How Unikrn uses blockchain and cryptocurrency for esports betting

Rahul Sood made his name as an enthusiast gamer and the cofounder of VoodooPC, a maker of custom gaming PCs that he started in 1991. He sold that business to HP in 2006, and he headed HP’s efforts in gaming computers through 2010.

He moved to Microsoft and started Microsoft Ventures in 2013. In 2014, he left to start Unikrn with cofounder Karl Flores. Unikrn enabled betting on esports events. Esports has become a hot industry, with market researcher Newzoo estimating it could hit $1.5 billion to $2.5 billion in revenues by 2020. While Sood has moved on from gaming hardware into gambling, he feels he is still focused on enthusiasts.

Last fall, Mark Cuban purchased coins in Unikrn’s $30 million initial coin offering for UnikoinGold, a cryptocurrency token that enables players around the world to bet on esports events. U.S. citizens can’t bet with real money in some jurisdictions because of gambling restrictions, but they can wager using the virtual currency UnikoinSilver, which can’t be cashed out.

Now Unikrn is spreading into various related businesses — like a web TV show that covers the esports industry. It’s all in the name of creating an esports brand for enthusiasts. Unikrn has struck deals to get its coin used with partners like Gunner Optiks and Maingear. The latter has begun making cryptocurrency mining PCs. Last week, Unikrn hired gambling industry veteran Andrew Vouris as chief operating officer. We reached out to Sood to get his opinion on the whole crypto and blockchain craze.

Here’s an edited transcript of our interview.

GamesBeat: How far back did you get interested in cryptocurrency?

Rahul Sood: We created the Unikoin about two years ago. We had users and usage and growth. That’s when we decided to turn it into a crypto token.

GamesBeat: Before the crypto days, when you guys were evaluating what kind of business to start — I think the idea of betting on esports was the main idea?

Sood: The main idea, really, is to become — if you think about what Unikrn is, we’re sort of the Disneyland of esports. Everything we do is about heightening the experience of watching or participating in esports. Part of that has to do with betting. But we create odds around all the major esport matches around the world. We have the most comprehensive esports book anywhere.

We run both physical tournaments and virtual tournaments. We have a tournament platform where we can do that. We have team ownerships. We own part of one of the hottest [Counter-Strike: Global Offensive] teams in the world, BIG. They’re based in Berlin. And on top of that, we create content. We have some very good written content and video content around esports. We have a studio in Berlin and a studio in Las Vegas.

And the last thing would be the Unikoin, which is at the center of everything we do. It’s a token people can earn on the platform for free. They can earn it by connecting their gaming accounts to our platform, their Riot or Steam account, and playing games. They can use Unikoins in jackpots for virtual goods like skins, and they can also trade in skins for Unikoins. There are plenty of ways to acquire Unikoins, and now, people in more than 113 countries are using it. It’s quite popular.

GamesBeat: What was the thing that got traction for you guys in the first place?

Sood: The biggest thing was our sports book, the fact that we analyze all of the data on esports and turn it into odds. We license those odds to markets where we’re licensed and regulated to do so. So, that was the first thing. Then, our content started gaining traction and then, our tournament platform. We just signed a deal with the MGM Grand. We’ll be running tournaments in their casino in Las Vegas, starting in a couple of weeks. We continue to build our brand in esports. We’re trying new things that go back to what our mission is. It’s about heightening the experience of watching and engaging in esports.

GamesBeat: Since you crossed that line from a gaming company to the gambling side, how early on did you have to start paying attention to regulation?

Sood: Before we even started the company. I left Microsoft Ventures to start this company. I’ve been in gaming before with Voodoo and HP. I’m very much about doing things by the book. I saw a trend in esports where gamers were getting older. I’m in my 40s, and I probably play two or three League of Legends games a day. I like to bet on sports. I see this as an emerging trend.

