Topic: Just-Dice.com : Invest in 1% House Edge Dice Game - page 126. (Read 435457 times)

The 1% Kelly assumes a fixed bankroll for the house.

This is NOT TRUE.

Min and max bets is a terrible idea. That is why this website is so damn beautiful! Where else in the world can you bet anywhere between 0 and 8,500,000,000 units (satoshi, in this case) of anything? Don't lobby to kill one of the defining characteristics of the place!

Again, some of these points aren't exactly correct, but rather then dwelling on that, I just wanted to say: The whole point of these new coming changes is each will be able to pick what they want!!! No need for more discussions! yay!

Perhaps the JD-economy has one less degree of freedom than what most people think.  

You pick the variance you are OK with and, over time, you earn the expected profit stream.   You're just picking what % you want of the biased random walk that is the JD profit curve.    

Assuming all investors are rational and respond instantly to put the system back to equilibrium:

At max profit per bet = 1%, reserve ratio = 100%, and deposit amount (controlled by JD) = 100 BTC, an investor expects to earn "P" and expects variance "V"

***JD changes max profit per bet to 0.25%***

Now, each investor sees that to generate "P" while subject to "V", they need to increase their deposit to 400 BTC (but they are unhappy because they have more counter-party risk, and dooglus is worried about getting robbed)

***JD changes to allows reserve ratios as low as 25% but keeps max profit per bet at 0.25%***

Now, each investor cuts their deposit back to 100 BTC, and leverages up to the max (because this minimizes counter-part risk but keeps "P" and "V" the same)

***JD allows the investors to choose their max profit per bet, and puts reserve ratios back to 100%***

Now, each investor keeps their deposit at 100 BTC, and they all choose 1% max-profit per bet (again, this minimizes counter-party risk but keeps "P" and "V" the same).  And we are back where we started  

The 1% Kelly assumes a fixed bankroll for the house. = fixed min & max bets!

+100 to this

Also I would rather raising the max bet to 0.5% as a compromise between investors rather than rush in this new complicated "choose your own risk option" until it fully tested for no us intended consequences.

And remember it not a fixed bankroll.  When whales play, many players divest increasing variance of those remaining.  When bankroll goes down a lot, many new people reinvest and dilute the share of bankroll and therefore ROI of those that stayed invested. The 1% Kelly assumes a fixed bankroll for the house.

I also think the measures being discussed here are just too complicated, and introduce a risk of mistakes in the code (c.f. casinobit fiasco) and also makes it harder for investors to understand their risk and variance.

I think dooglus should just settle on a max bet and then investors who want to go less than that can just divest and risk less.  1% seems like a good amount to me and in that case, since my personal preference is a 0.5% max bet, so I will probably divest 50% of my assets in order to reach my target of 0.5%

Complexity is a bad thing, we should avoid it if possible.

Will

Did you ever consider that maybe we want to find a compromise, to keep those "weak hands" in?

Sure, they dilute your profits, you could say. But those unwashed mathematically uneducated masses sure add to the total bank size, this making the place more attractive for big players.

It's possible that JD is the closest thing to the risk/reward they want and are asking for it to be changed closer to how they'd like it. My stance: Doog made and is running an awesome site. Investors disagree over the risk profile they'd like the site to take, and it is rational to have that discussion. User level max bet implementation will allow for everyone to play with the risk/reward tolerance they are comfortable with.

Excuse me, but I need to ask: so why these people invested in a casino that has a 1% house edge, plus an optimal kelly (1%) max profit? Complaining about variance knowing those parameters is like complaining because at 3AM is dark.

to some people, it is mathematical rational to not operate at full kelly. People are optimizing their utility, not their profit. To some investors, variance decreases their overall utility - therefore it is rational for them to want to exchange decrease in profit for decrease in volatility.

It's sub-optimal for profit, but optimal for maximizing their own utility. It is irritation only if they declare their strategy to be maximum growth then ask for non-optimal max bets.

The investors that whine really annoy me.

All these people came, diluting our investment and expected an constant risk free return. Very annoying. I expected swings like this where I could lose 20% in a day. I have made a lot of money off of Just Dice as an investor.

However this investment got worse and worse returns because of all these people who had NO idea what they were getting themselves into.

I have revised my thoughts on the matter.

Max bet should be 0.5% or 1% no lower, and investors can leave their coins with dooglus, any investors too scared of dooglus they can invest elsewhere and let us risk takers play this game.

To be clear: Why should we nanny and cater to those who want secure, safe, happy, comfortable high returns? Why?

Let the scared little hands leave. Please.

that's my point: don't use any tiers, don't use reiteration since it increases complexity, use a simpler algorithm...

right now % of total bankroll is computed for each player. Winnings are assigned proportional to % of bankroll. Do the same exact thing, but with variable max bets...

Example:

Right now A invests 100 BTC, B invests 50 BTC.
1) Site keeps track of total invested (100=A, 50=B)
2) Site calculates total bankroll = 150 (sum of deposits)
3) Site keeps track that A gets 2/3 of winnings/loss (invest/bankroll), B gets 1/3 (invest/bankroll)

Proposed:
A invests 100 BTC at 0.96% max bet, B invests 50 BTC at 0.77% max bet
1) Site keeps track of total "invested" (A=100*.0096=0.96, B=0.385)
2) site calculates maximum bet = 1.345 (sum of "invested")
3) Site keeps track that A gets 71% of winnings/loss ("invested"/maximum bet), B gets 29% ("invested"/maximum bet)


no tiers, and it uses the same calculations and computations as currently being done - but "invested" (in quotes) is now what is available for maximum bet.

