Ehm.... you're wrong. A public key can be fully recovered from a private key. What this means is that Doog could use a hash of the investor's individual passwords to construct a new private key daily and dump the cold wallet into the public key derived from it.

bitaddress.org, for example, allows you to recreate your public key from a private key. Go to the "Wallet Details" tab, paste in the private key and click 'view details'.

The page is a single large javascript program, and works entirely offline. If you don't trust it, you could disconnect from the Internet before pasting in your private key.

Nonetheless, this wouldn't be ideal because it would give a few investors access to the WHOLE cold wallet. What we need is some sort of decentrally stored script which, given the investor's passphrase, will dump the cold wallet to ALL the investors at once.

Doog???

My original post was ignored so I'll bump.

Would it be possible to implement a failsafe for the cold wallet. Something where the top 5-10 investors can put together a passphrase made out of their individual passwords and dump the cold wallet to the safety wallets of ALL the site's investors??

The site DOES run on a 1% edge.  The reason why current profit is at 0.26% is because a whale won 10k by wagering 1 million coins (20% of total wagered) in one day.

He never regambled his winnings and walked away with a house loss. Since then, profits have been tracking the 1% edge very well.

Doog mentioned on the chat that he was performing a hardware upgrade.

One key aspect worth noting is that, up until the advent of virtual currencies, one large edge of inflationary over deflationary policies is the fundamental limit to how small your currency can be functionally made for transfer.

The indefinite divisibility of bitcoin completely bypasses this incentivizing increasing monetary velocity as a result.

@Doog: Another point that I think needs discussing is the layers of security surrounding the cold wallet.
In particular, would it be possible to know how you plan to activate the dump to our emergency withdrawal addresses in the case something "extreme" were to happen to you?

Would it be possible to setup some sort of multi-signature transaction whereby the top 5-10 investors can combine, say, a hash of their 2FA passwords to activate the dump transaction? This way, if the site were suddenly shut down or all communication with Doog or Deb vanish, the top 5-10 investors can attempt to contact each other privately and construct the passphrase to activate the dump transaction remotely.

Obviously the dump transaction would consist in a redistribution of the cold wallet funds to all investors proportionately to their stake in the bankroll.

Like I said, this wouldn't be a measure to protect investors from the stealing of funds by Doog but simply to give investors a Plan B should greater forces interfere with the site.

Overall, like I've mentioned in previous posts, the site functioning should be structured around principles that incentivize long-term, patient, investing so that investors might relax and think of things to do with their time.  

@Tucenaber: I do not agree.

If anything, switching to the new system would STATISTICALLY signify a higher return in the long term. We are currently at 0.25% profit. If another Nakowa walks onto the site, he will statistically lose next time. Eventually in the long term the true 1% house edge should be reached.

If I am right, investors would make a lot more money under the new system as opposed to the old since Doog just takes a cut of wagered and not of profits.

@Sebastian: Of the 5 million BTC wagered on this site, 1 million of them were wagered in one day by Nakowa. That's 20% of all wagered BTC on JD. You understand that the 1% house edge protects investors in the long run via the law of large numbers. Unfortunately for us, Nakowa was an isolated circumstance thus deviating reality from statistical expectations. If more Nakowa's were to play on the site, we could expect to reach the true 1% line in the forseeable future since Just like one managed to win 10k, another stands to lose 11k etc...

It would appear that "many" of the investors that chimed in have shown a certain regard towards the priority that they give to Doog "being on the same boat as them".

Sort of like saying: "We expect a certain standard of security with regards to the site's functioning." As we have been accustomed to expect due to Doog's diligence. A diligence to which we have deposited our trust in exchange for a 1% edged stake in a bitcoin casino.

The taking of commission is not the only example where our expected 0.01% EV is skewed in the short to medium term.

