Question about moneypot

[RHavar]

If the bankroll was 100 Bitcoin and the house edge was 1%, the max bet would be 1 Bitcoin.

I'll remove all references to kelly criterion tomorrow morning to avoid any potential confusion and make the structure defined here and before in the thread that this is how it currently is.

We are in the midst of changing the whole system and re-writing all the areas, so this will be a fill-in until that time.  When we announce the new changes, I will make sure that all updated changes and terms are clearly defined and available to see.

With the new changes, investors will be able to adjust their own level of risk.  There are some that are in agreement that think anything more than half kelly is the right investment strategy, while there are others that are very willing to leverage their investment as much as possible.  I think it is good that the investor has that personal choice.

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)

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[lclclc223]

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)

In the short run, the investment can reach high volatility that can either win or lose the investor a high amount of Bitcoin.  Such as the previously mentioned example, in the short term, this could mean that a quick loss of 100 Bitcoin at a 1% House edge would result in as high as a 99.3 profit to bankroll.  The commission would be 70% of the house edge on the wagered amount, in this rare case, a 7% commission.  It does not mean that commission is 70% and that Moneypot would take 70% of 100 Bitcoin.  

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"

[RHavar]

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?

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:




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:

Code:

var kelly = 1;

function roll() {
  return Math.random() > 0.495 ? 1 : -1;
}


var wins = 0;
var loses = 0;
function run() {

  var bankroll = 1;

  for (var j = 1; true; ++j) {

    var bet = bankroll * 0.01 * kelly;
    bankroll += bet * roll();

    if (bankroll > 1e40) {
      wins++;
      console.log('Won all the money in the world. Won: ', wins, ' Busted: ', loses);
      return rerun();
    }
    if (bankroll < 1e-40) {
      loses++;
      console.log('Busted! Won: ', wins, ' Busted: ', loses);
      return rerun();
    }

  }
}

function rerun() {
  setTimeout(run, 0);
}

run();

Sample output of running with a 1x kelly:

Code:

...
Won all the money in the world. Won:  189  Busted:  0
Won all the money in the world. Won:  190  Busted:  0
Won all the money in the world. Won:  191  Busted:  0
...

Sample output of running with a 2x kelly:

Code:

Busted! Won:  38  Busted:  83
Won all the money in the world. Won:  39  Busted:  83
Busted! Won:  39  Busted:  84
Busted! Won:  39  Busted:  85
Busted! Won:  39  Busted:  86
Busted! Won:  39  Busted:  87
Busted! Won:  39  Busted:  88
Won all the money in the world. Won:  40  Busted:  88

Sample output of running with a 3x kelly:

Code:

Busted! Won:  0  Busted:  191
Busted! Won:  0  Busted:  192
Busted! Won:  0  Busted:  193
Busted! Won:  0  Busted:  194
Busted! Won:  0  Busted:  195

---

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

[RHavar]

2) Does MoneyPot charge commissions if the gambler wins?

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

In the short run, the investment can reach high volatility that can either win or lose the investor a high amount of Bitcoin.  Such as the previously mentioned example, in the short term, this could mean that a quick loss of 100 Bitcoin at a 1% House edge would result in as high as a 99.3 profit to bankroll.  The commission would be 70% of the house edge on the wagered amount, in this rare case, a 7% commission.  It does not mean that commission is 70% and that Moneypot would take 70% of 100 Bitcoin.  

Where is the 7% coming from?

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

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"

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

[lclclc223]

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?

[lclclc223]

So what is the new maximum bet going to be?

[lclclc223]

Of course, this would mean that the longer it takes to reach that, the more exponentially larger the bet the theoretical whale would have to bet.  All bets received by the investor would still be +EV (positive expected value bets) and the investor has access to pull their investment at any given time.  

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?

[lclclc223]

Fair enough, so what about the referral system?

[hua_hui]

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.

[lclclc223]

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

[lclclc223]

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?

[hua_hui]

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.

[mobnepal]

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.

[lclclc223]

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?

[lclclc223]

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

[lclclc223]

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

[lclclc223]

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

[lclclc223]

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?

[lclclc223]

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?

[hua_hui]

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.

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.