At the time, there was nobody doing it right, nobody working with regulators, thinking about licensing, any of that stuff. That was the approach we took. Eventually, this was going to be a real thing. There were betting operators doing this stuff, and they didn’t know what they were doing. We wanted to be the company that could help them to do that. That was how we started.

GamesBeat: I guess one of the insights was really that people are going to care about these esports stars — who they are and how they play.

Sood: Exactly. The other insight is that, like traditional sports — if you think about how traditional sports work, people bet on sports all the time. People create odds on this stuff, and they take bets. In our space, in video games, it was the Wild West. There was skin betting, which is highly illegal, not ethical at all….

GamesBeat: Can you explain that a bit? People were trying to figure out the results of matches and betting skins in Counter-Strike?

Sood: It wasn’t exactly that. People were building websites where you could connect your Steam account — that takes about 10 seconds — and you could deposit your skins and start playing games like roulette and craps on these unregulated sites. They didn’t care how old you were or where you came from. It became the underpinnings of the largest underage gambling ring in history. It was really bad.

We took a stance against that. We believe that regulation is needed in the space. Valve took a stance against it and started to go after some of these gambling sites. Things are getting better. But they’re still not where they need to be. That’s why we continue to do what we do.

GamesBeat: There’s been some crackdown there. Has that helped raise awareness, that people need to figure out where the lines are?

Sood: Yeah, it has. It’s helped raise awareness. It’s helped get regulators more involved in this, helped them understand what’s going on. It’s definitely been a good thing. There was some crackdown or at least Valve sending cease-and-desist warnings and stuff like that. It’s also attracted the attention of some of the best betting operators to say, “How can we look at this market and build something legitimate?” That’s where we come in. That’s part of what we do.

With our Unikoins, it’s not just about betting. We have so many non-betting applications on our platform — where people can earn Unikoins. They can do stuff with jackpots for free where they can win skins, things like that. They can also use Unikoins to buy items. We just did a partnership with Gunner where you can actually buy Gunner Optiks using Unikoins, and we have more partnerships coming. We’re the second-largest shareholder in Maingear gaming PCs, next to the CEO. There’s a lot of stuff we’re doing with those guys. You’ll see other opportunities where people will accept Unikoins for purchases.

GamesBeat: There’s this parallel trend of crypto and blockchain. I wonder, where did this get on your radar as the way to execute on this company?

Sood: About two years ago, Mark Cuban, who’s one of our investors, he suggested that we start looking at blockchain because of the type of business we’re in. We’re in a highly regulated industry. Blockchain, if applied properly — you have things like transparency and trust. You can put things on the blockchain that are traceable and accountable. The cool thing about it is that for transparency, there’s really no better technology out there.

We started to think about how we could build our entire commerce platform on blockchain, where everything is transparent and open. At the same time, things like AML, anti-money laundering, and KYC, know your customer, can be put on the blockchain. That’s what we did. We said, “If we were a bank, what would we need to build on the blockchain to have proper systems in place?” We built our entire platform on blockchain — our entire token-selling platform was built from the ground up by Unikrn. It has global KYC. It has individual verification. It has AML systems built-in. It’s the only fully regulated global token-selling platform in the world, and we built it ourselves.

On top of that, we built a wallet, Unikrn Wallet, which allows people to accept Unikoins just like Paypal would. It’s on a private blockchain. That way, we can support tens of thousands of transactions without any sort of traffic or other issues. If the blockchain is backed up, transactions tend to take a long time. With our platform, they happen instantly with no transaction fees.

We’ve turned Unikoin into two tokens. One of them is Unikoin Silver, which continues to be our free token that can’t be transferred or sold, but can be used with everything we do, and then the other is Unikoin Gold, which is a crypto token which can be purchased on major exchanges and also used on our platform.

GamesBeat: Are you seeing much fluctuation in the currency? What’s happened with it?

Sood: [Laughs] It’s definitely volatile. It tends to follow the market. But, as we anticipated, it’s starting to see stability over time.

GamesBeat: What was your own interpretation of all of that, Bitcoin hitting $20,000 and then going back down? Why did it all happen?