The stability in the fluctuations of the bankroll is also a matter which should seriously be taken under consideration due to its massive decline over both the Nakowa event and the recent months. Whereas we cannot agreeably presume to limit the amount of coins that get invested into the site, we should establish a set of principles to somewhat control the rate of divestment in the short term. The con of this is that there would certainly be limits to the amounts we can withdraw from our accounts all in one go.

The pro on the other hand is that we could sit back, forget about the functioning of the site and learn to at least trust a rigorous, statistically justified edge in a gambling casino. The trollbox might be often animated with spirited scammers, spammers and trolls. The investor sphere of the site however should be taylored for investors for whom the trust in Doog has value. These must be the long term investors and their interests should underline the principles of site governance.

So what is a long term investor exactly? I, personally would define him as one willing to trust Doog and ready to take the mathematically well defined risk of investing in JD over a LONG amount of time. This presumes that the risks are at least quantifiable and, luckily for us, they are. Someone willing not to chicken out after a loss such as the Nakowa event was, should be proportionally missing out on the same percentage of profit as Doog has.

Lets look at the numbers then. Doog has made 1.2k BTC as opposed to the 4.9k BTC (75% less) he could have made had he been charging a steady 0.1% fee. What did the "long term" investor miss out on? For a rough estimate, lets realize that the bankroll size shrank from a maximum of ~70k to the current ~35k that we have today. Some of it was due to the site loss (~10k) but the rest was divested out of fear (~25k). The scared are to be considered weeded out. Those left behind willingly digested a 14% risk for a longterm profit that is proportionately higher than Doog's (~50-60% less than what they expected to make) due to the fact that the bankroll shrank so dramatically in size.

Our investor risk adjusted profit would be more in line with Doog's if the bankroll didn't vary too much over time. In the case of the Nakowa event just described, the investors profited off the risk more than Doog did. However, if the site concedes a large loss on a timescale similar to a large divestment wave, the "long term" investors would catch the short end of the stick.

A "long term" investor must therefore demand a reasonably stabilized bank roll and we should discuss how to enable such a thing. Ultimately, aligning the risk-adjusted profits of both long term investors and Doog should be the proper way to proceed if we are to give Doog's trust objective value at least in defining how the site operates.

As a fun little aside one could ask if Doog is being remunerated properly for his services, particularly when compared to the amount of money he can run off with. Judging from the current site stats, Doog could choose to run off with 35k now or expect to make ~5k over the course of a year, eventually making more than he could steal over a 7 year period.

Is this convenient for Doog? Legally, how long can we realistically expect the site to exist for? If that number is less than Doog's expected turnover on stealing bank, then we should be worried. Under the fee scheme, his turnover would be more like two years, possibly giving us more peace of mind.

Wow! Great plot Peter.
Doog can this be added to the site stats?
We should have better site stats. Things like:

Bet size probability distribution
Bet percentage distribution
A nakowa information tab so that whenever the question "why are we so far below the true 1% line" arises, we can direct people to the relevant information

Once all this information. Is freely available, it would be nice to have full probability projections for the site's profit based on the user's general betting patterns. A plot like the one Peter just posted related to the investor's profit would add a serious touch of extra "legitness" to JD. I'd be willing to write a python code to model all the data myself if no one else wants to do it.

Last but not least, I apologize for my liberal use of the "1% line" term. Generally I'm referring to the post-Nakowa projected profits as opposed to the profits we should have from the beginning.

They have no hologram?

Doog, I thought we already surpassed the pre Nakowa win max site profit. If so just wait for site profit to fall back on the current 1% projected profits line and then switch to charging per bet.

I don't think this scheme deters you necessarily from caring about the investors. If anything it puts you on the spot if site profit ever deviates significantly again from the 1% line. In other words you're gonna lose all credibility if another nakowa event takes place.

Switching to Sebastian's point, keeping the scheme as is could be justified by saying that it deters short term investors. By exposing short term investors to greater downside variance, they should be incentivized to keep their coins invested thus leading to a more stable bankroll.

