Topic: [POLL] Just-Dice INVESTORS: Do you agree with lowering the max bet? (Read 7080 times)

The whole point is that they wouldn't have to put their life savings on there, you could put less and add more if you lost some. It's all relative. The big upside to 1% is you don't have to put as many coins at 3rd party risk. I would say the downside is it would be easier to see if the system is being cheated at a lower %. Although I guess that is relative too.

OK, I think it we are on the same page, just differing on semantics.

- I am saying that the "effective bankroll" = what is actually deposited + the sideline cash ready to jump in.

-You are saying that the "actual bankroll" = what is actually deposited + what has been pledged but held offsite.

We are both applying the Kelly criteria to the same thing and that thing is the sum of what JD holds and what is sitting off site ready to be transfered to JD should the need or opportunity present itself. 

And I think this proves again that the % max bet *must* by greater than 1% of what is actually deposited at JD in order to maximize earnings. 

Risk perception of a casual investor who has only few BTC invested is very different from risk perception of site owner, or of an investor who put his life savings into the site. Hope the risk selection feature will be implemented soon.

I don't know if you can make assumptions about that money. We don't know what would happen if funds became depleted. A reasonable assumption of what sideline investors would do if investment drops 30% might not be the same as if investment drops 99%. My point is it's non-linear. I like Doog's fraction reserve/investment thing because it makes it explicit.

I just wanted to give you a heads up that making a default 2% max profit sets you in high-variance no-expected investment growth territory, and that's scary shit!

So, what do you think about the idea that the "effective bankroll" is not what is displayed on the JD website, but is actually a greater number due to the "sideline" money that would come in should the JD bankroll become depleted?

This was my argument for why it may make sense to have a max bet % greater than 1% of the funds physically held by JD.  

I was just reading up on the Kelly Criterion (KC) and saw something interesting. Just as the KC maximizes bankroll growth, apparently risking 2x KC (in our case 2%), results in ZERO expected bankroll growth. Beyond 2x KC, expected bankroll growth is negative. So just keep that in mind when speaking of setting max profit to 2%.

Would this analysis change if we assume that the marginal investor sitting on the sidelines, waiting to get in to a lucrative investment, can jump in quickly?  He has incentive because each new BTC invested after the whale attack gets a bigger-than-normal piece of the pie (until it reaches equilibrium)? 

If we assume the marginal investor (waiting on the sidelines) can respond instantly, then perhaps the two cases *are* mathematically the same?  (Well except for the fact that with the lower max bet % comes increased counter-party and legal risk.)

I think I am coming around to this logic.  Let me know if we are on the same page:

The Kelly-criterion says that the optimal max bet is 1% of bankroll, but the "effective bankroll" is not what it says up there on the just-dice.com website.  The effective bankroll must include the available funds from all the people that would jump in if the "posted" bankroll got small.  Of course they would jump in (assuming no security breach) because each marginal bitcoin reinvested buys a larger slice of the pie than what it did before the whale attack.  Thus, the first investors that move in to help battle the whale will have a higher-than-normal return until enough people re-build the site's "posted bankroll", thereby diluting things back to equilibrium.

Earlier in this thread, we showed that, under certain assumptions, reducing the max bet % has no advantage for the investors in aggregate.  Total expected profit is simply volume * house_edge.  We showed that instead, reducing max bet % has the effect of increasing the aggregate exposure to counter-party and legal risk (as a larger volume of BTC must be deposited to JD cold storage to support a given bet volume [aggregate profits]).  Investors can pick there level of risk exposure simply by how much they invest.  But they need to appreciate the expected variance of their investment in order to gauge how much exposure is appropriate, given their personal financial circumstances.

I am thinking that the optimal max bet % is high, but still low enough so that investors can jump in quickly after a whale attack to prevent the max bet (in absolute BTC terms) from jumping around too much [so that we don't annoy the whales].  I think 2% would be a good start too.

+1

I for one is goin to devest if I only get .25%. The turnower is to small for this.
Hopefully we will get the option to set the risk % individually soon.

Hey VTC. I totally understand your point and I think the CP risk is an important aspect to take into account as an investor. I'll address this again in a moment.

However, I just want to quickly point out that while divesting everyone 75% when we were at 32,000 would make the max PROFIT (not max bet) 80 just as it did by lowering max profit to 0.25% of invested funds, these are not actually mathematically equal. Remember these numbers are dynamic. For example, let's compare these two scenarios, A and B respectively if the site a player comes in and loses 1000BTC (site wins 1000 BTC):

A) Invested goes from 8,000 to 9,000. Max profit goes from             1% *   8,000 = 80        to       1%  *  9,000 = 90
B) Invested goes from 32,000 to 33,000. Max profit goes from     0.25% * 32,000 = 80        to   0.25% * 33,000 = 82.5

The same goes if a player wins 1000 BTC (site loses 1000BTC):

A) Invested goes from 8,000 to 9,000. Max profit goes from             1% *   8,000 = 80        to       1%  *  7,000 = 70
B) Invested goes from 32,000 to 33,000. Max profit goes from     0.25% * 32,000 = 80        to   0.25% * 31,000 = 77.5

Thus, what Dooglus actually did (reduce max profit to 0.25%) is fundamentally different-- it reduced risk, not just adjusted the max profit downward.

