Polychain bets on HotStreak to streamline sports betting using blockchain

In the world of sports betting, instant payouts and reliable custody are essential to the user experience. HotStreak, a web3 platform for daily fantasy sports (DFS) competitions, bets that the decentralized nature of blockchain makes it an ideal solution for DFS platforms.

The sports betting market in the United States has grown rapidly as states begin to relax regulations affecting the industry. It doubled in size in 2021 with more than $52.7 billion wagered in total over the year, according to Morning Consult.

There are two major issues with major sports betting platforms like FanDuel today, HotStreak CEO Greg Dean told TechCrunch in an interview. The first is that as a gamer, "getting your money in and out is extremely painful," he said, because payouts are tied to legacy payment systems such as ACH transfer that force the user to trust the counterparty against which he is betting. platform to distribute funds to them.

While users bear the friction of slow, centralized payment systems, operators bear the brunt of creating and managing their own proprietary currencies on the platform to facilitate payments, Dean said.< /p>

The tea behind HotStreak's web3 sports betting protocol Image Credits: HotStreak

"When you talk to someone and explain that [for] billion dollar companies like FanDuel, when you open up their tech stack and look inside, you see a proprietary wallet on the ramp, a proprietary digital currency and a proprietary ledger, all maintained by this centralized, trusted authority. I think we're going to look back on this and have a bit of a laugh at the industry,” Dean said.

From the perspective of operators, he added, there are overhead costs associated with creating these payment systems.

"It's just a huge inefficiency in terms of how the business operates. Really what they want to do is create good products that users want to use, not become a gateway and exit for fiat or for a 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 near-instantaneous payments and managing asset custody based on a set of pre-determined rules in the protocol itself rather than relying on counterparties to initiate payments to other players. The payment settlement time on its platform is 10 seconds, according to the company's website.

HotStreak raised around $1.5 million for its funding round in May last year, largely from angel investors who Dean says are “big crypto enthusiasts.” Today, the company announced that it has provided an additional $9 million in funding for a Series A round led by crypto-native venture capital firm Polychain Capital, a new investor in HotStreak.

The product has evolved significantly since the round, Dean said. 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 launched our first round, it was based more on the technology we're developing for the DFS product, which is basically a set of neural networks that evaluate short durations of sporting events," Dean said.

The company recorded transactions worth $3-5 million per month on its platform this summer and is now profitable, Dean said, although he did not share a specific figures regarding revenue or profitability.

Nigel, co-founder and CEO of FanDuel...