How Decentralised Poker Solves the Rake Problem

The function of the 'rake' provides a perfect example of how decentralised poker platforms are superior to their centralised counterparts. Whether it be a brick-and-mortar casino, or a major online poker facility, the rake is what makes it profitable for the operator to provide the game in the first place. A player wins a hand, and the dealer (human or computer) takes a cut. In theory this seems fair, but in practise it leads to two major problems which are both solved by decentralised poker.

First, let's look at how a rake typically operates. Suppose two players raise and re-raise one another as the cards continue to be dealt. At the showdown, one of those players reveals a superior hand. The pot is all his – except for rake, the portion taken by the dealer on behalf of the house. This pays for the overheads of the operation (such as dealer wages, government licensing fees, etc). The rake is also the method by which the house generates profit. The higher the rake, the higher the profits for the house.

In blackjack, the house directly competes with each player, and makes its money by busting less often than the punters. In roulette, there are one (or two) numbers on the wheel which belong to the house. Strike red? Red wins. Strike black? Black wins. Strike green (0 or 00)? The house wins. In these games there is no need for a rake, because the house is statistically guaranteed to make money by virtue of its edge in general play.

In poker, the house doesn't play against the punters, but merely deals, which is why a rake is necessary in the first place. Up to this point, any sensible person will have no objections. Why shouldn't the dealer get paid? Why shouldn't the house turn a fair profit for providing a fair game of poker? Be it online or offline, those who facilitate the game deserve some recompense for their efforts. The rake is an accepted and necessary part of poker.

With all of that said, there is an obvious caveat: the higher the rake, the worse for the player. In a brick-and-mortar casino, the rake may be as high as 10% of each pot. That is, when a player wins a hand, the dealer apportions up to 10% of the pot to the house, and moves the remaining chips to the player who just won that money by risking his own. The rake policies vary from casino to casino and table to table but you get the basic idea.

With major online poker outlets the rake is generally less than at traditional casinos. PokerStars, for instance, rake in 3-5%. This is financially viable because of lower relative overheads than their brick-and-mortar counterparts, and the higher volume of hands which can be played at an online table compared to one in which humans have to physically handle cards and chips.

The obvious problem for the player is this: the more hands he wins, the more he loses. It is that simple. If he wins $1,000 in one hand and walks away from the table, he will have lost only the one rake. If, however, he grinds away at the table for several hours to win that $1,000 he will have been raked dozens and dozens of times. By raking each micro-outcome (i.e. each hand) the house is effectively penalising the players who win the most hands!

Decentralised poker solves this problem by only taking a rake at the end of the macro-outcome i.e. the end of the game. Whether five hands are played, or five hundred, the decentralised poker platform takes its rake only when players leave the table (or the 'channel'). This is possible because the game itself is being run not by a single dealer, or a single computer server, but collectively by the computers running the client via which the game is played.

For the poker player, this means lower rakes and higher winnings. For the centralised poker platforms, this means a serious threat to their business model. Why would any sane person prefer to lose up to 10% of every hand they win, when they can instead pay a small, one-off fee no matter how many hands they play?

In the online world, rakes lead to another problem which is less obvious but potentially more serious: 'actions hands'. If a poker facilitator rakes in higher profits the larger the pot, then it is obviously in their interests to see larger pots being played. If players are dealt high-ranking hands then larger bets will be made, and the pots will grow as a result. No matter who wins the hand, so long as the bets are big, the house wins more money, because it is taking a percentage of the pot.

Do the major centralised poker platforms intentionally deal more 'picture cards' in order to create 'action hands' to increase their rakes and therefore their profits? You will hear different opinions on this among veteran online poker players. Even if one does not believe this takes place in practice, all can agree that the concept makes sense in theory: if a rake is taken each hand, the house stands to benefit from larger pots. If the same house is responsible for dealing the cards, there is an inherent conflict of interest at play. This is common sense.

Decentralised poker eliminates this problem both in theory and in practice. The rake is taken only at the end of the game – there is simply no incentive to deal 'action hands'. Moreover, the decentralised running of the game (by way of each player's own computer assisting in its operation) mitigates the ability of a central actor to create 'action hands' in the first place. The game is run by the network for the network - not by the house for the house.

Due to the nature of the game, the rake is a necessary element of running a poker table. What is not necessary is for the winning players to lose a rake every hand, or for any player to take the risk of being dealt into 'action hands' for the house's benefit. Decentralised poker offers players a fair game with a fair rake.

Decentralised poker is going to change the game. If you currently own shares in a centralised poker platform, it may be time to cash out right now!

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