Charging per bet does make the whole presentation of the site more elegant. You are officially brokeraging for gamblers and taking an honest fee for it. I agree with the monetization of your own personal profit for referrals. Furthermore you could invest in a constant stream of advertising once you have a stable income. It works out better for investors when whales play as they don't have to worry about paying a commission on an unlikely transient house win which will both make them feel like they're making more money and protect them from wild up/down variance in the medium term. In the long term, assuming 1% line is followed, investor profits should be identical to the current commission scheme.

Overall I agree that you should make the final decision. It's your site and no matter what you decide, people will undoubtedly keep on playing and investing. I thank you again for the great service you provide and look forward to contribute to discussions of this kind.

Sebastian: I meant it just to give investors a feel of how their profit evolves in real time under the new commission scheme. Just ease the transition.

Doog: Should you ask the investors to vote on this?

Yes Doog... you have picked up on my point exactly. I think your idea of taking 0.1% of wagered amount from the investors as each bet is placed is a GREAT idea. Is there any way you can setup a trial run with a counter on the website so we can track investor profits the way they are as opposed to this newly proposed scheme?

I think we're getting somewhere! Thank you very much for taking the time to read my posts.

Electerium:

I already suggested raking bets by charging either 0.01-0.1% of the winnings or a flat fee of 10uBTC for all winnings above 1mBTC. What this means is that if the gambler loses, the investors pay the fee. This effectively modifies the house edge by 0.1-0.01% in case of the variable fee and and by MUCH less than that in case of the flat fee.
Dust bets could be rendered immune to the fee raking.

Of course Doog would stop taking commision on the winnings.

I've explained the importance of this in terms of investor risk. Taking commissions as it is being done now exposes the investors to unnecessary downside variance in the short term. This asymmetric variance exposure is meaningless as long as the investor plans to keep his coins invested over a long timescale.

Currently, the 1% house edge has been earning the site ~2000 BTC per month. If today a whale loses 2000 coins in a betting session, that constitutes an unlikely event that you, as an investor, expect to find compensated over the course of time (i.e. another whale wins around 2000 BTC in another session).

If you get taxed after such an unlikely event, your investment can only be profitable if you keep your coins invested for enough time such that the 1% profit edge can make up that 10% tax you paid as a result of an unlikely profit.
Under this example, an investor would have to either:

a) take out their investment and wait for site profit to fall back towards its expected 1% trend
OR
b) make sure they keep their coins invested at least another 3-4 days to make sure that the house can make back those 200 BTC that he lost in tax

An option i suggested which would avoid the raking of fees and at the same time maintain the commission scheme is for Doog to charge commission once every two weeks or once a month by taking 10% of house profits as calculated by a moving average (15 day average). This would allow Doog to take commissions from a truer investor profit. To disincentivize divesting he could keep on charging 10% of overall profits for any investor who chooses to divest before the fee has been applied. Or, better yet, give part of this "divestment tax" to the investors that keep their investment intact for the long term.

This would ensure that investors do not accidentally get taxed over a statistically unlikely upswing while at the same time incentivizing a more uniform bankroll. At the moment bankroll oscillates by 10% due to people pulling out and investing back in trying to play the upswings and downswings in the site profit. This puts the constant investors at risk of exposure to downswings due to the site bankroll dropping after an unlikely win.

Furthermore, the 10% bankroll divest that generally happens after an unlikely upswing burdens the patient investor even more by making his cut of the bankroll larger during an eventual downswing. It must also be said that this often works to the advantage of the patient investor also. Ultimately though, due to Doog's rough commission cut and the poor incentive for a stable bankroll, the downside variance (and the overall variance also) for stable investors is exaggerated in the short to medium term.

It would be interesting to know how often people invest/divest. These problems are very important for the site to discuss because they should push Doog to publish site statistics more often.

I have attempted to request detailed data for the betting statistics whose plots he posted here a couple days ago but haven't received anything due to him being busy. I have asked him in the past about profit and wagered data and he was kind enough to both supply it for me and make the raw data available directly on JD.

