FunFair is making fair, transparent, and fast online casino games based on Ethereum

Jez San has been a pioneer in games, online gambling, and crytocurrency. And his latest startup, FunFair, allows him to combine all of those passions at once.

San believes the future of games and online gambling lies in Ethereum, a cryptocurrency that distributes itself across many computers in what is called a blockchain. Similar to Bitcoin, Ethereum has become a hot platform for secure and transparent trading. But Ethereum is different from Bitcoin because you can build software programs (dubbed Smart Contracts) on top of it, and San’s new company uses Smart Contracts to build online casino games on top of Ethereum.

San has raised $26 million via an initial coin offering (ICO), as pre-sale event for the Singapore-based company. He was able to do that in part because of his rich history in tech and games, where he has been immersed since the 1970s. He founded Argonaut Games (1982-2006), an early video game company that started with games for the Commodore 64 and Amiga and then moved on to making titles like Star Fox and Malice. In 2002, San received the honor of officer of the Order of the British Empire for his contributions to computer games.

He has also had a career in online gambling. A decade ago, he founded PKR.com, a real-money gambling online poker game room with 3D avatars. He started that in 2004 and he left in 2006. The audience grew to more than 5 million users, and San tried to keep investing in the company. But online poker became an increasingly tough business and PKR.com finally shut down in May.

But San believes FunFair has a shot to provide a platform for Ethereum casino games for companies with gambling licenses. Programs that run on Ethereum’s Smart Contracts can be slow, but FunFair has architected a platform for fast games. Those games can use Ethereum’s transparent random number generators to create fair games. And since the blockchain ensures secure and transparent trading, players don’t have to put down big deposits to ensure they will pay. The transaction fees can be smaller, and that removes a lot of the friction from playing real-money online gambling games, San said.

San announced the platform this week, and games using it could be out sometime this year. He runs FunFair (with offices in London and Singapore) with cofounders Jeremy Longley and Oliver Hopton. I interviewed San about his plans and got him to explain Ethereum and blockchain in simple terms that even I could understand.

Here’s an edited transcript of our interview.

GamesBeat: Where are you based these days? Are you still in the U.K.?

Jez San: Still in London, yeah. The office is in Camden. I’m at a gaming conference in Amsterdam now, and then in a couple of days’ time I’m at a blockchain conference in Barcelona, and then I’ll be in Vegas at the big gaming convention, G2E. There’s a lot of travel involved.

GamesBeat: I was interested in this combination of online gaming and blockchain. I don’t always tune into this market. Only every so often do I get into the gambling side of things. But this seems like an interesting intersection that’s happened. I’ve watched a lot of the excitement over Ethereum and the like. I was hoping to ask you about the big picture, as well as the particulars of what you’re doing.

San: It was inevitable for me to get into the mix of blockchain and gaming, because I’ve been working around both of those things for a long time. What we’ve done is we’ve solved some of the problems with how to do casino games on the blockchain. The company is called FunFair. We’ve built a technology that lets us do a lot of stuff in real time. It lives above the blockchain. We call it fate channels. It’s a form of lightning network that lets us offload some of the work the blockchain would normally do and do it ourselves directly, fast, and then push the result to the blockchain.

What that lets us do is real time rapid numbers and micropayments, so we can do bets and wins and things like that, and also player interaction. We can do all of those things super fast, which means we can build the kind of fun interactive games that people want, instead of the ones that are currently on offer. The benefit of all this technology is, first, significantly lower cost. The casino operators that license this technology don’t need any servers. Usually one of their biggest costs is the server infrastructure, an enormous number of servers living on a remote island somewhere that run the games. With the technology we’ve invented, the blockchain is our servers. We run all the casino games inside smart contracts on the Ethereum blockchain.

GamesBeat: Can you explain that in more detail?

San: The difference between this and the Bitcoin blockchain—what that’s built to do is move money around. They can send money from A to B and the cryptography decides who is allowed to send it and where it went. What Ethereum has done that’s new is they actually let you run programs on the blockchain, quite sophisticated programs. They use a language called Solidity, but it’s very similar to Javascript. You can write entire programs that live on the blockchain.