Right, I remember reading that post. I'm okay with making that distinction, calling it 'math' vs. 'psychology'. I will just continue to get cranky when decisions based on the latter category are called "irrational". (sorry for the outburst by the way. low blood sugar, I bet)

Oda: for what is worth I agree on the fact that many investors are just clueless of what investing in a casino means (some of them dared to write that for them J-D is a "long term, stable investment" - LOL so hard at that, they do not even understand what the business model of a casino is). This can lead to panic, FUD and bank runs. In fact I already wrote about it in another thread yesterday, agreeing with your point:

(ffs, I can't keep myself out of the discussion... compulsive gambling, compulsive discussing, it's all the same )

I don't disagree with your table, but as was pointed out before, there's no way to exactly quantify the counter-party risk here, so from what we *can* quantify (volatility, returns) Bitsinmyhead's point still stands.

And in any case, the point I tried to get across before was a different one anyway: the entire j-d system is dynamic, not static, and influenced by human reaction. Ignoring those (possibly irrational) reactions is *irrational* itself. Maybe the most relevant case: when bank size starts dropping because of the high variance, people get nervous and pull out, bank size drops further, people will get even more nervous, etc.

Granted, we weren't quite there yet yesterday, but we were getting close, with all those paranoid remarks like "Dooglus = nakowa", or "nakowa cracked SHA".

Can you please try to at least see my point, even if you ultimately won't agree with it: this entire discussion reducies the correct maxbet size to the Kelly formula, but doing so ignores an important aspect in managing profit and risk -- that not all actors asses risk the same way. All other things being equal, higher maxbet means higher variance, which means the bank can be brought closer to zero. Some of us (me included) are willing to sit that out and trust that the whale will eventually run out of luck, and will be harpooned by the 1% edge, but for other actors, this swing is too much. I'm not saying we have to agree with them, but it's not correct either to say they're acting "irrational".



I said no such thing. I said opinions are divided on this -- though not necessarily equally. Even if the ratio of opinions on this would be 2/3 to 1/3, it would ridiculous to claim that *all* the investors share the same opinion. By the way, please include me in "dissenting opinion": *personally* I would have preferred that maxbet stays 1%, or maybe goes to 0.5%, but *considering other investors and how they might react*, I was sort of okay with the decision, as long as it isn't permanent.

Plus, can we please not entirely ignore the fact that site profit went from around -0.1% yesterday back to about -0.03%? No guarantee yet that it'll all work out just fine, but we're certainly on the right track.

OK, I see now.  "Trust" had nothing to do with it. 

I can't quite explain it, but for some reason I feel what I called the "don't trust investor B" scenario is more fair/better/preferred [although I agree now that trust was never the issue].  Maybe it is because this scenario does not require memory of the previous state. 

Either way, I now think fractional reserves is a great way to reduce counter-party risk.

+1

When you speak of counterparty risk, you postulate that it is low because the chances of Dooglus running off with the coins or losing them due to incompetence are low. I agree. But you are forgetting a huge factor of CP risk: he could be robbed, threatened, etc. (heaven forbid). This is a huge risk:

* Banks have armed guards, vaults, local/city/state/federal law enforcement, etc.

* Just Dice is just Dooglus and in his girlfriend, apparently in a rural area in Canada (maybe some people even know precisely who/where he is, I don't know). He controls anywhere from $4,000,000 to up to $7,500,000 (potentially much much more) after just three short months of operation. This is scary. I worry for him and Deb as people, and to ignore that risk for investors as well is to be willfully blind.

I think allowing the offsite coins/fractional investment/whatchamacallit will be great because it reduces the risk to investors AND it reduces the risk to Doog, who will be holding less of hundred's of strangers coins. That's win-win.

Hey Peter. Thanks.

I'm gonna skip down to your second example, the *do trust investor B* scenario.

This *IS* the scenario that will be done (the way Doog is conceiving it). The site will track your full "investment", only a fraction of which ail be on hand at JD. Max Profit (not max bet!) is still calculated as a fraction of your full investment, including offsite coins.

I understand the confusion, but trust is not an issue. The reason we don't need to trust in this system is because if Investor B's investment drops significantly (say a whale wins 10 max profit bets in a row, dropping investment to 100*0.99^10=90.xx%), then investor B will be auto divested of his whole amount, until he replenishes his onsite deposits (using your definition). So at no point is he getting free returns on risk-free investments. Also, at no point would there be a situation where an investor "owes" the site btc. Thus no trust.

A real concern with this scenario is that say investment is at 50k, and suddenly a whale kills it and wins 20 max profits in a row. Conceivably, many of the more "leveraged" (lower reserves, your definition) would hit the bottom of their deposits (your definition, coins held on site) and get auto divested. So you could see investment suddenly come crashing down to say, 25k, leaving only more risk-averse investors.

This scenario worries some, I assume, because it might cause a loss of confidence in the site. However, I think this is overblown because:

A) you could have the site show: "Invested: 32,040.12312844 BTC (15,349.19494033 pending)", thus reassuring that we're just waiting for people to deposit more coins to maintain their investment. *ooooohhh.... I like this idea! Just thought of it*

B) Max Profit may drop dramatically, but I don't see this as a negative. As it leaves just the fully deposited and most likely more risk-averse (running fractional Kelly), the site will automatically turn more conservative and act as an automatic cushion to massive downward swings

C) This will be risk-averse investor's wet dream! Suddenly they'd have a much higher percentage of total invested, low risk ('cause of their probably fractional kelly), and could reap some outsized rewards. This will tend to draw back the investors that got margin-called out, and new investors.


I think all this will have a stabilizing effect on investment, whale-impact, etc. I just keep seeing win-win-win scenarios in this new system.

Cheers!