Bitcoin Forum

On the investment page there are a few stats:

Site Bankroll: 389,800,231.98 bits
Wagered against bankroll: 14,589,464,076.97 bits
Investor Profit: 87,654,258.75 bits
Your stake: < 0.01 %
Your amount: 100.86 bits

I am confused on what the formulas are for the first three? Sometimes I see the "site bankroll" fluctuate. Is that just a result of other investors investing or divesting and a combination of gamblers winning and losing? Also, how much of that belongs to moneypot and how much belongs to investors? Secondly, I assume "wagered against bankroll" is the total amount of money gambled, so it will always increase? Finally, and this is where I am the most confused, what is the formula for "investor profit"? Also, is it proportional to "your amount", and does it change when invesstors invest or divest?

Thanks in advance to all of you taking the time to respond.

When a gambler loses, your stake stays the same but the bankroll goes up (aka you make money). When a gambler wins, your stake stays the same but the bankroll goes down (aka you lose money). When someone invests,  the bankroll goes up but your stake decreases (aka you don't win or lose). When someone divest, the bankroll goes down, but your stake increases (aka you don't win or lose).

Good question, something for them to disclose

yup

Investor profit is just how much gamblers have lost in total.

I'm guessing that's minus what the gamblers have won? Also by investors is it moneypot and investors or just investors?

So I guess my question is which one is the best indicator of how much I would make if I hypothetically were to invest more money withough actually investing

Something doesn't quote add up:



Today:
Site Bankroll: 389,934,103.16 bits
Wagered against bankroll: 14,772,889,421.86 bits
Investor Profit: 99,064,021.05 bits
Your stake: < 0.01 %
Your amount: 103.90 bits

So collectively the gamblers lost 99,064,021.05-87,654,258.75=11,409,762.30 bits, which is a 13.0% increase. The site bankroll barely budged, making only a 0.03% increase, meaning the investors collectively divested 11,275,891.12 bits. Ergo, gamblers lost a ton of money, the other investors divested a lot of money, and I only get a 3% increase? Note: I did not divest any of the 100.86 bits that were already in there. So either moneypot is faulty or the formulas are more complicated than that (unless I'm wrong)...

It's probably the last one  ;D


Let's illustrative purposes lets the bankroll was 100 BTC, and you own 1% of it (1 BTC), and the investor profit has been 0.1 BTC. Now let's say a gambler comes, and loses 1 BTC.

That means the investor profit has gone up from 0.1 BTC -> 1 BTC  (1000%)!  How much would you expect to make?

Well you don't make 1000% of your money, that's for sure, because if so you would've made 10 BTC (that's more than the gambler lost!). But rather, your profit would be { your stake} * { increase in bankroll }  or 0.01 BTC  (You own 1% of the bankroll, so take 1% of the loses and gains).



So back to the moneypot example, the change in investor profit is actually meaningless. What you care about is a gambler lost ~11.4 BTC on a ~390 BTC bankroll  which means the bankroll should have increased by ~2.92%, and thus your stake should be worth the same amount more. Which matches your observation.


BTW a very probable reason the amount divested almost exactly matches the amount lost, is because the person who divested the money is the same person who lost it ;D

(Disclaimer: I'm not an investor and haven't been following MP, I'm just going purely based on the info in your post)

So in other words, the poor guy took the money out of the bankroll just to put it right back in.

Sorry I'm sounding like such a newb, but what is commission?

But didn't it say they do 50%? Also, so the higher the commission the less the investors get?

Wait, so let's say that the site bankroll is 1000, and I own 10%. Then when someone loses 100, how much do I get? And what if they win 100?

Ugh, is it 0.2% (what the FAQ and your post says) or 20%?

--

I'm going to assume it's 20%, because 0.2% is negligible and doesn't make much sense.  Also the total amount of commissions should include what is paid to apps, no?

