The problem with frictionless finance

Technology often removes natural barriers that previously moderated consumption: You can shop whenever you want because online stores never close; you can binge a new show because Netflix doesn’t make you wait a week for the next episode; you can respond to every message instantly because you no longer have to go looking for a stamp first.

This is not necessarily progress. Driving to a store is annoying, for example, but so is spending all your money on things you don’t need because shopping is always a click away.

In other words, many of the frictions that technology has removed were doing useful work.

Businesses will always look for ways to remove barriers to consumption, of course, which means it’s often up to consumers to add a few back.

MIT’s Renée Richardson Gosline calls these barriers “beneficial friction”: cognitive or procedural speed bumps intentionally added to systems to encourage more responsible and effective use of technology.

This is why I refuse to pay for ad-free YouTube, for example: The ads add just enough friction to the viewing experience to stop me from binge-watching vintage NBA videos until I feel nauseous.

Unfortunately, those kinds of speed bumps are much harder to find when you’re binge-gambling on the NBA — especially when you’re gambling with crypto.

The Rolex safety net

The online crypto-casino Stake took in 6.8 billion bets in February alone.

That’s 2,769 bets every second!

Some of these are very big. “Some users gamble hundreds of millions in crypto on Stake every year,” Bloomberg reports. Among others, Bloomberg cites the example of Tyler Niknam, a gambling influencer, who reportedly placed $18 billion of bets with Stake over the course of four years.

(The report also suggests that many influencers, including the rapper Drake, are secretly given house money to bet with.)

But many of the bets are very small: Nearly a third of the bets made on Stake in February were virtual pulls of an online slot machine.

The smallest bets are made possible by crypto, the efficiencies of which make it economical for Stake to accept wagers as small as $0.0001.

No Las Vegas casino will let you play slots for $0.0001.

Crypto makes the biggest bets much easier, too. Stake reports that a customer placed a single $1.4 million bet on Carlos Alvarez to win the Australian Open last month. 

No bank would let you wire $1.4 million to a sports book — so it’s likely that the bet could only have been made with crypto.

(Alvarez won, netting the bettor a $2.5 million payout.)

This was always the plan for Stake, which built its business around using cryptocurrency to remove many of the natural frictions to gambling — frictions that make even online casinos a little harder to access.  

Stake is exceedingly easy to access, which its customers seem to appreciate. Bloomberg reports the company generated $4.7 billion of earnings in 2024, up 80% from 2022. 

It’s only continued to grow since: Deposits are up 61% over the past year, to $21.6 billion.

For many customers, however, Stake can be too easy to access. 

The Bloomberg report documents the plight of Chris from Sweden, who repeatedly begged Stake to stop his compulsive gambling by blocking his account. Following the rare occasion that they agreed, Chris — unable to stay away — simply opened a new crypto wallet and resumed betting.

Stake accepts fiat, too, but customers don’t find that as useful: 80% of deposits to Stake are made in cryptocurrency.

Casino games are not the only thing that crypto makes easier to access. 

Crypto prediction markets have lowered the effective minimum age for sports betting — to zero in some cases. Perpetual futures allow anyone to bet on privately-held companies. Tokenization will soon make stocks available to trade 24/7. “Super apps” will soon allow us to buy crypto, trade perps, and bet on sports with our retirement savings held in brokerage accounts. 

These are generally considered good things: Expanding access to every kind of financial product for every kind of investor is the democratization of finance that crypto has always promised.

But sometimes it’s better when things are not available to trade. 

For example, the only thing that saved Chris in Sweden from losing all of his money with Stake was investing some of it in Rolex watches — which he did precisely because watches are so difficult to sell.

Pretty smart: He saved himself from penury by adding some beneficial friction to his investing.

But that’s also exactly the kind of friction that crypto is so good at eliminating. 

So, expect to see perpetual futures on Rolexes, too — available 24/7 in a super-app brokerage account, right next to your 401k.

— Byron Gilliam

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