Sood: The crypto market, I look at it as just a correction. I’ve been following Bitcoin for years now. Usually, when you see it go up, straight up like that, you see a correction. I’m looking at this as a correction. I also look at this as, Wall Street is now getting involved, doing option trading on Bitcoin, and so, there’s probably a lot of — a combination of corrections along with some market manipulation happening. But I’m a long-term believer in Bitcoin. It’s going to be a global standard for transactions. It’s the ideal currency to do major transactions, real estate and cars and things like that.

What we’ll see is, a lot of these ICO tokens will disappear or consolidate. People are getting smarter. Only the good ones will end up at the top. When we built Unikoin, we really built it for our users, not as a speculative thing.

GamesBeat: We’ve seen a lot of these scams come and go. Are we getting past that stage yet, or do you still worry that some of this is going to stay around and maybe hurt the market?

Sood: Last year, there was a lot of exuberance around tokens and ICOs. People were just buying anything and everything. This year, we’re seeing that it’s harder to do an ICO. It’s harder to get listed. All the good exchanges are taking the time to do a full review, a legal review, that sort of thing, on the token itself. For example, Bittrex, one of the largest exchanges, they won’t list just any token. They go through a review of the company and the token now. People are getting smarter. Those factors are making it better now. I think over time, you’ll see that the market will get smarter and less of these scams will get listed.

GamesBeat: Brian Fargo, when he announced his token, he said they were only going to take accredited investor money in their ICO. They were not going to invite general consumer money.

Sood: Right, right. We actually did accredited investors for our pre-sale, and then, in our crowd sale, we opened up the platform to anyone who wanted to purchase it. We’ve had the coin as a product for about two years since we first created our token. We have users and usage. We have a real product on the platform that’s usable today. I think if you look at some of the ICOs out there, very few of them have actual usage. They’ve used it to raise money, but they don’t have a working platform yet. That’s a problem.

GamesBeat: We’ve gotten to another interesting stage where Bitcoin went through its rapid rise and correction. What kind of fallout do you see in the aftermath?

Sood: I think what ends up happening is there’s more institutional money coming in to Bitcoin. The market tends to follow Bitcoin. It’s the leader, along with Ethereum. I still believe, long term, in Bitcoin. But with that said, I don’t pay attention to the day-to-day fluctuations of it. I’m more interested in building a great platform for our users. By doing that, we get more usage of our token and more users wanting to play on our platform. For me, that’s all that matters.

GamesBeat: Were you guys more interested in Ethereum for any particular reasons? Do smart contracts have a use for you guys?

Sood: Many of the smart contracts have vulnerabilities in them. When we built our token-selling platform, we did it without smart contracts. We did ourselves with our own secure platform using Ethereum, using ERC20, but we didn’t use the typical smart contract because they had some vulnerabilities because people could get tokens off of the smart contract.

And then, at the same time, we didn’t want just anybody participating in our token sale. We had things like anti-sanctions bouncing built in, individual names that couldn’t participate. With a typical ICO, anyone can send Ethereum to any address and get tokens in return. We didn’t allow that. We had to know who people were, where they were coming from, that sort of thing.

We use Ethereum because we believe in the future of Ethereum. We think companies will eventually only go on Ethereum. We think all the noise we saw last year, some of the stuff that we see now, will be cleared up as people get smarter and exchanges change their processes and so forth.

GamesBeat: Who are your competitors right now in this market?

Sood: I don’t want to sound arrogant, but there are none. None of the others in the space actually have a working product. There’s a bunch of people who call themselves esports companies who are doing ICOs, but they don’t have a token that has usage. They’re just raising money in the hopes that dumb people will buy their tokens. It’s a shame that that’s happening, but you have companies like that on the major exchanges.

We’re a company. As I mentioned, we’re venture backed. We got started in 2014. We have users all around the world. We have a working platform. We have people using Unikoin Gold today. We have licenses in places like Malta and the Isle of Man. You’ll see more usage for Unikoin in the coming months.