So someone bets 1 BTC @ 1 house edge. The apps get 0.005 BTC, MP gets 0.002 .. and investors have all the risk?

Also just to make sure it's clear for investors, let's assume the the bankroll is 100 BTC and someone wants to bet on a binary 1% house edge bet. What exactly is the max profit of that bet going to be? Because if investors are going to take 100% of the risk for 30% of the EV, it's pretty damn important they are risking under a kelly.

People never win in the long run, unless the site is bad.
If the share is fair, you should get 10% of whatever people lose in total.

Something for Dogedigital to answer, but as I understand it, with 10% of the bankroll you will get 3% (amortized) of what people lose in total (the rest of apps and MP)

I doubt someone that has build this kind of service/opportunity would give the full 10%.
No gain for them otherwise.

Hopefully somebody from MP can shine some light in this question...

The documentation on MP needs to be fixed too then. It's not a particularly small mistake, considering it's the difference between investors paying amortized 50.02% commissions vs 70%. Also, would you be able to answer my earlier question about the max bet, which is probably the most important. ;D

What about Plinko bets? Max win is set to fixed  1% of bankroll?
This can not happen again https://www.moneypot.com/bets/18530298 ?

I hate to be blunt, but that's just both disingenuous and dishonest.

Yes, in the absolute most extreme case where someone only does a single giant bet, the commissions might be 7%. In reality, even when people lose money they turn over their money several times.

So what's typical? Well, how about some maths. A gambler who's got 100 BTC to lose, will on average he'd be able to wager 10000 BTC (on the standard 1% house edge site) before running out of money. Which means investors are going to pay: 10000 * (0.5 + 0.2) in commissions, or 70 BTC. The remainder goes into the bankroll (30 BTC).

Which is exactly what I said. Investors are paying an amortized 70% commission.



*sigh*. As I suspected. You're off by over a factor of three, which means you're putting investors into negative expected bankroll growth territory.  I would've thought understanding half a page of basic casino maths would be a prerequisite to running a casino.


Although to be fair, you're not the first investment site owner to struggle with it. It's pretty sad, but I think Dooglus is the only guy running a site that really gets it.

I stated what is an objective fact, your amortized commissions are 70%. I didn't mean that as an attack, or that it's bad (in itself, it isn't). I meant that as a fact.  Which it is. To which you reply:


Which is both insulting, and a plain lie.  Even how you derived the 7% commission is using the same definition of commission I am, so you can't even pretend it's a terminology mistake.


That's not my intention, I just wanted straight answers.


I think when you're holding other peoples money, there's a certain duty of care which you're not showing. At least in my books, when you hold other peoples money, tell them you're risking it according to a certain schedule, and don't -- that's negligent.

I honestly don't even think 90% commissions is unreasonable, and there's many investors that would line up for that if you can give them enough turn-over and risk management.


Of course, that's why investors invest. The more bets the better.



Well obviously. That's pretty hard to mess up (although I can name two casino that did).

Huh? I have never said, or implied such a thing. If anyone told you I said that, they are lying. And if your investments were -EV, it's probably more likely that I'd start gambling on your site than saying anything.


I'm saying that if your previous answer to me is correct, you're risking >3x as much for investors as you should. When I originally wrote MP, if the bankroll was 100 BTC the max-profit on a 1% game would've been 0.5 BTC. Which is the fully kelly. You added an extra 20% commission, and are saying that max-profit is 1 BTC. When in actuality you should've decreased the max-profit to keep the bets kelly-compliant. See my earlier point about negligence.

This is a very reasonable business model, and I don't think there's anything wrong with it. The important part is just being honest and clear about it, so everyone knows what they're getting into. Earlier in the thread you wrote the MP commission was 0.2%, which fine, was a mistake. Then you literally said the commissions are "no where near 70%" using a contrived example of how it's 7%. Now you're being clear, and that's great.

Anyway, I'm glad we're in agreeance upon this.

