How Do Online Casinos Work?

How do online casinos work?

Online casinos have risen to prominence over the last decade. Technological advances, specifically with regards to the internet and smartphones, has resulted in people spending a lot of their time online.

For many industries, this added connectivity has led to added convenience along with different modes of delivery. The gambling industry is no exception. Some might even argue that online casinos have helped the gambling industry to build a better reputation.

Various colored poker chips fly out of tablet screen on a green casino table.
So how do online casinos work? On the face of it, there is little difference between an online casino and a brick-and-mortar casino. All of the online casino games are the same or are based on existing casino games. In an online casino real money is bet, won and lost, just as it would be in a physical casino. You need to be of age and in a location where online gambling is legal to play, and you should always do so responsibly.

There remains though, a healthy amount of skepticism about online casinos and whether or not they are to be trusted. Some of the concern is warranted, while some of it can be dispelled once you understand how online casinos work, how they are regulated, how the games are developed and how your money is handled. By using the best online casinos, and understanding how these casinos operate, you can lay all of your doubts to rest.

This article will explain the intricacies of online casinos. This includes their history, legal requirements, and regulations, what forms they come in, what games you can play and how they work, as well as some of the key gameplay differences when gambling online.

Brief history of online casinos

In the 1980s and 1990s, more and more desktop computers made their way into homes. With the addition of the internet, it connected people like never before. What do people like to do when they are connected? Play games with each other. It’s no surprise that a desire to play poker and other casino games grew.

The beginning of online casinos was heralded in 1994 when the government of Antigua and Barbuda passed the Free Trade and Processing Act. This act effectively allowed casinos to apply for licenses to open an online casino from outside of Antigua and Barbuda.

The next step was to have the correct gambling software. Microgaming, a software company based in the Isle of Man, built the first fully functioning gambling software in 1994. Microgaming teamed up with Cryptologic, an online security software company, to integrate encrypted communication protocols to ensure secure financial transactions. Once fully integrated, Microgaming launched The Gaming Club in 1995. This was in-effect the first online casino in the world.

1996 would be a significant year in online casino history. In this year, InterCasino claimed the first real money wager in an online casino. InterCasino is still active today, but at that point had only 18 casino games. It was also the year that the Kahnawake Gaming Commission was established in the Mohawk Territory of Kahnawake in Canada. This commission has remained one of the most respected bodies for regulating and issuing online casino licenses to this day.

Since these humble beginnings, over 85 countries have legalized online gaming and the online gambling industry is set to be worth $85 billion by 2025. Since the ’90s, the world has grown more connected, and the online gambling industry has become more regulated and professional.

Legality, licensing and regulation

As with any industry that involves money changing hands, there needs to be extensive regulation to avoid exploitation by either party or by both parties against the state. The online gambling industry has thorough regulations that apply differently depending on what country you’re in.

If you are wondering if online gambling is legal in your country, you should first confirm before signing up with an online casino. In the US, for example, each state has its own specific online gambling laws. In areas that online gambling is legal, there is more than likely a licensing body that regulates and hands out licenses to the online casinos.

Laptop screen displaying online casino with cards, red dice and poker chips
You should investigate the licensing of a casino before you sign up with them. As with a real casino, you stand to win real money. If the online casino is not fully licensed, or licensed by an unknown licensing body, you could end up losing all of your winnings. If an online player has a complaint against an online casino, they will lodge it with their regulatory body. The respectability and location of that regulatory body could make all the difference as to whether or not anything will be done.

During the Black Friday raid in the US in 2011, many online casinos were indicted. Many players were spooked and tried to withdraw their winnings. For some, this resulted in the online casino unable to payout, and because it was illegal to use the online casino in the first place, they had to forfeit their winnings. Online poker players brought a class action lawsuit against Full Tilt Poker for failing to pay out winnings.

Lit up ace cards behind a lit up poker chip with a black background.
The Black Friday raid brought a renewed focus on regulation and licensing for online casinos. For players, it has meant that there are now reputable regulatory bodies that ensure that online casinos meet minimum payout percentages and keep player funds in a separate account than that used for the casino’s operations. It has also meant the online casinos use 256-bit encryption to secure player data and banking details.

The licensing and regulations in the online gambling industry are as robust as ever. This means that if you know online gambling is legal where you live, you can find a respectable online casino that has stringent regulations. This ensures your safety and peace of mind.

