Just-Dice.com : Invest in 1% House Edge Dice Game

[01BTC10]

just add a big disclaimer explaining them what variance is

Understanding variance is not in realm of possible for a vast majority of investors. All they want is easy and fast money but it doesn't really exist. They would have been better forgetting about JD for 2 years and then come back.

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[mechs]

I've just checked JD chat logs, and I see that Dooglus acknowledged math was on our side, but "we couldn't count on Nakowa coming back after winning".

When somebody pointed out that gamblers always come back, Dooglus said that "Nakowa already walked away with 4k in August".

Wow. Just wow.

First, is obvious that Nakowa didn't "walk": he just stopped for a few weeks and CAME BACK. For Christ sake, he was playing yesterday, and you say" he walked in August"? Doog, as a casino operator you should know how gamblers minds work. They might stop for some weeks after a big win, but the more they win the more they will think their strategy is unbeatable. Nakowa will come back to "prove his points", until variance hits him hard, and at that point he will lose everything very fast because he thinks he can "spot patterns", and he won't be able to accept he might lose.

As a poker player I've seen that story over and over and over.

IMO a very poor management decision was made based on irrational fears and highly unlikely scenarios, I'd dare to say totally negligible scenarios from a statistical point of view. And we all know our business is based on probability, right?

The hard cold facts:

We have pissed off and treated badly our best customer ever

Investors who did not divest are left holding huge losses that won't be covered for months

If dumb investors do not understand that a casino is NOT a "stable" investment, you just add a big disclaimer explaining what the word "variance" means. You do not screw up with your best customer who, additionally, is giving a HUGE promo to your site, condemning most of your investor to remain holding a bag indefinitely.

The math works if you have a fixed house pool and the player will always keep playing until house is ruined.  however, no ether of those are true.  The more the whale wins, the more that was being divested leading to a run in the bankroll.  Also, Nakowa is not a computer simulation which will go on forever.  Once the house through a mixture of bad luck and fear divestments went down low enough, it would not be worth it for Nakowa to keep playing. 

[Dabs]

Well, just no. If you played at 49,5%, statistically and probably your next roll will be a loss 50,5% of the Time. Like every roll of you was before. There is no "memory". Whats so hard to understand about that?

Statistik and probability like this only work when you look in the future.

The probability for loosing 6 Times in a row is ~1,65%, but if you already have lost 6 Times in a row it is still ~1,65% for loosing even another 6 Times in a row.

First, since you are not aware, I don't play 50%. I play 87.7779%. I was the only one, then a few people copied me.

In this particular case, the next roll is sure to be an 87.7779% chance of winning, however I contend that it would be more than 99% chance of winning.

Here's my "memory". 3 variables. 2 are exactly the same. 1 changes a bit. Literally. (okay, it changes a digit sometimes, so it's not just a bit, but a byte.)

Also, if looking at the future, I can see the odds of 6 times in a row before it happens, what changes as it is happening? Just pretend we're back 6 rolls ago. The same statistic. Why does it change when I've already lost 5?

Wow. You simply do not understand gamblers fallacy and you created a "gambling security"? Please tell me that nobody ever invested in it.

Secondly, you cannot explain the patterns you spot because there are no patterns.

Uh... Okay, I won't tell you that 6 people invested in it, and about 14 people "subscribed" to my updates while the martingale run was going on. I gave updates every 50,000 rolls out of the 1.3 million rolls, which was roughly about every other day. I only play when I am online and awake even though I use a bot to automate the bet. The bot is custom made and changes the bet based on instructions I give it, based on perceived patterns that it detects that I think means something, whether or not it actually means anything.

I took about 6 BTC from 6 people, and made it climb to 11 BTC in about 2 weeks. So we each lost 1 BTC when it busted. I'm not a whale, so no one paid any attention.

Secondly, I can not explain the patterns, but not because there are no patterns. Just because you can't spot it, doesn't mean it is not there.

As someone else explained, pi has a pattern. It looks like there is none. 3.1415926 ... I can tell you the next million digits.

e has a pattern. It looks like there is none. 2.7182818284 ... I can tell you the next million digits.

1.414213562373095048801 = square root of 2. I can tell you the next million digits.
1.732050807568877 = square root of 3. I can tell you the next million digits.
0.57721566490153286 = Euler–Mascheroni constant. I can tell you the next million digits.

My just-dice account. I can tell you the past 1.3 million rolls. It already happened. I will attempt to tell you the next million rolls, but I can't exactly do that. No one can see a pattern. Does not mean it is not there. Does not mean it is there.

Yes, I understand Gambler's Fallacy. It is the fallacy of the maturity of chances. It is the mistaken belief that if something happens more frequently than normal during some period, then it will happen less frequently in the future. In situations where what is being observed is truly random (i.e. independent trials of a random process), this belief, though appealing to the human mind, is false.

The key here is that we are not looking at true random numbers. We are looking at the results of a deterministic process that takes as input random numbers, where the deterministic process is repeated exactly the same except for 1 bit.

That process has also been shown to output a uniform distribution of results.

It took awhile, but eventually someone figured out how to predict the next million numbers from a Mersenne Twister given a minimum set of numbers in the sequence.