70% commission of profits is better for investors than 70% of the house edge  ;)  (But worse for MP or Apps, who don't want to eat that variance)




You have still side-stepped the most relevant question for investors, what risk level is investors money being risked at? From my reading of response implies a ~3.33x (?) kelly, but I suspect that is a mistake. Could you confirm what that is really the case? I'll ask the earlier question again for clarity: if the bankroll was 100 BTC, and someone was betting on 1%-house-edge binary bet ... what would the max-profit be?

Please read the kelly (https://en.wikipedia.org/wiki/Kelly_criterion), and learn the difference between expected growth and expected value.  You can (and probably are) +EV but -bankroll growth. This should be stuff you did 5 months ago.

This is the second time you've called me out on my "mistakes" which were correct. I don't mean to be so hostile, but seriously..



lol, the "one change" can break everything if done incorrectly. You can't throw in a random constant in on one line, and expect the previous safe-guards to not break very badly.



No hard feelings either. Just to be clear, I think the extra commission is entirely reasonable and important for everyone (apps, gamblers, investors) that there's a sustainable business model in place (which you seem to have). It's better for investors to have 30% of a large-number, than 10% of a small number. I get it.

You just need to communicate it clearly and make sure you're not over-exposing investors  (or at least, tell them they're no longer at a 1x kelly and at a Y).  

That is entirely reasonable, and if its clearly communicated removes my reservations.

FWIW: If you do that, and a gambler does max-bet that's going to be -expected bankroll growth for investors (like i said, earlier). I personally wouldn't invest, but if investors are aware it's entirely reasonable and their choice (and risky +EV for them)

Just a few questions from the perspective of an interested current investor:

1) Can Ryan explain the difference between EV (which I take to be expected value) and expected bankroll growth?

2) Does MoneyPot charge commissions if the gambler wins?

3)

Where is the 7% coming from?

4) Can you make a definitions page clearly outlining what each piece of jargon means? In fact, that would be very beneficial even here, as your use of the word commission changes from time to time here as well...

5) The kelly is not actually not that confusing. I think most investors would understand if you write that "based on a mathematical formula known as the kelly criterion, the most that an investor could lose on a bet with 1% house edge is 1%, the most that an investor could lose on a bet with 2% house edge is 2%, ect"

EV = Expected Value. It's the easiest to understand, it's basically the average you'd make over a VERY LARGE amount of bets. e.g. If we flip a coin, with fair odds the EV is going to be 0, even though in reality you'd either have made money, or lost money.

But lets say someone offers you good odds, 2.01x if you win, and 0x if you lose. That's a great deal! You should take it, it's +EV. But the question is, how much should you bet?  Well, you don't want to bet too little, because you're missing a great opportunity. But you also don't want to bet too much, because you risk losing too much money and will be very slow to recover (if you recover at all). The paper and surrounding stuff goes into great depths to explain why you should optimize for bankroll growth, not EV.

So if you plot it, you'll see it probably looks like this:

https://dl.dropboxusercontent.com/spa/rmczv2tqcr196vz/gk2naram.png


So risking a 1x kelly is mathematically ideal, and what every casino should do. But reality is not so clean:

a) You can't force a gambler to do it  (almost most of the time, gamblers only want to bet a small amount and not what you tell them)
b) It might be worth taking a few 1-2x kelly bets, because otherwise you might lose the gambler to a competitor
c) Very few people actually do large bets, but everyone likes being able to do large bets.
d) Lots of investors are gamblers, so maybe they want to risk a wild ride
e) Variance sky-rockets with bigger bets. As I remember, Dooglus sanely dropped down from a fully kelly on JD (which had thousands of bitcoins in its bankroll) because of variance concerns
etc.