If online gambling is illegal in your area, you might be tempted to explore an offshore online casino. The risks involved are obvious. You could pay a fine or even be sent to jail. You also put your funds at risk as there is no way that your local government will fight on your side if the online casino refuses to pay out your winnings. All in all, it is safer to gamble online in areas that it has been legalized.

Setting up with an online casino

Once you’ve done your research, and found that online gambling is legal in your area, the next step is to select the best online casino to play on. There are many sites that offer online casino reviews. These reviews can help you to understand what each online casino offers in terms of support, bonuses, games, and mobile apps.

Once you’ve decided on your online casino of choice, you will generally follow the next four steps:

  1. Create your account
  2. Load your bankroll
  3. Select a game
  4. Wager money on the outcome of the game

When you create your account, you’ll be asked to provide your identification documents, proof of address, and banking details. It is important to check that your information is encrypted by the online casino so that it is not available to third-parties. All top online casinos will have encryption software for their player data.

In the past, online casinos and players had to be creative to get around the legalities of online gambling in areas where it was illegal. To do so, many casinos set up payment processors to handle the payments between players and casinos. This is naturally risky, and in areas where online gambling is legal, there is no need for it. The top online casinos will allow you to use Visa and MasterCard for payments.

Once your account is registered, you will load money to your account. This is typically a portion or the full amount of your bankroll. Your bankroll is the amount of money you have allocated to use for gambling.

Managing your bankroll is an essential part of earning money rather than losing it when gambling. It involves knowing how to bet, when to log off, and what type of buy-in you should pay for. You should be extremely deliberate with how you use your bankroll, otherwise, you could end up losing much more money than you initially expected. This is part of gambling responsibly and is essential to enjoying your gambling experience.

Once you’ve added your banking details and added your cash, you are ready to play. You would then browse through the games on offer by the online casino. Most online casinos do not make their own games. The games are made by software companies who rent the games to the casinos.

This is beneficial for players for two reasons. Firstly, it means that the game manufacturer is incentivized to create a game that is trustworthy and fair. The quality of the game is tested and needs to stand above competitors. Secondly, the casino is unable to rig games, which they wouldn’t want to do in any case, because they don’t have direct access to the game’s software.

Tablet and iPhone displaying online roulette and poker.
The best online casino will use the best games. This means that players can sit back and enjoy the game, rather than wonder if they are being taken advantage of.

If you win the game or bet, the online casino will add the winnings to your profile’s bankroll. If you lose the game or bet, money will be deducted from your bankroll. At any point, you are able to withdraw your bankroll (with winnings and losses) back into your bank account.

If you no longer want to have an account with an online casino, you can withdraw your money and close your account. Some online casinos will have terms and conditions that determine when you can withdraw and whether or not you can withdraw any signup bonus.

Bonuses

If you have explored online casinos before, you will be familiar with signup bonuses. How do online casino bonuses work? Basically, in order to entice players to register and remain with their online casinos, many online casinos offer bonuses for players. These often come in the form of matching the amount of money a person deposits when they sign up as a welcome bonus or rewarding loyalty.

How do online casino welcome bonuses work? Some online casinos offer very generous welcome bonuses. It is important to read the terms and conditions that come with a welcome bonus. Naturally, an online casino wouldn’t want to give you the bonus only for you to immediately withdraw it and close your account. As a result, many welcome bonuses require players to play a certain amount of games before they can withdraw the bonus.

Casino bonus in big gold letters with blue and red sparks in the background.
This is important to know because your bonus will be placed with the bankroll that you deposited. This means that you might be restricted from withdrawing for a certain period of time, and perhaps not even some of your winnings until you have met the criteria for withdrawal.

Another type of welcome bonus is access to free online casino games. This is usually in the form of limited free-spins in online slots, or free credits for casino table games. These bonuses will help you find the types of games that you’ll enjoy playing more often.

Some online casinos will give you the option to accept or deny the welcome bonus. When considering this, you should think about how long you envision playing online. The truth is, the most successful players earn their winnings over a long period of time. This comes with constantly reflecting on your strategy and managing your bankroll wisely. If you plan to enjoy online gambling, it would be worth accepting the welcome bonus as you will play through all of the required games needed to withdraw the bonus. Ultimately, each online casino will have its own welcome bonus, and you should understand the terms before signing up.