To date people haven’t done anything that sophisticated with this. They’re doing exchanges and trades, things like that, but they haven’t done games. What we’ve built are four casino games. All of the program logic lives inside these programs that they call smart contracts. Because they live on the blockchain, they’re completely transparent. The way they execute, the inputs and outputs, everything is transparent and recorded on the blockchain.

We still have a pretty graphical 3D frontend that the player sees. When the player plays a game in their browser, it’s in part playing locally on their computer or other device, but it’s mainly playing on the blockchain. The benefit of that, as I said, is we don’t need any servers, because the blockchain becomes the server, and second, everything is more fair than it’s ever been before.

To give you an example, most of the existing casinos online require the player to put a deposit into the casino. Usually they use a credit card, or Bitcoin in some cases, and they make a deposit that they have to leave in the casino. All of the games you play from then on are playing from the casino’s wallet, which you’ve left your money in. That puts a lot of risk on the player. They have to ask for their money back when they want it. They might not get it quickly. In rare cases the casino can run off with it.

In our version of this technology, because the games are running on the blockchain in these little smart contract programs, players can play directly from their own wallets. They don’t make a deposit. The player can never lose their main fund. They’re only risking whatever they’re putting on the game at that moment. It’s much safer for the player.

Because the games are played entirely in smart contracts, they are completely fair. Everything they do, from the random number generation on forward, is transparent on the blockchain. Not only can they see that they weren’t cheated, but they can see everyone else’s games and see what the games are doing in the long term. They can see that people are getting exactly what is claimed. It makes these games transparent and fair for the first time.

GamesBeat: When you say that it’s played on the blockchain, it’s utilizing all of the server resource that’s being dedicated around the world to the blockchain? It’s almost like tapping collective computing power.

San: You don’t actually need a lot of computing power to do the server side of casino games. They’re not protein folding or anything like that. What they do need is picking random numbers, deciding if the player won or not, and paying the player. The logic is pretty straightforward. It’s different for each game, but roulette would just be picking what number it lands on. In a slot machine it’s the position of five reels. Then you look at those numbers and decide if the player should have won. The logic is done in the smart contracts, so people can see that you can’t cheat. They can see the input and the output. If they should have won, they would have won, and the payment would have gone straight back to their wallet.

One aspect that makes it very special, that’s a unique solution to this—everything I just described would have been possible for someone else, but we designed the fate channel technology so this can run in real time. The games are fast, and when they’re fast, they’re fun. People can interact with the games at the speed they want. In the past, people who have tried to solve this problem haven’t been able to run the games quickly, and so the games are so slow that they aren’t any fun. Fun is obviously a prerequisite.

GamesBeat: How many players can play at once, or play at the same table?

San: Our technology doesn’t have a scale problem. We can have as many as we can find. The traditional way of implementing this, without the fate channel technology, would have been very slow and wouldn’t have been able to cope with capacity. It might have only managed 10 people playing at the same time. Our technology has no limit to the number of people who can play simultaneously. We’ve taken most of the load off the blockchain, but we keep the blockchain for starting and finishing the game session. Then we do the rest of the game through our own proprietary means.

GamesBeat: How early did you have to get started on this?

San: We’ve been working on the whole project for about a year, but it really came together in the last six months, when we made real progress. We’re now very ahead of our peers. We’re the only people who have solved this problem, making it what we call, “fun, fast, and fair.” That combination of things, so far, has eluded most people.

GamesBeat: Did you anticipate this big valuation for Ethereum?

San: It’s been very exciting to watch as it’s gone crazy. When we started the project, Ethereum wasn’t at the value at it is now. The thing that’s driving the value of Ethereum is partly the fact that you can build applications, which is what we’re doing, and partly this ICO market of ventures being able to raise funds through the Ethereum network. Those combine together to drive the valuation of Ethereum. We’ve benefited from being able to crowdfund from that platform. But equally we’re reliant on the Ethereum platform, because it’s the only one that can do smart contracts right now.

