How Blockchain Technology Will Disrupt eSports, Gaming, Financial Institutions and More

By Frank Curreri Forza (2016)

Marco Cuesta and fellow co-founders of FirstBlood Technologies spent much of the past year relentlessly tackling a series of cutting-edge questions: 

How do you prevent the kind of insider trading mess that embarrassed skill-based gambling goliaths DraftKings and FanDuel? How do you convert illegal eSports bettors to law-abidance? How do you process online financial transactions with greater transparency and speed – even for people who don’t have a business or bank account, even for people living in remote corners of the world – yet at the same time insure a crackdown on eSports cheaters, online harassment and identity theft? 

Hungry to create solutions and capitalize in a skyrocketing sector, Cuesta and the FirstBlood Technologies team held a crowdfunding raise; within 60 seconds, he says, they secured a whopping $6.1 million. 

In this interview, the Boston-based techie defines Blockchain and why he believes this fast-evolving technology will disrupt traditional banking and financial transactions. Cuesta also discusses his company’s mission to serve two masters by: 1) innovating and adapting Blockchain digital currency to win the support of lawmakers who regulate online gaming; 2) Creating a game-changing platform to win the hearts of eSports gamers. 

What is blockchain?

Cuesta: Blockchain is essentially just a database, except instead of one person documenting and categorizing things, everyone in the network has a copy or a ledger of that database. So every single person who is in the network has a ledger of transactions for every single wallet. It creates a network where there is trust. So if you send me $100 – I don’t have to make a leap of trust or take your word for it – with Blockchain I’m going to receive your $100 payment once the transaction clears. The Blockchain network does that on its own. It knows that person A does have $100, so if they send person B $100, it’s definitely going to happen. If they don’t have $100 and they try to initiate the transaction, the network will recognize that they don’t have $100 and the transaction will be denied. 

Not only can you use Blockchain for transactions – everybody knows Bitcoin – but you can use it to run programs. So what we’ve done is put an eSports competition platform onto the Blockchain. That makes it very transparent and enables you to see what is going on for each match and anybody in the world has access to this. That means our firm, the people playing the game, and that also means regulators and affiliated businesses. However, personal information such as social security number or address is not posted on the Blockchain. The company running a program or processing a particular transaction keeps all that internally. 

What other advantages and incentives exist for refereeing eSports games and processing wagers via Blockchain? 

It’s actually a lot cheaper to use Blockchain rather than going through PayPal or banks that have a lot of friction and prevent nearly 40% of US consumers that are under banked from participating in the global economy. Now, of course we will implement the highest standards of KYC/AML (Know Your Customer Anti-Money Laundering) on our platform, but even then some people in certain countries are un-bankable because of low income or inconvenience. Unlike other payment systems, Blockchain doesn’t require expensive centralized maintenance and we’re really trying to remove some barriers and even the playing field. 

The network itself is like a lot of little computers running as opposed to a huge, centralized server farm. What’s really cool about that is it allows us to actually reward people using the program who verify match results, that the game outcomes are correct, and also adjudicate disputed cases. Because I don’t know if you’ve heard, but there is a huge cheating problem in the eSports space; it’s very easy to get on and spoof your identity, to use bots, game hacks … and to hit-and-run people with racist or sexist comments. So what we’ve done with our system, in addition to having an automatic game-checking mechanism, that checks the API data from the game, that basically just pulls the data directly from the gaming server to see who wins and cross check it with the self-reported user results. So once the match begins and you bet on yourself, you go and play the match, and then the two players will come back afterwards and you say that you won or lost the match. 

The self-reporting results are checked against the actual game data to make sure there is consensus and that everyone is telling the truth. If everything checks out, the transaction is awarded to the winning party. 

But if there is a discrepancy in who won, or there is a racist comment or something like that, a player can initiate a claim and the payout will not happen, and it moves directly to our jury-voting portal. From there you have anonymous jurors review the evidence and decide if someone did or didn’t hack – or whatever the issue may be. 

We have a large jury pool, whatever the majority decides, the disputed payout is made to the winning party. So that’s how we use Blockchain to innovate the space.  

So the database will check to see if this player is using a device that matches who they say they are, and relies on multiple factors to verify someone’s identity. A final transaction will not occur on the blockchain until a player’s identity and sufficient funds are verified. 

Eventually, the system can also detect red flags indicating that this person used the platform and stole money, and here’s evidence for the entire world to see that this person may have stolen money. This makes it easier to remove bad apples from our Blockchain platform and to file suspicious transaction reports. That’s one way the integrity system works. 

The biggest argument against Blockchain in the eSports space would be what?

The biggest problem is that some people are just trying to slap digital currency, like Blockchain, onto the eSports competition model and not actually innovate the space. Yes, Blockchain is innovative, it’s a much more efficient system for transacting than anything that we’ve had before – it’s faster and cheaper. But just because you slap digital currency on something doesn’t necessarily make it better or solve the biggest issues in the space. There have been people who have tried to create their own coins to use in certain gaming eco-systems but there is no platform, there is no eSports integrity system to stop people from cheating … if anything it is just another form of Disneyland money that people to use to lock in value to supply chains to only buy things from a certain vendor. It’s not very practical or innovative, so beware of those kinds of people that are just trying to make a quick buck because there have been a lot of scams in this space because they don’t have to really deliver anything. They just make their money off of raising funds and then they jump ship and nobody ever hears from them again. 

