Bitcoin is a currency that does not require authorization. This explains why it was necessarily used in practices considered vices, which are often morally condemned, if not legally forbidden. There was, of course, drug use driven by the Silk Road marketplace, which we have already discussed at length in this course. But it wasn't the only activity of this kind: gambling and sex work also experienced a kind of synergy with Bitcoin.

This chapter is divided into three sections. The first deals with bitcoin poker, which really took off in the spring of 2011. The second will be devoted to the SatoshiDICE dice game, which had been a huge success since its release in April 2012. In the third, we'll analyze the first case of paid porn with Bitcoin, the subreddit r/GirlsGoneBitcoin.

One of the growing areas of Bitcoin's economy between 2011 and 2012 was online gambling, and more specifically poker. Indeed, 2011 was marked by a crackdown on online poker, which helped to shed light on Bitcoin as an alternative currency.

On April 15, an event that would come to be known as "Black Friday" by poker players took place: the websites of PokerStars, Full Tilt Poker and Absolute Poker (the three leading platforms in the USA) were shut down by the FBI. The platforms were accused of circumventing the Unlawful Internet Gambling Enforcement Act, which prohibited banks from validating transfers to online gambling platforms. To do so, the three platforms posed (https://web.archive.org/web/20110419230512/http://www.justice.gov/usao/nys/pressreleases/April11/scheinbergetalindictmentpr.pdf) as merchants selling "merchandise such as jewelry and golf balls" to players, so as not to arouse the suspicions of their banks. The closure on April 15 was disastrous for the poker world, which had set back several years in terms of online activity.

Bitcoin was perfectly suited. Gambling was one of the possibilities envisaged by Satoshi, when it integrated functions for a possible poker application into version 0.1 of the software code (as we saw in chapter 4 of the course on creating Bitcoin). Bitcoin sould solve the problem "by reducing the issue of chargebacks and reducing the ability of governments to shut down payments".

A bitcoin-based online poker platform already existed: it was Betco.in, launched in August 2010 by Pavel Karoukin, a Belarusian developer then living in the USA and using the pseudonym Hippich. The interface was rudimentary, but functional.

In 2011, with "Black Friday", platforms were multiplying: Moonco.in opened in June (but quickly drifted into a betting site and was hacked in September) and BTC on Tilt launched in July.

The most emblematic platform opened its doors at the end of August: Seals with Clubs. It was launched by an anonymous developer, FreeMoney, who discovered Bitcoin during slashdotting in July 2010.

The platform was supported in particular by professional gambler Bryan Micon, who discovered Bitcoin in June and declared to be "totally enthralled with bitcoins". He accompanied the development of Seals with Clubs from January 2012. In March, he highlighted it on his Youtube channel. Normal players would be made aware of the platform's existence, as it would be mentioned in September 2012 on the TwoPlusTwo forum, one of the most popular forums for poker-related discussions.

Apart from poker, gambling with Bitcoin was also growing enormously in general in 2011. Virtual casinos were multiplying, so much so that a sub-forum dedicated to the field was forced to open on Bitcointalk in August. A census page (Betwithbtc.com) was created by the trader GoWest in September. In addition to poker, there was blackjack, roulette, slots, lottery, sports betting and other original games.

But all these games relied on a centralized platform, and were not verifiable. It was in this context that a new kind of concept stood out in 2012: a dice game whose fairness could be verified by the user. This was SatoshiDICE, developed in April by a certain Fireduck.

Fireduck, real name Joseph Gleason, was an American developer age 30. He became interested in Bitcoin in the summer of 2011, after which he started frequenting the Bitcoin subforum on Reddit (r/Bitcoin). In addition, he became involved by developing several software tools: he programmed a timestamping tool, deployed a node for Namecoin and launched a rudimentary exchange service compatible with the short-lived Google Checkout online payment system.

In 2012, Fireduck found a way to make betting money auditable in a decentralized way. On April 9, he launched an online casino, hosted on his personal website, 1209k.com. On r/Bitcoin, he presented it as a "verifiable Bitcoin Casino". The site relied on fixed addresses, each of which gave a predefined chance of multiplying the player's stake by a specific number. The user send the amount to the address and, if the draw is favorable, receives the corresponding reward at his or her personal address. For example, the address 194udqXac9hGs5RvevjHR5L3EJaGXDzahe gives a 50/50 chance of doubling the stake, minus casino fees of 1-3%.

The game takes the form of a dice game. A draw is made for each transaction, and the result lies between 0 and 65,536. This "lucky number" is obtained by selecting the first two bytes of the digest (calculated by HMAC-SHA-512) of secret information and the identifier of the incoming transaction. If this number is strictly less than a target linked to the address (32,768 for the address that doubles the stake), then the roll is a winning one and the player receives the expected payout. If it's higher, then the person receives a small fraction of the amount, to confirm that the system has worked. Each bet therefore generated two transactions added to the blockchain.

The process was transparent and ensured that users could verify that the casino had not cheated. To do this, the fingerprints of the day's secrets are published on the chain (for example, the secrets for the day of April 18 were stored in transaction 428bcc630b00fe431623b4e1fb0f726493dc0a2ead86ace9f65cd51bc8092459). The secrets were revealed in the days that follow, allowing punters to do the math themselves. This makes the system "provably fair".

