Understanding Gambling Behavior and Risk Attitudes Using Cryptocurrency-based Casino Blockchain Data

Abstract

The statistical concept of Gambler's Ruin suggests that gambling has a large amount of risk. Nevertheless, gambling at casinos and gambling on the Internet are both hugely popular activities. In recent years, both prospect theory and lab-controlled experiments have been used to improve our understanding of risk attitudes associated with gambling. Despite theoretical progress, collecting real-life gambling data, which is essential to validate predictions and experimental findings, remains a challenge. To address this issue, we collect publicly available betting data from a DApp (decentralized application) on the Ethereum Blockchain, which instantly publishes the outcome of every single bet (consisting of each bet's timestamp, wager, probability of winning, userID, and profit). This online casino is a simple dice game that allows gamblers to tune their own winning probabilities. Thus the dataset is well suited for studying gambling strategies and the complex dynamic of risk attitudes involved in betting decisions. We analyze the dataset through the lens of current probability-theoretic models and discover empirical examples of gambling systems. Our results shed light on understanding the role of risk preferences in human financial behavior and decision-makings beyond gambling.