Outside of welcome bonuses, some online casinos will offer bonuses every time a player deposits more money to their account. Even the games themselves will sometimes have in-game bonuses to entice you to play more. Make sure that you understand the in-game prompts when it comes to money and bankroll. In-game top-ups can often lead you to spend far more than you initially planned.

There are also loyalty bonuses in some online casinos. This is when the casino rewards loyal players who have spent a certain amount of money with the online casino. It is often tiered depending on how much has already been spent. The bonuses can range from money, credit, and free tournament entry to event tickets and merchandise.

Types of online casinos (download, web based, mobile)

In a real casino, you walk through the door and towards the games you want to play. How does it work in an online casino? There are currently three main ways that you can access and play in an online casino. They are through a downloaded program, through your web browser, and on your mobile phone.

Downloaded online casino software

In the mid-to-late 1990s, the main way that players accessed an online casino was through downloading and installing a casino program. For many, this was their first experience of an internet casino.

You would then launch the casino program on your computer and it would open up in the same way a computer game would. Once opened, the casino software automatically connects to the casino’s service provider. Once connected, a player can play all the games online through the program.

The downloaded online casino had reliable gameplay and fast graphics. In the early days of the internet, this was even more impressive. The reason for the speed was that the images and graphics were cached on your computer, rather than being loaded anew each time, as would be the case on a web browser.

The downside to using a downloaded online casino program was that you could only use it on the computer that you installed it on. You couldn’t log in to a friend’s computer and access your account and games.

As internet speed has improved over the last 20 years, the benefits of a downloaded online casino are not as apparent as they once were. Most people prefer to access their online casinos through their web browsers. That being said, some online casinos still offer a downloaded version of their platform.

Tablet and iPhone displaying online slots game.

Web browser based online casino

The most common way that player accesses online casinos is through their web browser. This involves simply typing the online casino’s URL into your browser and logging in. It is marginally slower than a downloaded online casino program because the games, images and graphics are loaded through the web.

Many people feel uncomfortable about downloading and installing casino software on their computers, so the web browser-based online casino is a more viable option. It also offers added flexibility as you can securely log in on different computers and web browsers. All you need is a connection to the internet.

Web browser-based online casinos are often built to be responsive. In other words, you can play on your laptop, tablet or smartphone because the display responds to your screen’s width. This flexibility is why this type of online casino is so popular.

Mobile apps

The last ten years have ushered in the era of the smartphone. These days, we spend an inordinate amount of time on apps on our phones. As a result, online casinos offer iOS and Android apps so that players can easily access and play online.

On phones, an app is often easier to navigate than a responsive web browser. On a tablet, the same is true. The design, graphics and loading speed can be quicker on an app than in a web browser on your phone.

Jackpot slots machine with 777 displayed with coins flying around it
The online casino apps are similar to the downloadable online casinos of the 1990s. The downside is that you can only use it on the device it has been installed on. By purchasing the app on the Apple App Store (iOS) or the Google Play Store (Android), you know that the app is secure and has been reviewed.

For security reasons, it is not recommended to download an app directly from a website. Make sure that you download it from either the Apple App Store or Google Play Store.

Types of games

If you imagine walking through the doors of a real casino, you might be overwhelmed with choice. There will be countless flashing lights, casino table games, and slot machines all vying for your attention. Much in the same way, once you’ve decided on a reputable online casino to sign up with, and set up your account and bankroll, you might be overwhelmed by the volume of games available to you.

As with a real casino, online casinos have a full selection of games, sometimes including online sports betting. All the games offer the chance to win real money. Online casino games are played in the same way as they would be in a real casino. The only difference being that online casino games have an element of computer-generated chance, whereas the real casinos have a face on the other side of the table.

With the exchanging of real money, casinos need to ensure that the games are fair and regulated. This applies to online casinos even more so. There is no room for computer error when it comes to real money games.

How do online casino games work? Many people wonder if the game is not rigged in the casino’s favor. As with anything in life, knowledge is power. The more you know about how online slots, online poker, and online blackjack work, the more comfortable you will feel about the fairness of the games.

Slots

There are many skeptics about the fairness of online slots. Some of this stems from the skepticism of video slots in casinos. The truth is that, statistically, playing slots online has a higher payout than casino slots games.