That proves that they’re valuable. The people who believe Bitcoin is the only solution possible—Bitcoin doesn’t have smart contracts, or not yet anyway. For a long time the Bitcoin people were saying that smart contracts have no value, but the reality is that they have enormous value when you try to build our applications, because you can’t do what we’re doing on Bitcoin.

GamesBeat: How many people are working on this for FunFair?

San: Right now the team is 20 people. 10 of them are in development, and the other 10 are in PR, marketing, and other things. But we’re rapidly expanding now that we’ve finished the first stage. We’ve moved to a bigger office and we’re hiring to build the team out and get a lot more done.

GamesBeat: Are you able to do many kinds of casino games? Do you think that video game companies or social casino game companies can also jump in on this in some way?

San: The technology we’re building could apply for almost any kind of game, especially any games that require randomness or payments. Any game that needs micropayments would benefit from the technology. So yes, it has applications outside of what we’re doing. But initially we’re focused on the casino game market. We’ve built prototypes of three different slot machines and three or four table games – blackjack, baccarat, roulette. Those are live on our site right now and you can see what we’re working on. They’re not finished yet, but they look pretty good, even as prototypes.

This is a platform, so the games we’re building are really just to demonstrate what is possible. The next phase of the project is to encourage other game developers and suppliers to build their games on our platform. The launch games we’re doing is showing off what the platform can do, and then we let everyone else in on it.

GamesBeat: What’s the easy way to explain Ethereum or blockchain to people?

San: The way to explain blockchain is that using math and cryptography, you can prove who owns what money and send it reliably without anyone else involved – without a bank, without a credit card company, without Paypal. The way it works is with a ledger. The blockchain is a ledger that contains a list of who owns what. When you want to move 10 Bitcoins from Dean to Jez, you’re not really moving anything. You’re just changing an entry in the ledger as to who owns them. That way they can move from anywhere in the world to anywhere else in minutes.

That’s what Bitcoin did, which was groundbreaking, because no one had been able to move money around without having intermediaries do it for them. This was the first time you could do it yourself. The innovation of Ethereum is that instead of just being a fixed function – moving money from A to B – Ethereum made it possible to run programs that do a lot more than move assets around. Ethereum is effectively powering any number of applications.

One thing that’s been the killer app for Ethereum is the ability to create new tokens, which are almost new currencies, but they can be application-specific. In our FunFair application, we use the FUN token, and Ethereum lets us do that, literally design our own currency that’s only used inside the game. You play the games using FUN tokens. The developers get paid using FUN tokens. The affiliates and the casino operators get paid with FUN tokens. But those tokens are only used inside the game. Outside the game, on exchanges, you can buy and sell FUN tokens for other currencies – dollars or pounds or euros. It’s effectively designing an economy inside the game.

GamesBeat: I’ve come across this with the Neverdie folks. Jon Jacobs is designing tokens that let you have the ability to take your avatar around to different games, or to revive your character when you die, things like that.

San: That’s their angle, yeah. There are so many applications possible once you can create your own tokens that are specific to each product. You can design an economy around them. And yes, they can interchange. They have a standard for how to create these tokens, and the exchanges can swap one for another one at whatever the exchange rate is. The economy becomes larger than any individual token. It’s not a one-to-one cost, because they all have floating exchange rates based on supply and demand. But it means that building applications on top of the Ethereum platform, you get access to all the rest of the Ethereum ecosystem as well. The whole is greater than the sum of the parts.

GamesBeat: There was a scare around Bitcoin and the anonymity of it, which led to this rise in ransomware.

San: Ransomware used to just take credit cards, and most crime is still done in dollars. It’s a side effect of having digital money. But despite how popular ransomware has become, it’s still a tiny fraction of the use case for digital money. U.S. dollars are the main currency for criminals worldwide, but that doesn’t mean you blame the dollar for crime.

Bitcoin isn’t actually that anonymous, though, and neither is Ethereum. The criminals will get caught. They can collect their ill-gotten gains, but as soon as they try and move it, try to turn it back into dollars, they’ll get caught. They can’t do that anonymously. Criminals have picked the wrong currency. If they wanted to be completely anonymous, there’s one called ecash, but even then I think the authorities would notice if someone tried to exchange a large amount.

