages signed using a particular private key. All messages bearing one key might be worth a dollar, all those bearing a different key five dollars, and so on for whatever denominations were needed. These electronic bank notes could be authenticated using the corresponding public key, which the bank has made a matter of record. First Digital would also make public a key to authenticate electronic documents sent from the bank to its customers".

    However, since the Internet is working, many things happened to its users related with computer risks. Some of them went to the Court, and many others remain in an unhealthy silence. Data stolen from banks and cryptology used by terrorist organizations or drug dealers as well as the hacking-cracking, piracy, personal dossiers and blackmailing have been studied by the police, lawyers, journalists and professional technicians.

    Moreover, a crisis in any economy does not help to recover any investment in data processing. There are too many unpaid bills and half performed projects in computing. At the same time, politicians at the Parliaments of many countries approved Laws on Data Protection. Computer victimization is very high due to the lack of knowledge and technical dependency on equipment and service sellers. In an increasingly complex and critical environments, there is almost no technology industry secure enough, and multinationals are very confused because of the lack of expertise, expensive commercial nets and counter-productive promotional efforts.

    In Spain, the Asociación para la Prevención y Estudio de Delitos, Abusos y Negligencias en Inform tica y Comunicaciones Avanzadas (APEDANICA), a team of first class computer experts that are familiar with the Police and Courts of Law needs on technology, is trying to carry out a project for a Casino on the Internet. Unfortunately, local authorities are very hard to persuade that this is one of the best investments a politician can promote right now. After several months of disappointed hard work, APEDANICA members are open to make trips to any country open for this project.

    From my personal point of view, the only way to check how strong is any crypto-system for electronic money is playing with it. Global gambling in the Internet is the best way to reach the quality level that the market demands, even if nothing is perfect, and that if something can go wrong, it will (the famous Murphy Law).■

    Miguel A. Gallardo, President of APEDANICA
    Carlos III University Associate Professor
    P.O. Box 17083 - E-28080 Madrid (Spain)
    Tel: (341) 474 38 09 - FAX: 473 81 97
    E-mail: miguel@grial.uc3m.es
    ASOCIACION PARA LA PREVENCION Y ESTUDIO DE DELITOS, ABUSOS Y NEGLIGENCIAS EN INFORMATICA Y COMUNICACIONES AVANZADAS (APEDANICA)