Moneypot just took a huge loss?

[Wendigo]

That's an amazing win such a lucky guy. I haven't played Plinko in my life but what is the probability to hit that 121x? And did Moneypot pay him the whole amount because there is another thread where he claims he is still waiting for his withdrawal.

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[Shogen]

That's an amazing win such a lucky guy. I haven't played Plinko in my life but what is the probability to hit that 121x? And did Moneypot pay him the whole amount because there is another thread where he claims he is still waiting for his withdrawal.

The chance is 1 in 32768 or 0.00305%. As Rmcdermott927 said in https://bitcointalk.org/index.php?topic=1140898.msg13715691#msg13715691 yesterday, the moneypot staff were looking into it to make sure the bets placed were legitimate, which I think is a common practice.

[dooglus]

(AFAIK) dooglus, nor RHaver are the ones who own MoneyPot

Your grammar is weird, but to be clear I do not and never have owned any part of moneypot.

I just want to say that... I'm impressed. Even when two of the more mathematically-inclined people on the forums didn't fully understand the repercussions of the Kelly algorithm, you do. From now on, I will be sure to bring any math-based questions I have directly to you, since you're obviously now the most knowledgeable person on the forums.

Don't feed the troll.

It's clear nobody understood the risks, not even the guy who coded moneypot...

@Dooglus an interesting note:

Taking the payout line that was used:

[ 121, 47, 13, 5, 3, 1.4, 1, 0.5, 0.3, 0.5, 1, 1.4, 3, 5, 13, 47, 121 ]

We naively assumed the house had a 1% edge, but actually it's an illusion.

We can actually normalize this payout line to:

Code:

[ 172.42857142857144,  66.71428571428572, 18.142857142857142,  6.714285714285714,  3.857142857142857,  1.5714285714285712,  1,  0.2857142857142857,  0,  0.2857142857142857, 1,  1.5714285714285712,  3.857142857142857,66.714285714285714,  18.142857142857142,  66.71428571428572,  172.42857142857144 ]

That is interesting. It took me a while to understand your point, so I guess others may not understand it too.

You noticed than none of the payouts in the array are zero, so if you bet 1 BTC you can't lose the whole 1 BTC no matter which payout you get. And so in a sense you aren't really risking 1 BTC. The losest payout is 0.3x, so the worst that can happen is that you lose 0.7 BTC. So you recalculated the multipliers such that you get the same result from betting 0.7 BTC with your new payouts as you would have got betting 1 BTC with the original payouts. Then there's a zero in the array, and you're truly risking the whole amount you bet.

Calculate the new multipliers as (oldMult - minOldMult) / (1 - minOldMult)
So the 121 jackpot becomes (121 - 0.3) / (1 - 0.3) = 172.4285

So when betting 0.7 BTC, it's an identical bet! The EV stays the same (-0.01 BTC or what ever), but now we calculate the house edge, we'll figure it out as 0.01 / 0.7 ... or 40% higher.

Right. The house edge of the original row of payouts is 0.9195%, and after 'normalizing' it, it goes up to 1.3136%. You're losing the same, but betting smaller, and so are losing a bigger percentage of your stake.

The "super payout" line you had, just exacerbates the problem. The most you could lose was ~4% of your bet, so with a 1% house edge, the *real* house edge, after you normalize the payouts would be 25%!

So while crazy, it's not as crazy as you'd first think!

Yes. Before normalization the house edge of this line:
    [1.0656, 1.0585, 1.0368, 1.0155, 0.9616, 0.9841, 0.9895, 0.9918, 0.9962,
     0.9918, 0.9895, 0.9841, 0.9616, 1.0155, 1.0368, 1.0585, 1.0656];
is 0.9997%.

After normalization:
    [2.7083, 2.5234, 1.9583, 1.4036, 0.0, 0.5859, 0.7265, 0.7864, 0.9010,
     0.7864, 0.7265, 0.5859, 0.0, 1.4036, 1.9583, 2.5234, 2.7083]
it is 26.0342%.

'Kelly' tells us the same before and after normalization: risk 99.97% of the bankroll. This doesn't seem overly unreasonable. Who is going to play a 26% house edge game at large enough stakes to stand a chance of winning the whole bankroll?