That’s the thing about cryptocurrencies. You can move them around a lot while they’re still in crypto form, but as soon as you try to turn them back into dollars or pounds, you’re going to get noticed.

GamesBeat: For you guys, are you interested in all this initial coin offering (ICO) business as well?

San: We had a successful pre-sale, which was done with an ICO. That’s now three weeks ago. We raised $26 million. We have another part two of the token sale coming up, probably in September, but we haven’t set a date yet. The pre-sale was largely to let institutions come in. We had a few Silicon Valley-type VCs. Some public came in as well, but a limited amount. The main sale we’re doing is more focused on the public, on a wider distribution of token ownership, which is better for us in the long term. Our potential customers one day are going to require those tokens, so it’s in our interest to have them widely spread.

GamesBeat: Is that the challenge now, that people don’t really know how to use this currency yet? Will it take a while before they’re ready to gamble with it?

San: We’re not live yet, so we’re not worrying about that. Right now we’re still building awareness, to make sure people know who we are and what we’re doing, the technical problems we’ve solved that make it possible to do what we’re doing. We’ll probably go live around the end of the year. We’re not going to be an operator ourselves. We’ll stay purely a platform developer. We’ll license casino operators to use that platform. There will be lots of casino operators using it. After that, maybe we can look at other applications for it, bring in other social games and so on.

GamesBeat: So you’re still in a B-to-B space, basically.

San: Right. We’re going to stay in B-to-B forever. We used to be, in our previous company, an operator. It’s quite hard to be an operator. It’s mainly a marketing exercise. We would rather be in development, focusing on the technology and the games.

GamesBeat: That was your poker company, right?

San: Yes, PKR.com was the poker company. Poker’s a very difficult business now. Poker is in a decline. People aren’t playing it as much as they used to. PKR is now gone, unfortunately, like many poker companies. It’s last decade’s game, not this decade’s. But it was an exciting time. I had a good time working in the poker world. Unfortunately it’s no longer a good business to be in.

GamesBeat: How long ago did you close that down?

San: I started that business in 2004. I actually left as a full-time employee in 2006. I remained as an investor, and it only just died recently. It lasted more than a decade. The first five years it was very profitable, and then the next five years it was very loss-making. Eventually it just ran out of money. The investors, including me, were pumping in money to keep it alive while we could find a buyer, but finding a buyer was impossible in that case.

GamesBeat: It seems like the gambling side is moving into this a lot faster than other areas of games. It’s an interesting place to be.

San: There seems to be a trend. In the last 10 years, I guess, ever since Facebook, social gaming and virtual goods, all of those things are different aspects of bringing real money into games. It’s weird, because casino games are usually quite regulated in how they pay out and what the companies can do, while the social games and the virtual goods are not regulated. People can still spend serious money doing that. At some point I think there’s going to be some kind of merging of all these things together. We’ll see how that sorts out.

Esports as well, betting on other people playing games, that’s going to be very interesting. When you’re playing head-to-head it’s not so bad, but when people are betting on the outcome of other people’s games, that’s going to be a whole new problem to solve.

GamesBeat: Do you have other companies that are live now as well? Any other things you’re doing?

San: I’m still involved with Ninja Theory, which obviously has Hellblade coming out shortly and looking good, beautiful 3D characters. We might try to see if they can help us with some of our games in the casino world. That’s my main game investment. I’m still angel investing in other companies. I own pieces of a few crypto companies, like Kraken, the exchange. I was one of the original angels on that. I was one of the original angels in DeepMind, which Google bought a couple of years ago. The last 10 years I’ve mostly been angel investing. It’s been exciting to start a new company again. I really do enjoy the challenge of being in a startup.

GamesBeat: You always seem to like to stay on the leading edge of things.

San: It’s what I enjoy. I’ve had a few exits in my day. I have to be challenged. I have to be in state of the art technology, solving difficult problems. That’s where I’m at my best.