Operation was simple (all you need was a wallet to play), instantaneous (for small stakes) and easily verifiable. These features ensured that the game attracted a large number of players right from the start. In just 10 days, the online casino processed almost 5,000 BTC in bets, equivalent to over $24,000. But this sudden success frightened Fireduck, who feared legal consequences, so he looked to sell the site to someone who would assume the legal risks, and who could pay him a monthly salary to work on the technical side. In an announcement posted on the Bitcoin subreddit on April 17, he wrote that he had "been running a bitcoin casino for a little over a week. It has made 146 BTC with an investment of around 45 BTC to get it started" and that he was looking for a buyer.

The opportunity was seized almost immediately by Erik Voorhees, who, as a staunch libertarian, had no qualms about defying regulations. After discussions with Fireduck in the comments and privately, he acquired the concept for 40 bitcoins, or around $200 at the time of exchange. The next day, the platform was operational on a new site: Satoshidice.com. On April 24, after a minor graphic overhaul, Erik announced the launch of the platform on the Bitcoin forum.

In the months that followed, SatoshiDICE was a phenomenal success. People got hooked on the game, especially as it was so simple and instantaneous. As each bet (win or lose) generated two transactions, activity on the Bitcoin blockchain exploded. The number of daily transactions, which had hitherto been around 7,000, increased rapidly, surpassing (by a small margin) the previous record of 13,900 transactions as early as May 4. Erik Voorhees himself rejoiced on the forum. On May 19, the number exceeded 35,000 transactions; on June 14, it reached 61,782 daily transactions, which would be the record for 2012!

This increase has prompted a reaction from the technical community, who were concerned about the sudden influx of transactions. This was the case of Matt Corallo who wrote on June 13 on the forum:

Developer Luke-Jr talked about "SatoshiDice abusing the blockchain".

SatoshiDICE's success also attracted competitors.The process was replicated and improved upon by several online casinos, which also highlighted the fact that they were "provably fair". One of these was Bitzino, launched on June 8 by a man named Larry Taad, which offered a variety of single-player games such as blackjack, roulette and video poker.

Despite the public outcry, SatoshiDICE continued to go from strength to strength. As the months go by, it would account for almost half of the transactions carried out on the chain, for around 5% of the economic volume.

This was what motivated Erik Voorhees to go even further. Starting on August 24, he carried out an informal IPO on Mircea Popescu's online stock exchange, MPEx. He issued 100 million shares (with the stock exchange acronym S.DICE), and sold 10 of them to raise 34,500 bitcoins, or $371,910 at the time of sale. These shares were entitled to dividends from the site's revenues. The shares would also be represented on GLBSE. Thanks to its investors, the site was refurbished in October, and apps for Android and PC were made available in November. In February 2013, Erik sold a further 3 million shares for 6,100 bitcoins, or around $337,827 at the time of sale.

The profits from the online game would be enormous. In eight months, SatoshiDICE would earn 33,310 bitcoins, which would amount (with the rising share price) to over $500,000. By January 2013, the company would be valued at almost $9 million in capitalization. Similarly, BitZino would make a profit of around 10,000 bitcoins. Seals with Clubs, on the other hand, would make an estimated 600 bitcoins a month on average.

Gambling wasn't the only activity that benefits from Bitcoin; there was also what is referred to as sex work. This includes activities involving direct physical contact (prostitution in the strict sense), but also indirect sexual stimulation, such as striptease, phone sex or pornography. Since the 2000s, a new phenomenon had been developing: that of camgirls who take advantage of live Internet broadcasts to interact directly with their customers, who can communicate their desires to them.

The use of Bitcoin is suitable for sex work. In an industry largely based on cash, Bitcoin seems to be a safer option. Online, Bitcoin not only enables transfers to be made where prostitution is forbidden, but also, through its relative anonymity, avoids social admonishment from society. Satoshi understood this. In 2009, he mentioned the use of "micropayments for adult sites", and in 2010, he wrote that "Bitcoin would be convenient for people who don't have a credit card or don't want to use the cards they have, either don't want the spouse to see it on the bill or don't trust giving their number to 'porn guys', or afraid of recurring billing".

It is therefore logical that this use emerged during this period, even though it remained more or less in its early stages. In January 2012, Tony Gallippi launched a service called PimpCoin, which allowed a deposit card to be customized to accept bitcoin for sex work.

On March 26, 2012, a subforum on Reddit called r/GirlsGoneBitcoin was opened by Julian Tosh, aka "Tuxavant", a Linux and privacy advocate living in Las Vegas. It was inspired by the adult sub-forum r/GoneWild, where users post nude photos of themselves. The beauty of r/GirlsGoneBitcoin was that girls can add an address to their photos in order to receive tips in bitcoins. A user going by the pseudonym LadyBytes made a tutorial (NSFW) to show how easily they can use Bitcoin.

The subreddit will go from strength to strength and would count almost 2,000 members by the end of the year.

Bitcoin became a currency of vice. In addition to drug trafficking, it quickly distinguished itself for supporting gambling, as well as pornography. In particular, the success of SatoshiDICE led to an explosion in the number of transactions carried out on the blockchain, demonstrating Bitcoin's ability to accommodate this type of activity.

But this new form of currency wasn't just suited to vice: it was also the ideal currency for Internet crime. A number of bitcoin hacks and thefts occurred in 2012. We'll find out more about this in the next chapter, which concludes our course on the Wild West of finance.