To gain an intuitive understanding of why Kelly tells us to risk more than 26% of our bankroll on a 26% house edge bet, it helps to see the plinko bet as 17 separate bets. For the low payout bets where the ball lands towards the middle we would want to set quite a high max bet, since the payout is a small multiplier of the stake, but for the high payout bets on the outside edges we would want to set a low max bet. We can only set a single max bet, and so we need to find some way of balancing the competing forces. It turns out we maximise the log of the bankroll by giving more weight to the max bet implied by the more common (inner, low payout) outcomes.

As the wikipedia page says:

Even Kelly supporters usually argue for fractional Kelly (betting a fixed fraction of the amount recommended by Kelly) for a variety of practical reasons, such as wishing to reduce volatility, [...]

One take away for plinko players would be that the house edge is rather misleading. You actually pay the house edge on the entire bet, rather than just what you're risking.

And so you should never play a plinko game that doesn't have a 0x somewhere on it?

[TwitchySeal]

Regardless of if this bet was kelly compliant, regardless of the question of if it was appropriate to allow this bet, and regardless of what the setters of MoneyPot were under RHaver, if it is your opinion that this bet would allow excessive risks, then it is your responsibility as the owner/operator of MoneyPot to disallow such bets from being placed. As the owner/operator of MoneyPot, it is your responsibility to ensure that your bankroll investors are not exposed to excessive risk.

No it's not.

As an investor - I would prefer the Bankroll not to be based on any humans personal risk tolerance level.  (if my assumptions are accurate, then especially ranlos)

I would prefer my investment to be subjected to the extreme risk they said it would be.  I'm fully aware the bankroll could get wiped out and the upside that comes with it.  That's one of the biggest reasons I find it appealing.

~32k bets placed every day, which puts an excessive risk on the bankroll, as if bets are large enough, then the bankroll could potentially be wiped out multiple times per day

You've got it backwards.  Volume reduces variance.

[MaritiJames3]

That's an amazing win such a lucky guy. I haven't played Plinko in my life but what is the probability to hit that 121x? And did Moneypot pay him the whole amount because there is another thread where he claims he is still waiting for his withdrawal.

At gambling you must have just really lucky. You can not just go win viz. You really need luck and at the right time.
You also need to invest much else win you anything because.

[Quickseller]

Regardless of if this bet was kelly compliant, regardless of the question of if it was appropriate to allow this bet, and regardless of what the setters of MoneyPot were under RHaver, if it is your opinion that this bet would allow excessive risks, then it is your responsibility as the owner/operator of MoneyPot to disallow such bets from being placed. As the owner/operator of MoneyPot, it is your responsibility to ensure that your bankroll investors are not exposed to excessive risk.

No it's not.

As an investor - I would prefer the Bankroll not to be based on any humans personal risk tolerance level.  (if my assumptions are accurate, then especially ranlos)

I would prefer my investment to be subjected to the extreme risk they said it would be.  I'm fully aware the bankroll could get wiped out and the upside that comes with it.  That's one of the biggest reasons I find it appealing.

I am not sure that the risk-reward ratio is appropriate in this case.

My point more is that if the person who is offering an investment personally thinks that such investment carries excessive risks then he should either not offer such investment or should disclose his opinion of such.

~32k bets placed every day, which puts an excessive risk on the bankroll, as if bets are large enough, then the bankroll could potentially be wiped out multiple times per day

You've got it backwards.  Volume reduces variance.

No. How it is/was setup is that if you make the maximum bet size, then once out of roughly every 30k bets the bankroll will lose ~99% of it's value. So while gamblers are making the other ~29,999 bets, the bankroll will be steadily increasing, as will the maximum bet size. On the 30k^th roll, the bankroll would lose ~99% of it's value and would then be significantly less attractive to gamble against which would make it less likely that it would ever recover.

[EngiNerd]

Perhaps this is a silly question, but I'm curious why are we just now having this discussion? MoneyPot has been up and running for years, and I'm assuming its usage/implementation of the kelly criterion has remained the same over that time. It's just strange to me that previously there had not been any bets that drew this kind of attention to the % of bankroll kelly would allow to be risked.

Is it because of the additional nuances introduced by multi-results with the Plinko play-style? Or just simply due to the fact that in certain scenarios it's not as intuitive as previously thought?

[Chemistry1988]

Perhaps this is a silly question, but I'm curious why are we just now having this discussion? MoneyPot has been up and running for years, and I'm assuming its usage/implementation of the kelly criterion has remained the same over that time. It's just strange to me that previously there had not been any bets that drew this kind of attention to the % of bankroll kelly would allow to be risked.

