A Review of The Missing DeFi Primitive
When you consider everything that has transpired in the realm of DeFi, it’s no wonder that so many players and onlookers are confused and disheartened. We’ve reached a point in time when the venerable DeFi strategy is not only alive and well but also has a solid foundation to build from. There have been glimmers of hope throughout the year as new versions have emerged, but it was never enough to turn this barren landscape into something worth fighting for. In an attempt to make sense of what has become of one of world football’s most enduring concepts, we’ll be taking a look at all the iterations of DeFi that have existed since its inception almost two decades ago. We won’t respond to any of them directly; rather, we will take a step back and analyze where they all go wrong. The Missing DeFi Primitive is our conclusion.
The Beginning: What is DeFi?
We begin this review with a question that should be obvious to all at this point in time: What the hell is DeFi? We’ll dispense with the history lesson for a moment and get right to the point. To simplify things for the modern viewer, DeFi is the process of exploiting the quirks and weaknesses of the traditional game to make a profit. In its most simple terms, it is the use of high-stakes betting on football matches in an attempt to make money regardless of the outcome. The word ‘DeFi’ is a portmanteau of ‘deceive’ and ‘faking’. It’s a play on words, plain and simple.
The Golden Age of DeFi
For those of you who prefer an in-depth look at the evolution of DeFi, we recommend reading the excellent book DeFi: The History of a Modern Phenomenon by Richard Scudamore and Nick Harris. What follows is a breakdown of the period from its inception until the present day. The first wave of DeFi, from 1994–1998, was led by the likes of Bet365, Paddy Power and William Hill. All were intent on capitalizing on the growing popularity of online gambling and the subsequent growth in popularity of online betting. These companies pushed the boundaries of legality in an effort to grow their marketshare and increase their profits at the same time. The second wave of DeFi, from 2000–2006, saw a large shift in the companies that made up the sector. Newcomers to the market such as Ladbrokes, William Hill’s Indian partner and 2008’s Co-Winner of the Money-Laundering Fugitive, largely shut down operations in the UK and Ireland. Meanwhile, traditional players such as Paddy Power and Bet365 found themselves in the crosshairs of a new breed of operators that capitalized on the growth of the market and the increase in demand for legal gambling.
True Blue DeFi
The true blue DeFi is perhaps the most intriguing of the lot. It all started with a bang, as it were, in 2007, when bookmaker Paddy Power introduced the first version of its “Real Bet” product. The Real Bet was a masterstroke on the part of Paddy Power. It was illegal to place bets in Britain before 2007, when Paddy Power boldly broke the rules and introduced the Real Bet. The product was a hit with customers and quickly became the rage in the UK. This is where the story takes an unexpected turn. The Real Bet was swiftly succeeded by other illegal offerings, including a host of other betting products that also masqueraded as legal betting. However, one of the company’s founders, Bob Winner, saw an opportunity to cash in on the new trend. In February 2008, he introduced the first ever legalised version of the Real Bet: the Red Bet. Winner was spot on. The new, legal Real Bet proved a massive hit with customers. It was so successful, in fact, that it was quickly followed by the Blue Bet and Green Bet. In the space of two months, Paddy Power’s online business had gone from strength to strength. It was clear to all that the future of online gambling lay with legal betting and, in the process, Paddy Power had created one of the most successful entertainment brands of all time.
The Era of the High-Stakes Bet
In one of the more bizarre twists in modern sporting history, it was the launch of the Red Bet that led to the downfall of Paddy Power. In late 2011, the Ad Commission deemed the Red Bet to be too toxic for the American football audience. It was a decision that stunned both Paddy Power and the gambling community at large, who had come to rely on the product as a source of income. American audiences had come to appreciate the humour and irreverence that defined Paddy Power’s brand of humour. They also demanded a product that reflected that humour. In many ways, the American market was ready for the return of the Red Bet. The Red Bet was an instant hit with American gamblers and, within a matter of months, it was being reinstated. By the end of the year, American sportsbooks were all running the new Red Bet. Paddy Power was left with no other option but to close its doors.
The DeCon Crisis
In the summer of 2011, Paddy Power was readying itself for what was to be a triumphant return to the Bet365 markets. It had served the gambling community well for too long, and it was ready to make its triumphant return to the list of market leaders. The first sign of trouble was evident almost straight away. Paddy Power was required to sign a confidentiality agreement that prevented it from discussing its return to the Bet365 market. In a statement released after the agreement was signed, Paddy Power said: “We have been required to sign a confidentiality agreement that bars us from discussing the plans or discussion of plans with anyone, including our competitors. We are committed to the integrity of our business, and will not breach this agreement.” By October 2011, the game had changed. The industry was in disarray. There was a general feeling that something had to be done to bring order to the market and put an end to the spread of illegal bookmaking. The authorities were right to act. The DeCon was passed in February 2012 to crack down on illegal bookmaking and to bring clarity to the market. It re-criminalized most forms of gambling and introduced a new regulatory framework that has seen bookmakers forced to relaunch many of their products in compliance with the new rules.
So, What’s Next?
In a word, DeFi is alive and well. It’s simply been forced underground by the competitive environment created by the advent of online gambling and the subsequent growth of online betting. It’s alive and well because it’s always been there. Many attempts have been made to phase it out in the past, only for it to come roaring back once the opportunity presented itself. It’s a debate that’s raged on and on in the minds of those involved. At the end of the day, the debate over DeFi’s future can be boiled down to this – will it ever go away? The simple answer is: no, it won’t. The only thing that can put an end to it is time, and in the year that has passed since Paddy Power’s fall from grace, time has very little on offer.