Now, having said that, I wasn't thrilled either about him reducing the max profit, and I still believe going 100% Kelly Criterion is the way to go. HOWEVER, I understand his motivation (trying to avoid what would essentially be a bank run), and I think his new plan is fantastic!

The new plan is a combination of allowing an investor to change their Max Profit percentage to a number between, say, 0.001 and 2% (less than 1% being fractional Kelly and over 1% being a multiple of Kelly) AND also allowing players to have what I will imperfectly call fractional investing.

Fractional investing is a little confusing at first, but makes a ton of sense. Say you want to invest 100 BTC in Just Dice at 1%. Fractional investing will allow you to, say, deposit 10 BTC in Just-Dice, and tell JD that you have 90 BTC more off site. Since your total investment is 100BTC, you will be risking up to 1BTC on that first bet. If your investment increases, no problem. If it decreases, no problem as well, because if it ever dips to below 10BTC, you'll be auto-divested until you desposit more funds.

This goes back to the Counter Party Risk, VTC, that you mentioned. By allowing you to have part of your investment off site, you reduce your CP risk with sacrificing returns. For Doog this is win-win because it allows risk-seeking investors to get the returns they want while protecting more risk-averse investors. Finally, this is great for gamblers and whales, as this will tend to increase the Max Profit back up to the levels people love to play and spectate (Also, don't forget that it's max PROFIT: whales make 300BTC bets, but plenty of people make long-shot bets to try to win that much, kinda like a lottery)

tl;dr: new variable investment risk doog is implementing is great. Let's bear with him as he implements it.

Nice insight for a guy with only a handful of posts. Maybe everyone should lurk for 7 months before posting. Seriously - it's a really smart way to frame the argument and makes it clear that Dooglus' implementation of the .25% max bet should definitely be a temporary 'fix'.

The previous 1% max bet makes it exciting and dangerous for both investors and gamblers, whales and those that choose to martingale up to max bet.

This is a great form of advertising.  Now the max win is only 80BTC, which you can buy a 2nd hand Kia, not 300BTC that wins you a brand new  BMW.

Nakowa has cause quite a stir and more people are spending time on JD.  His big win will bring other gamblers.

Investors didn't have to invest in JD.  Mech could have divest 75% if he wanted less risk (and reaccordingly adjust his invested balance daily to reflect 25% of his total account).  Now everyone is punished, investors and whales.

Thank you guys for understanding me.

That's why if Doog divested everyone by 75% when Nakowa was playing, it would lower his max bet to 80 btc as the total invested amount would drop to 8,000.  But this would also leaving 24,000 spread out in player balances.

And then those that want to invest more that .25% of there balance can feel free to do so from their account player balance.  

Now investors are at the mercy of Doog's change.  It would have been much easy to divest everyone by 75% so it can free up our coins instead of keeping them at cold storage.  Now the only way to get back to 1% risk is to buy 3 times the amount of BTC we have invested off of an exchange and invest more, introducing more counterparty risk, and a more cumbersome process.

The best would be set max bet to a flat 2%.  And you can invest 1/2 of what you would have invested for 1% risk, or 1/8 of what you want to invest for .25% risk.  Thoughts?

(I am an investor with a triple digit amount of BTC in JD)

You are right, but even if you consider it ruined when only say 1000 btc is left, chances are negligible for that to happen.

Ok, bankruns may get you there quicker but bankruns are avoided by assuring investors that the investment continues to make sense. That would be the job of dooglus, which he failed miserably to perform during the whale episodes (pulling his own investment, remaining quiet after a whale win, accusing whale of cheating, giving irrational explanations why whale is exception, ... ).

So now the idea is to let investors choose their own maxbet. If executed there will be a high max bet again, and a whale doing the same sooner or later. Will doog believe in his system then? Or will he bail out again? And how, by changing the rules yet again screwing all previous investors? Or by forgetting to assure investors and let a bankrun happen?

  

I was one of the top 10 investors.. though I happened to be lucky and divested before the latest couple of big site losses.
As I'm probably one of the very few larger investors who happened to still make a profit from investing - perhaps my input doesn't count much - but the risk as it stood was too high for me and I pulled my entire investment out.

Now that the max bet has been lowered.. I'm back in - but I only put 10% back in.

For those trying to get out of a hole, I can see why they're upset.. but to me it's a more reasonable investment now.
I guess this could be a double whammy for existing investors if new investors now find it more appealing and so dilute the share of existing ones.

maths. maths. maths. maths. maths. maths. RUN!

Improving profits, is not the point.

they want to decrease the max bet to limit the risk of being ruined by a lucky whale.

maybe if you increase the house edge, this will make investors more able to handle lucky whales?

this.

if you're looking for a fast buck, just gamble

Will

You can't consider it's "ruined when it's ruined".  If the bankroll got down to 5 BTC then the max bet would be 1% of that = 0.05 BTC.  It never goes to 0, but when it drops low enough the site is out of business.  A whale with double the stack as house is almost the same as whale with infinite stack.

What you guys don't quite seem to understand:  A 1% max bet is INSANE for the house.  You just suffered a 25% drawdown.  With a 1% max bet that is going to happen often at these bankroll levels.

Could you walk into any casino in the world and bet 1% of their bankroll on a spin of the roulette wheel?  Not even close.  And smaller real world casinos have still been cleaned out.

If you want a long term business in JD, you need to lower the max or be fully prepared to get wiped.  If you are just looking for a fast buck, well, good luck!