Moneypot (not to be confused with the game Bustabit which was originally called Moneypot) was launched last April, so it has been running for less than a year AFAIK. Yup the implementation of bet limit (just follow what Kelly criterion suggests) has not been changed since the beginning, but in the past no gambler was dare and lucky enough to make such a big bet on plinko and to win such a big amount. It seems no one even knows that the max bet limit on plinko is actually that high in the past.

[ranlo]

Perhaps this is a silly question, but I'm curious why are we just now having this discussion? MoneyPot has been up and running for years, and I'm assuming its usage/implementation of the kelly criterion has remained the same over that time. It's just strange to me that previously there had not been any bets that drew this kind of attention to the % of bankroll kelly would allow to be risked.

Moneypot (not to be confused with the game Bustabit which was originally called Moneypot) was launched last April, so it has been running for less than a year AFAIK. Yup the implementation of bet limit (just follow what Kelly criterion suggests) has not been changed since the beginning, but in the past no gambler was dare and lucky enough to make such a big bet on plinko and to win such a big amount. It seems no one even knows that the max bet limit on plinko is actually that high in the past.

Yep, the bet is unprecedented. It was a risk of almost half a bitcoin on a very, very long shot. But it worked for him so all the more power to him, .

An official announcement will be posted soon, but the verdict is that he's seriously lucky and it was real (BTW, he has been paid already). A lot of time was spent verifying everything and there's no sign of foul play. His bet was recreated in an even more risky fashion (i.e., apparently he didn't do a max. bet) and worked as expected.

@Dooglus and Ryan, I want to thank you both for your time here as well. Your math skills are way beyond most peoples', and far beyond mine (as you can see by my misunderstandings within this thread). It was a very interesting event, to say the least!

And this situation will absolutely be bringing changes to the risk algorithm soon, .

[dooglus]

You've got it backwards.  Volume reduces variance.

No.

TS is correct. It's hard to argue against you when you only say "No" and fail to back it up with any kind of argument about why increased volume wouldn't lead to decreased variance.

How it is/was setup is that if you make the maximum bet size, then once out of roughly every 30k bets the bankroll will lose ~99% of it's value. So while gamblers are making the other ~29,999 bets, the bankroll will be steadily increasing, as will the maximum bet size. On the 30k^th roll, the bankroll would lose ~99% of it's value and would then be significantly less attractive to gamble against which would make it less likely that it would ever recover.

You seem to be misunderstanding. During the ~29,999 losing bets the bankroll grows by a factor of more than 100, so when the lucky bet wins 99% of it the bankroll is still bigger than at the start.

The current setting optimises the rate of growth of the logarithm of the bankroll, and so is set 'correctly', especially given the terms set out in the FAQ about allowing full-kelly bets.

I expect the people running the site will overreact to this lucky win and reduce the maximum bet. In doing so they will be reducing their expected profit, and also their variance. I did the same at Just-Dice - it's hard not to overreact in the face of suffering a big loss like this.

[ndnh]

So a bet that should have had a 30%+ house edge (which is certain to make most gambler's think twice) goes through at 0.92% HE? Isn't that considered negligence? Over months of running no one checked if max bet is in force for plinko?

The restriction is on profit, not wagered. You could wager >1000 BTC if you wanted, as long as you weren't trying to win too much

I'd just take the highest multiplier as the trying to win amount. So the max-bet would be say on a 100BTC bankroll, and a 100x max multiplier on 1x kelly would be 0.01BTC.
Edit: On a red (usually) line the player would be trying to hit the highest multiplier which should the trying-to-win amount,

Looks like it's above others', too, with Bitvest's hefty loss today (9.2 BTC loss on a 0.1 BTC bet, with a 160 BTC bankroll). Wondering what their mass loss per roll is.

Bitvest has only allowed the max bet that it states as limit against each line. The bet in question was around 0.008BTC that fell into a x1111 payout. The investor cannot claim not to know the risks.

[RHavar]

So a bet that should have had a 30%+ house edge (which is certain to make most gambler's think twice) goes through at 0.92% HE? Isn't that considered negligence? Over months of running no one checked if max bet is in force for plinko?

I think you may have missed the part of the thread, where it was demonstrated how and why it should have gone through. There was no mistake

I'd just take the highest multiplier as the trying to win amount. So the max-bet would be say on a 100BTC bankroll, and a 100x max multiplier on 1x kelly would be 0.01BTC.