We’re looking to make a footprint in the space and we’re actually creating a platform that is publicly viewable on the Internet on our GitHub and then once we upload it to the Blockchain, everyone will get to see a copy of that.

(This was just conversation, we don’t want people to mistaken our platform for an exchange).

The biggest (Blockchain) network in the world right now is Bitcoin, which has a roughly $14 billion market cap at any given time. That is small compared to something like the $5 trillion forex trading industry, but it’s grown a lot.

The next biggest Blockchain is Ethereum, which is just under $1 billion and is the network that we’ll be functioning on because it allows you to upload entire programs to the Blockchain

It’s really funny because Bitcoin was created as a payment mechanism that anyone in the world could participate in and to give those people financial independence from banks, third-party processors and third-party institutions. So that’s the beautiful thing about it. It’s a tool that allows anyone in the world to now be a player in the global financial market, whether you are in rural India, or Africa, or New York City or Toronto, it doesn’t discriminate. As long as you have access to the Internet, that is all that matters. 

Most of the eSports online gaming going on at the moment is illegal, right? 

Illegal, yes, there is a huge illegal market for online gaming whether on Blockchain or not. But what we want to do is bring those transactions and illegal activities –whether its via Blockchain or otherwise – into the light by making a safe and compliant platform for our users and for regulators. It’s important to be compliant. In order to become a Unicorn, to be successful and stay out of trouble, you need to be compliant, you need to use the Blockchain benefits for the greater good and innovate in the eSports space and that’s what we’re doing. 

Who needs to be convinced, for a product like yours, to have a strong Blockchain presence in eSports gaming? 

Of course the end consumer is very important. I think as long as you create an easy-to-use platform, provide additional value and properly market your product. We’re verifying the game results and also adjudicating any illicit activities and behaviors that come up – hacking, harassment and cheating. That’s something consumers would really like to happen. But at the end of the day you do need the blessing of the regulators, showing regulators that Blockchain makes things a lot more transparent – transactions, game results, money laundering or harassment … that is something that would make their jobs easier in the end, where the private sector has created solutions to these kinds of problems. 

Let’s take the whole DraftKings and FanDuel thing that happened here in the U.S., that was very embarrassing when they had the insider trading going on with their employees. That was very bad. If you actually had a proper internal policy, kept records of proper KYC/AML and made sure to verify every player’s identity and had all of these transactions and game results public on the Blockchain, and if regulators had their own door to see those things any time they wanted – of course regulators can investigate with probable cause – but with Blockchain they would have a program that would make it a lot easier to watch over things and see if anything odd is going on. It makes it a lot easier to prevent and spot suspicious activity. So we’re trying to make everything as transparent as possible so that everyone benefits and is playing by the rules. 

Your platform is expected to be in beta by next May. How will you guys make your money? 

We’re going to collect a small fee from each match that is played, a percentage of the pot, and also there is the potential to license out this technology and make deals with merchandisers, that sort of thing. 

Until your platform is up and running for the masses, how does FirstBlood financially stay afloat? 

We had a pre-sale, much like you might have a pre-sale if you wanted to fund software development and in exchange provide early access to that software. We have our tokens, that are used on our platform, which give you the opportunity to organize your own tournaments and be rewarded for using your computer to verify matches, and also allows you to be rewarded for adjudicating cases. So if you add value to this eco-system you get value back from your work. 

So people saw our project, they saw how we’re trying to innovate, and they really liked it. We had a pre-sale of our token on Ethereum and were able to raise $6.1 million in a minute, which was the fastest crowd sale in history, especially for money amount per minute. It took the Blockchain about four minutes to actually confirm the transactions. So people sent us funds and then they got back our utility tokens in their wallet. 

It begs the question: Why stop at one minute? Why not go 20 minutes? 

(laughs). There were some projects that raised about $150 million using this same method but we’re a little bit different. We’re in eSports, which is a smaller market, and we had a cap for raising funds. We didn’t want things to get out of control, we didn’t want to seem greedy. We wanted to be reasonable and leave us a decent runway to get the business going. We could have probably easily raised twice the amount of money, but then it would have opened us up to people saying, ‘Ok, here is a platform that hasn’t even been built yet and this team, they’ve got a good reputation in the space, but who is to say they are going to responsibly spend $10 million?” We thought that would be too much to ask for and would turn people off and seem slightly unreasonable for this type of project. 

Tell us more about Ethereum, the Blockchain that your FirstBlood eSports platform will run on? 

Well, there is a lot of eSports gaming going on, it’s just that the proper venues aren’t there for people to wager that are safe and compliant. The industry itself is growing huge. There’s a lot of studies from major firms that predict by 2018 the eSports market will be about $3 billion, if not $20 billion. Some take into account illegal activity and some don’t. But the industry is going to be huge and we’re trying to convert as many people into compliant, law-abiding citizens who can enjoy themselves in this space. 

By the end of December we will have our first, closed pre-Alpha test of the FirstBlood platform.

We’ll update the Alpha, fix a lot of the bugs, and then sometime in February we’ll be introducing the second version of our Alpha and letting a little more people onto the platform and then keep refining it. Once the data hits we will start using our live tokens. 

So for the Alpha we’ll be using test tokens, but somewhere during our Alpha period we are looking to switch over to the main net, Ethereum … if not by then, then assuredly by the time we introduce our Beta, which will probably be sometime around May it will be usable for the masses.