How do online casino slots work? Online slots work in a similar way to the real money slots you’d find in a casino: you initiate a spin and you tell it to stop, hoping to get a winning combination in the slots. In online slots, you may get bonus rounds, which you wouldn’t in casino slots. The main difference though is that online casino slots have a Random Number Generator (RNG) coded into the software.

The RNG allows for the fairness of online slots to be regulated and measured. The RNG allows the online slot to produce random sequences every millisecond. The RNG is set up for each individual online slot, along with an algorithm to make each spin a unique spin. This means that the RNG in online casino slots doesn’t store memory of when last a specific combination happened. The results of the spin are not pre-programmed before you begin. They are determined by when you click to stop the spin.

Not only do RNG’s guarantee the randomness of the slots, they are also tested regularly and independently. The online gambling licensing and regulatory boards will require online casinos to undergo regular tests of their gaming software. The RNGs of online slots are audited and tested by third-party testers. The testers will check that the RNGs are running as they should and verify their theoretical return percentages. These tests can happen as often as once a month. Some online casinos make the results of these tests available online.

RNGs are used in all online slot games, from 3-reel slots to 5-reel slots. They offer credibility and integrity to the results of the slot spins. This does not mean that you are guaranteed to win. As with any casino game, the odds favor the casino. The RNG just ensures that the odds are fixed and returns are measured.

It is important to remember with online slots and RNGs is that the game developer is the only one who can adjust the settings. The online casino cannot tamper with it to make it more difficult to win.

If you are interested in getting used to online slots, many online casinos offer free online casino slots as a signup bonus. These free spins will help you get used to the tempo of online slots, while you may even get lucky and win.

Poker

Online poker is perhaps one of the most popular games in online gambling. The televised World Series of Poker has enhanced the popularity of the game and highlighted more of the strategy behind the play. Many players have registered with online casinos exclusively to play online poker. There are many more versions of poker online than you might find in a casino.

How does online poker work? Online poker has the same rules as casino poker. The main difference is the speed of the game and the aggressiveness of the bets. Online poker games make use of a time bank for players. This ensures that the game continues to progress smoothly between all the players.

In online casino poker, you won’t be able to read another player’s bluff in the same way that you would in a real casino. You might learn a player’s style of play after a few hands though.

In terms of the software for online poker, you will be pleased to know that RNG’s are used when cards are dealt. This means that the games cannot be rigged by the casino. Online casinos would have nothing to gain from rigging games in any case as they make their income from the rake.

The developers of online poker games use RNGs to make sure that the card dealt is always randomly selected from the available deck. The RNG selects a number, this number is assigned to a card in the remaining deck, then the card is dealt.

The fairness of online poker games brings the skill level of a player into sharper focus. As a result, online poker tournaments can amass significantly large pots. Remember though, that the higher the buy-in, the more likely you’ll be playing against some very strong poker players.

If you are new to poker, there are many free online casino poker games available. You won’t necessarily be playing in real cash games, but you will become familiar with the pace and style of online poker.

Experienced online poker players have been known to play multiple games at once, with each game in a separate browser tab. This is of course not possible in a physical casino, but it is one of the many ways that the online environment offers nuances to the way we can play.

Light up blue playing cards mid air with a black background.

Blackjack

Online blackjack does not differ from casino blackjack. There are different types of blackjack, and you might find more online than in a casino, but for the most part, the rules and play of the game remains the same.

One key difference with blackjack online is that a player isn’t able to count cards. In online blackjack, the cards are shuffled after each round. The cards are shuffled using an RNG. This means that you can’t necessarily count the burn cards when deciding whether to increase your bet or not.

The RNG for online blackjack games is tested and audited to ensure that it is operating correctly and fairly.

Live dealer

Some online players prefer to experience casino table games with a person dealing rather than a computer. As a result, there is a branch of online gambling that involves a live dealer. Mostly, you will find this in games of live dealer online poker and live dealer online blackjack.

Naturally, having a live dealer removes the need to use the RNG. As a result, you can see the dealing and shuffling in real-time on your computer. The dealer is live-streamed using a high-end camera to all the players in the game.

There is an added social dynamic to live dealer casino table games because they often come with a chat box that players can use to talk to each other or the dealer. The dealer can also be tipped at the end of the game.

Casino Game Developers

Since the first online casinos were created in the 1990s, software developers have been an integral part of the online gambling industry. Casinos can’t develop the games themselves, so it is important to know who the reputable software companies are. A badly developed game could see you throwing money at a game with little-to-no chance of winning anything in return.

