Bitcoin Forum

Alright, it's time for me to be a nitpick here. All the gambling sites seem to have the concept of ROI all wrong. ROI is a method of measuring profits in relation to capital invested. The appropriate way of calculating ROI is: Net profit / Investment.

This means if you're for example playing a Double ponzi game, and invest 1 BTC, you will get 2 BTC back. Meaning:

2 / 1 = 2, meaning 200% ROI.

100% ROI would mean just getting you initial 1 BTC back, and 50% ROI would mean you lost half of your investment. If ROI was measured the way people here use it, it would not be able to measure a loss.

So... yeah. Just me being a bit of a nitpick.

According to Invesopedia (http://www.investopedia.com/terms/r/returnoninvestment.asp) and Wikipedia (http://en.wikipedia.org/wiki/Rate_of_return#Uses), the calculation is actually http://i.investopedia.com/inv/dictionary/terms/ROIb.gif.

So Bitcoinduit et al. have it right. :D

No, that's Rate of Return, not Return on Investment. Rate of Return measures a CASH FLOW, while Return on Investment measures the total return.

Rate of return would be used on for example an investment where you invest 1 BTC, and then get 0.2 BTC every month. That would be a rate of return of 20%.

http://en.wikipedia.org/wiki/Return_on_investment

EDIT: Actually, on closer inspection, it seems that there are simply multiple ways of calculating ROI, and this is just the way I've been taught. I think mine makes more sense, though, since it tells you how much of your investment you get back, and if that's above 100%, then you've made a profit. If it's below 100%, it's a loss. But eh, seems like both are correct.

The linked Invesopedia article is on ROI, and the first sentence of the Wikipedia article mentions that ROR is also known as ROI. The page you linked to says: "For a single-period review just divide the return (net profit) by the resources that were committed (investment):
Return on investment (%) = Net profit ($) / Investment ($)"

Say you invest 1 BTC into a pyramid scheme on Bitcoinduit. The listed ROI is 5%, so you can expect to get back 1.05 BTC. If you put that into the equation, the ROI = 0.05 = 5%.

They're not exactly the same thing. Return on Investment is for single periods, as is clear from the Wikipedias usage of the two different terms.

I get 105% ROI when calculating net profit / investment, but it all depends on if you count the initial investment as a cost. Usually you only count overheads and interest when calculating net profit.

But as I wrote in my edited post above, it seems both are correct. Nevermind.

Most casinos actually tell you RTP (return to player), which is what you're talking about. You commonly hear that a certain slot machine has a 92% RTP. A 100% RTP means the player breaks even over time. A 100% ROI means you double your investment.

Another way of putting it is that RTP=ROI+1

And the number one reason casinos talk in terms of RTP?  ...drumroll please... because all casinos have a negative expected ROI to the player.

Not according to http://www.fastrak-consulting.co.uk/tactix/features/tngroi/tngroi05.htm (http://www.fastrak-consulting.co.uk/tactix/features/tngroi/tngroi05.htm) and several other sites. There are multiple ways to calculate ROI.