That's not a 1x kelly, though. What MP uses, is a 1x kelly.

[ndnh]

I'd just take the highest multiplier as the trying to win amount. So the max-bet would be say on a 100BTC bankroll, and a 100x max multiplier on 1x kelly would be 0.01BTC.

That's not a 1x kelly, though. What MP uses, is a 1x kelly.

Well, then I won't use kelly.

I don't seem to understand the kelly either.

[RHavar]

~32k bets placed every day, which puts an excessive risk on the bankroll, as if bets are large enough, then the bankroll could potentially be wiped out multiple times per day

You've got it backwards.  Volume reduces variance.

No.

Of course it does. For instance, on BaB in the last 6 hours, we've had someone (Alexy) win as much as the MP whale, and it's a total non-issue because of (our current high) volume. (In the same time period, another guy lost 10 BTC, and another couple people lost a bitcoin each) and in the course of the week the casino is still significantly up. As an investor, you wouldn't even be breaking as sweat. But with low volume site, if the whale doesn't come back (a reason i never delay withdrawals ) it's a possibility the investors will never even make their money back

[elm]

You seem to be misunderstanding. During the ~29,999 losing bets the bankroll grows by a factor of more than 100, so when the lucky bet wins 99% of it the bankroll is still bigger than at the start.

the problem I see with this bet is that even the chance is 1 in ~30k the user can win it in his first bet before the 29,999 losing bets. or what do I miss here?

[RHavar]

the problem I see with this bet is that even the chance is 1 in ~30k the user can win it in his first bet before the 29,999 losing bets. or what do I miss here?

Sure, there's nothing stopping that happening. You can be the poor sucker who invests before someone wins 99% of the bankroll, and then get diluted and never get your money back.

Bankrolling is a high-risk investment, treat it as such. Sometimes it seems low risk, because there's not much action happening, but it's just an illusion. (And that's even before you take into consideration the counter-party risks and what not).

[elm]

the problem I see with this bet is that even the chance is 1 in ~30k the user can win it in his first bet before the 29,999 losing bets. or what do I miss here?

Sure, there's nothing stopping that happening. You can be the poor sucker who invests before someone wins 99% of the bankroll, and then get diluted and never get your money back.

Bankrolling is a high-risk investment, treat it as such. Sometimes it seems low risk, because there's not much action happening, but it's just an illusion. (And that's even before you take into consideration the counter-party risks and what not).

lets see what I am still missing here. I don't know any land based or online casino that would take the risk to lose 90%+ of his Bank Roll with one bet and actually risking to close down their casino. I am also not aware that they use KC. why would MP allow this kind of risk?

[RHavar]

lets see what I am still missing here. I don't know any land based or online casino that would take the risk to lose 90%+ of his Bank Roll with one bet and actually risking to close down their casino. I am also not aware that they use KC. why would MP allow this kind of risk?

Well for instance, when I ran MP I personally put 100 BTC in the bankroll. Had the casino lost 90% of it's bankroll, I would've re-evaluated the risk and put another 100 BTC in  (and repeat). Alternatively, I could've say put 500 BTC in the bankroll and operated at a 0.2x kelly for instance.

(For me the former is much better, especially in in the case of a hack or exploit or what not. And I wanted to hold as little of other peoples money as possible, so by making it stupidly risky, that kind of helped. Most of the big investors I talked to were comfortable with the idea of risking 99% of the money they put in)


And while I'm not an investor in the current MP, if I did, I would much prefer it operating at a 1x kelly then something conservative. I think my biggest risk (as an investor) would be a hack, exploit or inside job. So minimizing the amount of money I physically deposit is ideal.

[asuryan180]

I think my biggest risk (as an investor) would be a hack, exploit or inside job. So minimizing the amount of money I physically deposit is ideal.

That's True,by considering he recent high rollers winning hundreds of bitcoins while playing against the house is kind strage and particularly when it happens at a publicly funded/invested site or any other gambling platform.

[WEBcreator]

That's True,by considering he recent high rollers winning hundreds of bitcoins while playing against the house is kind strage and particularly when it happens at a publicly funded/invested site or any other gambling platform.

There's nothing strange with it, as it has been explained by ranlo that there is no evidence of foul play and the bet was a legit bet. As has been stated in the FAQ as well that investing is an extremely risky action so potential investor needs to make sure that he can afford to invest since there are huge risks involved