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Polychain puts its money on Hotstreak to streamline sports betting using blockchain • Technology Flow

In the world of sports betting, instant payouts and reliable custody are critical to the user experience. Hotstreak, a web3 platform for daily fantasy sports (DFS) contests, blockchain’s decentralized nature makes it an ideal solution for DFS platforms.

The sports betting market in the US has grown rapidly as states begin to loosen regulations around the industry. According to Morning Consult, it will double in size in 2021.

There are two main problems with big sports betting platforms like FanDuel today, Hotstreak CEO Greg Dean told Technology Flow in an interview. The first is that, as a player, “getting your money in and out is extraordinarily painful,” he says, because payments are tied to legacy payment systems like ACH transfer, which require the user to trust the counterparty they’re betting with. A platform to actually distribute funds to them.

As consumers feel the friction of slow-moving, centralized payment systems, operators are shouldering the burden of building and maintaining their own proprietary currencies on the platform to facilitate payments, Dean said.

The team behind HotStreak's web3 sports betting protocol

The team behind HotStreak’s web3 sports betting protocol Image Credits: Hotstreak

“When you talk to somebody and you explain it [for] Billion-dollar companies like FanDuel, when you open up their tech stack and look inside, you see an on-ramp, proprietary wallet, proprietary digital currency, and proprietary ledger, managed by this centralized, trusted authority. I think we need to look back on it and make the industry laugh a little bit,” said Dean.

From the operator’s point of view, creating these payment systems creates overhead.

“It’s just a massive inefficiency in terms of business management. Really, what they want to do is build good products that consumers want to use, not go on-and-off-ramp for fiat or for proprietary digital currency,” he added.

HotStreak’s decentralized SHARP protocol aims to solve both sides of the problem from a payments and custody perspective by facilitating instant payments and maintaining custody of assets based on pre-determined rules within the protocol itself, rather than relying on counterparties to initiate payments. to other players. According to the company’s website, the payment settlement time on its platform is 10 seconds.

Hotstreak raised ~$1.5 million for its seed round in May of last year, mostly from angel investors who Dean said were “huge crypto enthusiasts.” Today, the company announced that it has brought in an additional $9 million in funding for a Series A round led by crypto-native VC firm Polychain Capital, a new investor in Hotstreak.

Dean says the product has grown significantly since the seed round. HotStreak’s 10-person team plans to use the new funding to further develop its own platform as well as the underlying protocol it runs on, he continued.

“When we raised our first round, it was based on technology we were building for a DFS product, which is basically a bunch of neural networks that price sports events over short periods of time,” Dean said.

The company saw $3 to $5 million worth of transactions per month on its platform this summer and is profitable today, Dean said, though he did not share specific numbers regarding revenue or profitability.

FanDuel co-founder and CEO Nigel Eccles, who has invested in several sports betting businesses, is joining the startup’s board as chairman as part of a Series A round that will help the company connect with other companies for potential collaborations. place

Hotstreak makes money from the entry fee it charges players to use its platform, which is listed on the app at the start of each game, and plans to monetize it by selling its software to other sports betting platforms, Dean said. .

Dean and his team aren’t the only entrepreneurs to see room for blockchain-based innovation in the sports betting space. Last month, BetDEX, co-founded by ex-Fanduel executives including Eccles, launched its own Solana-based sports betting protocol, armed with $21 million in funding raised last year from Paradigm and FTX. While BetDEX is more focused on reducing fees in the space, HotStreak is focusing its efforts on improving payments and custody processes.

“There’s an opportunity here to build something that can really change the industry and change the way people interact with sports gaming in general, because it doesn’t really make sense to give your money to some centralized guy. If you want to be bad or compete in DFS,” Dean said.

While Dean admits that the overall market for DFS providers may shrink as more US states bring legalized sports betting online, he believes the overall sports gaming market will still grow significantly. Focusing on DFS to begin with gives Hotstreak a regulatory advantage while the platform expands to offer more traditional sports betting products, which typically require expensive legal exposure.

Hotstreak doesn’t spend much on marketing, an activity Dean described as “cashing in” cash. Instead, the company focused on relentlessly iterating its user experience.

“If you’ve been in crypto long enough, it seems like there are a lot of solutions to a problem. “It’s probably one of the more concrete examples of a real systemic problem in an industry where the Web3 protocol can change that and drastically improve things,” Dean said.

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