@DOOG: the raw.dat file should be further expanded to include bankroll over time and histogram data of bet sizes. This shouldn't be too much information and would allow for a more detailed analysis of the underlying stochastics driving the site's and, more importantly, the investor profits.

I am looking to buy accounts that currently have negative investment profit on Just-Dice. If you have one please PM me and I may have a deal for you. Depending on how large the deficit is, I will offer more coins for it.

Please do NOT contact me if you investment deficit isn't larger than 0.1 btc.

Sale of the account can proceed through escrow if you choose. I personally prefer http://www.bit2factor.org/ so that no middle men are involved.

PM me for precise details if you're interested.

I am looking to invest more bitcoins on the site and would like to avoid the house fee.

Sebastian, I don't get your example. Make the full EV calculation.

Your too fixated on the fact that doog takes his cut when the profit is positive. The profit can become positive on a super unlikely upswing. After such an unlikely upswing, an equivalent downswing is just as likely. Which would lead invstors to lose more than they would have lost if they maintained full profit.

The value of a feeless account is worth 10% of the maximum feeless amount.
In the case of 1BTC it would be 0.1BTC. If you were to buy a feeless account at less than that 10% then you would technically profit as compared to a brand new JD account.

Oh... and, for the record. I am an investor. I have been since November and currently my profit is in the green.

No Sebastian, he takes his profit upon divesting OR at the end of the week. Which ever comes first!

From the Invest section:

"Commission is charged when profits are divested, or at midnight (UTC) on Sunday each week, whichever happens sooner."

Now that you mention it though...

Doog, just take your cut when people Divest!!!!

Doog, the fact that you take your cut only when we're in positive profit doesn't change anything. Like I explained in my previous post, you can always compound all the betting on the site in such a way that bets are a Win/Lose/Win/Lose sequence where when we win we are always in positive profit and the same exact argument applies. Your cut reduces the investors upside potential while leaving them vulnerable to the full extent of the downside swings.

The probability distribution of possible investor profits over time is a spreading bell curve whose center increases following the 1% line. At time t=0 the probability distribution is a very tight peaked curve (a delta function) around the starting profit. As time proceeds the center of this curve moves to higher and higher profits following the 1% line, representing the house edge, but also spreads out due to the variance of the betting happening on the site. As time proceeds, the chances of a swing to higher/lower than expected profit increases.
Now, your taking the cut simply when we are in positive profit limits the extent of the upside swings to the invstor profits while keeping the downside swings intact. Over time the downside swings become statistically more and more likely for investors. Ideally, if anything, you should be taking a cut of the running average of the profit so as to be sure that you're taxing the true wins of the house edge.

Let me show an example to make this clear. Suppose that house profit is at its historical maximum (which you have already taxed) and a player comes in to perform 2 50% 100 BTC bets spread out one week apart from each other.
The outcomes are as follows:

1) Player wins both of them with probability (p=0.25) thus resulting investor profit loss of 2*(-98)=-196
2)    "     loses                      "                               "                                 profit win of 200-20=180
3) Player wins the first and loses the second (p=0.25) with resulting investor profit win of 2-0.2= 1.8
4) Player loses the first and wins the second (p=0.25)           "           "         profit loss (100-10)-98 = -8

The EV of these two gambles is then:

EV=0.25*(-196+180+1.8-8)=-5.5BTC

The investors can expect to lose 5.5 BTC!!!!

Please Doog, I'm not here to bust your balls, lets think really hard about this. Limiting the investor upside is very dangerous. Especially when whales come around to play. We just witnessed a 1400 BTC downside swing to the profits this week. Assuming that Lika and Ben came to gamble the same amount of BTC next week, we the investors can expect an overall loss to our profits because you took your cut last week when we were at a max. As time goes on our downside risk becomes progressively larger and larger.

Please consider fees or, at the very, least taking a cut only out of the moving average of the profit (taken, say, over a month) as opposed to positive winnings.

I look forward to hearing back from you.