GamesBeat: Did you take note of some of these things where people are trying to do alternative app stores, whether that’s a good use of blockchain?

Sood: I do think it’s an interesting use of crypto. What’s cool about Unikrn Wallet is that anyone attempting to do something around crypto can just use our wallet and accept Unikoin Gold. As long as they’re approved by us, they can use it for anything related to gaming and esports. Companies out there are trying to build these alternative app stores. We’ve been approached by a couple to see if we’d allow them to accept Unikoin Gold in trade for games and things like that. I do think there’s an opportunity there. We’ll probably see more of that in the coming months.

GamesBeat: What do you think is going to be the most disruptive thing about crypto or blockchain?

Sood: I look at this, and I think about anything that requires transparency and trust. I look at the banking sector. Certainly, anything related to commerce where you need transparency. KYC and AML controls are much better if you build a proper blockchain than they are with fiat currency. You can see people’s wallets and follow where things are going. I also think things like health care for example — there’s not a lot of good disruptive applications in health care yet, but as patients become the stewards of their own medical data, blockchain technology is unreal.

I do believe that the sector we’re in — we’re on the cutting edge of esports and crypto, two major industries. We’re way ahead of the game. We have a two-year head start on anyone else.

GamesBeat: Is this where you think it will impact the gaming industry the most?

Sood: This is a great way for indie developers to get their titles exposed. For example, we can promote new indie games to new users. We can send our users to play their games. That’s one thing. You can eliminate the need for a publisher if it’s done properly. Obviously, I’m a big believer in the betting side of things. In a regulated market, doing it responsibly, there’s a bunch of over-18 gamers that like this stuff. They’re willing to place a bet on a game of skill. And there are plenty of applications in the transaction model.

GamesBeat: We’re getting to some of your news here. Can you tell me more about the broadcasting thing you’re doing?

Sood: When Unikrn started, we created a studio in Berlin where we were doing esports content, video content. We also do written content, which you can see at news.unikrn.com. We focus on building quality written and video content around esports.

We recently built a studio in Las Vegas. It’s going to be really cool. We have a temporary one right now, and we’re building the permanent one as we speak. DJ Skee, the guy that started Dash Radio, he came to one of our events during CES, saw our studio, and really likes what we’re doing. We decided to strike a deal. We’re going to create regular podcasts each week and distribute them through the Dash Radio network. That goes to millions of users through multiple car manufacturers and things like that. He was a big distribution engine, and he’s a popular person himself.

This is a first for us, facilitating that content, but we’re creating Unikrn Radio, which is going to be all about crypto and esports, two of the bleeding-edge industries. There’s a lot of interest in what we do, so we’re going to bring in special guests in the crypto space, the gaming space, and the esports space to talk about those subjects. I’ll be involved. I’ll be one of the hosts of the show. I like talking to people. We have Kingsley Edwards as well, who works at Unikrn, as another [host]. We’ll be bringing in all types of people in the industry to come talk to us.

GamesBeat: Are you finding that people in more mainstream parts of the game industry are getting interested in what you’re doing?

Sood: Oh, yeah. At the beginning, when we started the company, people weren’t sure if they wanted to talk to us at all because of the wagering side of the business. But over time, people have become a lot more open. We’re more than just a betting company. We’re a way for game developers to look at new ways of monetizing their games and exposing their games. People are taking us more seriously, which is nice. They’re willing to have conversations with us. We’re a little over three years old now, and we’ve built a pretty strong brand for ourselves.

GamesBeat: I guess there are still quite a few game companies that still draw a line around gambling, though?

Sood: Right. That’s why, when I talk about Unikrn, I say that we’re the Disneyland of esports. Disney has cruise ships with casinos on them, but they also have their theme parks where there’s no such thing. We’re the same way. Most of what we do is not related to betting. We’re in markets like Korea and across Asia where online gambling is completely prohibited, and we don’t allow it from there. You can’t bet with Unikoin Gold in any markets like that, skill or not skill. In the U.S., soon you’ll be able to use Unikoin Gold for different types of regulated betting, but there are lots of other things you can do on the platform.