So when I said MP is in -expected growth territory, it means its risking even more than that 2x kelly so with an theoretical-angry-whale-attack it should expect it's bankroll to zero!  Here's a toy simulator i wrote earlier:



Sample output of running with a 1x kelly:


Sample output of running with a 2x kelly:


Sample output of running with a 3x kelly:


---

So when I wrote MP, it was running at a 1x kelly for obvious reasons. Now it's apparently at a >3x. Which is fine, but I doubt investors realize what they're getting into. Probably a more honest name would be "+EV gambling", even if the site makes thousands of bitcoins (Which is very well might) it's still not (and can never be) safe with that risk level :P

Yeah, it's basically a fee you play to accept the bet. You pay the fee regardless if the gambler wins or loses.



No where, it's wrong. Even according to Dogedigitals maths it would be  (50% + 20%) of the house edge (1%) ... which .7% not 7%.




Agree, but any sane investor should trivially be able to figure it out if it's documented with examples.

So by investing in moneypot at a max bet of 3x, I run the risk of...

Also, why is it 3x? Is that just rounded from 3.333333333? Or is it 3?

So what is the new maximum bet going to be?

This makes sense to me, but that's because I've been researching the kelly for a few days now. In my opinion, the average investor would not understand that although they initially seem to be making money, when the point to stop would be. I doubt the average investor would be able to "pull their investment" at the right time. And, if the bankroll reaches zero, I can promise you that regardless of what explaining you do, people will call you a scam (also MP would lose its money).

Also, could you work out a new commissions system? Maybe a hard percentage on all winnings?

Thirdly, would you mind answering the question I posted several days ago, about how much of the bankroll MP controls?

Lastly, have you thought about a referral system for investors? Or will that just decrease the cut the each of us gets?

Fair enough, so what about the referral system?

when did moneypot have a referral system? it is kind of sad that i dont know about this when i have been using moneypot for a long time.

I meant they should make one

Hey, this one's for doge: is there any way to find out, other than sheer luck, which person is causing the investor profit to rise at such a fast rate?

well, the moneypot is to provide the bankroll for the diff app. itself need not any advertisement so there is no need to have a referral system. however, you can consider finding some of the app that offer referral system to tap on it.

As i have also invested in moneypot wallet before i know few things regarding how those calculation works. Bankroll chabge with new investor and divest from old investor. You will only get profit or loss from the point of your invest onwards. Investors profit also get fluctuate with every win and loss of players in whole moneypot gambling platform. I know one ocassion where investor  profit goes red suddenly from green as one of the player hit jackpot in plinko game. So only invest which you can afford to loss.

Also for dogedigital: what about keeping the max win (for gamblers) or loss (for investors) based off of the investor profit? That way there will always be positive cumulative profit?

Thanks for taking that into consideration. Also, why is there a 0.01 bit fee for investors? I know it's insignificant but my OCD is wondering

When I invest, the amount in the investment is less than the amount in the original wallet.

Nah, when I move it from my moneypot raw account to investing

It's alright for now. Follow up question: so you said that investors are at risk of around 3x kelly. Right now the bankroll is 424,225,832.74, and assuming 1% is the house edge by the crazy gambler fellow who's losses helped boost my investment by around 10%, then even if they won, then the investors collectively would only lose around 3% of what we currently have, right?

Does the investor profit tab under stats account for the 70% cut taken? Or is it just the net amount that the gamblers have lost?

i also remember this. The win is super huge and it makes a super big dent in the investment stat. It also takes away 1/4 to 1/2 of the profits. And i still can remember we have a lengthy discussion about this bet.

That is very true because any money investing on any casinos are high risky but there is a chance that one can get more profits, if they invest in it and same time they also can lose it fast. So if you want to be safer side then put your money in few good sites instead keeping all your invests in only one site. Investing in good gambling sites is better then gambling.

I really enjoined this discussion as a spectator but now I thought to jump in because OP is absolutely right with 5) that kelly criterion is actually not that confusing.

and thx to RHavar for trying to straighten out some very important points

Thanks! If doge is still reading this, could he say whether the investors profit number includes the 70% cut?