The top three casino game developers are Microgaming, Playtech and Net Entertainment. Microgaming has been around since 1994 and today provides some of the industry’s leading online casino games. After starting arguably the first online casino, The Gaming Club, in 1995, Microgaming decided to rather focus its strategy on developing casino games and is today an industry leader.

Playtech was founded in 1999 and is identifiable by their games having titles of iconic movies, comics, shows, and books. Playtech has also established itself as one of the leading mobile casino game developers.

Net Entertainment was founded in 1996 and has developed award-winning slots games amongst others. Recently they have set the standard for live dealer games, with exceptionally high-quality streams.

As with any industry, there are some up and coming game developers who are looking to make their mark. However, to be on the safe side, you can’t go wrong with these established developers.

Responsible gambling settings

Accessing online casinos is very convenient. It can be as easy as taking your phone out of your pocket and playing online slots. While some might be put off by going to your local slots, gambling online seems simpler and more private. The danger, of course, is that gambling, whether online or in-person, can be addictive. It is essential to ensure that you are gambling responsibly at all times.

A tablet displaying slots game and iPhone displaying roulette
Online casino games can be just as addictive, and often have in-game offerings to help you top-up or buy-in to the next game. You might see a signup bonus of free online casino table games, and play more than you thought you would. If you don’t manage your bankroll, online gambling could cost you a lot more than your initial bankroll.

Thankfully, many of the leading online casinos add responsible gambling settings to their platforms. As technology has helped us to access casino games more readily, it can also be used to limit our access to them.

Deposit limits can be set that limit the amount of money a player can deposit into their online casino account. This can be set to a daily, weekly, or monthly limit. Even if you think you are gambling responsibly, it is advisable to set this limit. You might get a sobering surprise if you hit the limit.

Some online casinos offer time-out periods. This is when a player knowingly locks themselves out of their account for a limited period of time. More experienced players might use this after winning to make sure that they cool-off before playing again. Too often, players make a winning and then lose it all trying to chase another win.

Players can also set loss-limits where you restrict yourself from losing too much of your bankroll in a session. This is a good example of how you can manage your bankroll by ensuring it isn’t depleted too quickly from bad decisions.

Some online casinos also offer self-exclusion periods where a player can lock themselves out of their account for an extended period of months or even years. This might be for players who know they aren’t going to play and want to lock their account in case it is hacked, or for players who know they are developing an addiction and need extended time off.

Each online casino will have versions of these types of responsible gambling settings. In any addictive realm, cash games can appear to offer a quick fix to financial stresses. In truth, online gambling can have devastating effects on personal finances if not done responsibly.

Your ideal online casino should be regulated and licensed at a respectable gaming board, and it should have an interest in ensuring that you are supported in to gamble responsibly. When done right, online gambling can bring hours and hours of enjoyment, and winnings.

Return percentages

It is always important to remember that the house edge is in favor of the online casino. What is the house edge? It is basically the odds being favorable that the outcome of a game will benefit the casino. That’s where the betting comes in. The bet is that this time the lower odds will take it, and they sometimes do.

To know how often the house’s edge is beaten you can look to a casino’s return percentage. The return percentage shows you relatively how much the casino usually makes per game. For example, Blackjack has a very low house edge of 0.5%, which means that the casino expects to pay 99.5% of wagers back to players, but in the long run, make 0.5% profit on the wager per game. 99.5% is the return percentage.

Magnifying glass over gold percentage symbol.
Other games will have a higher house edge. Online slots have a house edge of between 2-15%. American Roulette has a house edge of roughly 5%. It is important to remember this when playing. The law of averages is that you will win from time to time, but in the long run, the games will make the online casinos more money.

For that reason, it is essential to manage your bankroll and be strategic with your play when you’re ahead. Have an effective strategy and know when it is a good time to bet and when it’s a good time to walk away. When done responsibly, online casinos bring hours of enjoyment.

Thanks to robust licensing and regulation, online casinos have had to adhere to high quality and legal standards. The games themselves have had to prove that the software used is fair and random. With the number of options available, online casinos have had to make the best possible platform that is responsive to devices and has the option of a mobile app. The only thing left is to create an account with a top online casino and explore the online casino world for yourself.