On that note, game developers a few years ago didn’t want to talk about this. Some of them were ambivalent, and some were completely against it. But now, they’re starting to explore the possibilities, knowing that their demographic is getting older and many of them want to do this. It’s a way to increase the engagement of their games. They’re starting to look at it now and consider whether it might be a benefit.

GamesBeat: As far as the more mainstream parts of your business, can you predict where that’s going to be in the next few years?

Sood: Everything we do around esports is going to be mainstream. Esports are getting more popular. Traditional sports are becoming less relevant. If you look at the PGA Tour, the average age of a fan [is] 69 years old. Major League Baseball, the average fan is 55. Traditional sports fans are dying, and esports fans are being born. Everything we do is going mainstream. Whether that’s our token, using our token on the platform or using it across other platforms, or whether that’s just learning about esports through our content. It’s all becoming mainstream.

It’s going to be interesting to see what happens to our company a year from now, 18 months from now. Our growth has been incredible so far.

GamesBeat: As far as the money raised through this process, what’s the best use for that?

Sood: We sold about 130 million Unikoins during our token sale and collected something in the range of 112,000 Ethereum. That said, we haven’t really sold any of it. We look at this as an opportunity to make acquisitions in the space. If there are any interesting companies, we’re considering a fund. Given my Microsoft Ventures days, I have a lot of experience there. I’m always open to incubating interesting ideas that are relevant to what we do. We’ll see.

For the moment, we have enough money to continue building the business the way we’re going. We have a whole bunch of new products that are coming out around the corner. We’re releasing new updates to our existing products. We’ll see where it goes. But our number one thing is trying to cater to our customers and make them love our platform even more.

GamesBeat: How much usage are you seeing, how many users overall?

Sood: There are certain things we share and certain things we don’t share. The betting side of the business is highly competitive. But what I will say is that we have about 4 million active users in our community. On top of that, we have — our Unikrn Wallet is used in nearly 200 countries. More than 50 percent of the people who buy Unikoins are customers, which is pretty good. The rest are speculators or people backing us, helping us build our platform, but it’s more than 50 percent users, and that’s growing.

GamesBeat: Do you guys find that hardcore gaming fans are your bread and butter?

Sood: They really are. We’re still only PC. We’re heavily PC-centric, although the tournaments that we’re running at the MGM Grand are on PS4. The PC guys are the hardcore, the ones that like to buy virtual items, that like to buy hardware. They’re more tech-savvy when it comes to things like crypto.

When we created the Unikoin and we were debating when we’d start putting it on blockchain and turn it into crypto, we interviewed our customers and asked them, “Hey, are you familiar with wallets and things like that?” Most of our customers already had wallets and were very aware of crypto. We’re in the ideal market. Our customers get it.

I think many other tokens are trying to solve problems in areas where they have a real issue getting people to adopt crypto. That’s still very difficult. I don’t know if you’ve tried to buy and sell bitcoin and exchange it for cash, but it’s still very hard to do. There are plenty of problems to be solved in the space, but it’s nice that our customers are into the future. They love this stuff.

GamesBeat: It’s very different from the days at HP and Microsoft, I’m sure.

Sood: [Laughs] A big change from HP, no doubt. It’s been interesting. I’m sure you’ve been watching HP with the Omen and things like that. Getting involved with Maingear has been nice because it brings back what I loved in the past. Some of the stuff we’re doing with Maingear is pretty awesome. You’ll see more about that in the near future. And I was involved with Vrvana, the VR company. I helped them do their first raise, and they recently sold to a big company in Cupertino. I’ve been heavily involved in AR, VR, and gaming, even during my time at Microsoft and HP. I just wanted to get back in the space, which is why I started Unikrn.