[Akka]

Well, just no. If you played at 49,5%, statistically and probably your next roll will be a loss 50,5% of the Time. Like every roll of you was before. There is no "memory". Whats so hard to understand about that?

Statistik and probability like this only work when you look in the future.

The probability for loosing 6 Times in a row is ~1,65%, but if you already have lost 6 Times in a row it is still ~1,65% for loosing even another 6 Times in a row.

First, since you are not aware, I don't play 50%. I play 87.7779%. I was the only one, then a few people copied me.

In this particular case, the next roll is sure to be an 87.7779% chance of winning, however I contend that it would be more than 99% chance of winning.

Here's my "memory". 3 variables. 2 are exactly the same. 1 changes a bit. Literally. (okay, it changes a digit sometimes, so it's not just a bit, but a byte.)

Also, if looking at the future, I can see the odds of 6 times in a row before it happens, what changes as it is happening? Just pretend we're back 6 rolls ago. The same statistic. Why does it change when I've already lost 5?

What changed is that the low probability happened. If statistics would say one of 3 car accidents are deadly would you stop driving after your second accident?

Of course not, that changes nothing on the probability of your next accident being deadly.

Your chance is always 87.7779% if you play that (heck how should I know what you play). Even if you would have already lost a 1000 Times in a row.

But well, if you think there is a "ghost of Satoshi" rolling the dice, just keep believing it.

[oda.krell]

If we were in the world of mathematics I would have no doubt that keeping the max bet to 0.01% is the only choice. But in the real world people have, blame them, feelings. Now I run some simulations with a player who is playing at max bet, lets say that three over four of them are satisfactory, in those cases we are making money with no problems, but one over four is more or less like that (initial capital is one bitcoin):



Now think we find ourselves in the middle, the heavy gambler has taken half of our pot. I want to know how many people will believe in mathematics (waiting for the inevitable return to gaining) and how many people (normal people having emotions and knowing that the world is not mathematics) will think that actually the website is scam.

Our best customer has 1/4 probability (lets say, I would like to have a more precise computation) to make us think the website is scam. So mathematically, taking into account that humans are complex, that is actually not our best customer.

For fuck's sake, finally. Thanks for putting this sentiment into precise words. Fuck Kelly criterion. Fuck "trust the math". Investors are humans. Pretending they are not, pretending there's a zero chance that the site will receive irreparable damage in trust if the bankroll starts approaching new lows is delusional.

Maybe the sudden change from 1% to 0.25% was not the most wise action. But people need to pull their head out of their ass and stop pretending leaving it at 1% was THE ONLY MATHEMATICALLY CORRECT ACTION DO YOU EVEN LIFT BRO.

If you open a casino in your platonic realm of mathematical objects maybe that's justified. In the real world, you better take into account your fellow human's irrationality, because otherwise you're being irrational yourself.

Oda, you are investing in a Bitcoin casino, you are not depositing your money in a bank with a fixed yearly interest. 1% max profit can obviously lead to high volatility, but its the best way to get mid and long term profits. If you fear your investors do not understand they are investing in a casino, or what 1% max profit means, you just add a big disclaimer explaining them what variance is, and where they are investing. You just cannot expect 100% yearly returns with no variance and no risk. Do we agree on that?

As nicolaennio said, we are roughly in the middle of that graph, and instead of letting math do its thing so it can go up again, we scared away our best customer, who is the only one that has the volume that allows to climb up again quickly, effectively condemning investors to stick with a huge loss for months.

Will investors be OK with MUCH lower yearly returns but less variance? Don't think so, because the counter-party risk (eg: trusting your BTC to a third party which happens to be an unregulated gambling site) is too high for such a low return. As soon as a trustworthy competitor copies J-D's "original" model, investors will flee (mark my words).

Finally, the very bad thing that happened here is that the change was made unilaterally while our best customer was playing, pissing him off and condemning investors to stick with a loss in the mid term. Changing the default 1% max profit might be a good thing, having a "market for risk" so everybody can decide their risk exposure is certainly an excellent idea, but the way in which yesterday this decision was taken is very counter-productive.

Look, we agree on the math. We even agree that unilaterally, without announcement decreasing maxbet was a mistake.

My point is: stop arguing *purely* from a mathematical point of view when the domain in question is the physical world, which is governed by mathematical truths only under a pretty heavy load of simplifying assumptions.

In simple terms: everyone go ahead, criticise the decision. But do it with a modicum of humbleness, not pretending that it was somehow "provably" wrong to make the call to reduce maxbet.

[GOB]

Thinking more about the two "tuning parameters" GOB just described: deposit reserve ratio, and max profit %.  I am wondering how many degrees of freedom this system actually has.


inputs: (D) deposit amount, (R) deposit reserve ratio, (M) max profit %

outputs: (P) profit, (V) variance of profit, (C) counter-party risk

If I increase D, holding R and M fixed, then P, V and C go up, I think.

If I decrease R, holding D and M fixed, then P and V go up, but C stays fixed.

If I increase M, holding D and R fixed, then P and V go up, but C stays fixed.

How exactly is decreasing R different than increasing M?

Depends on exactly what you define D, R, P and V to be.

IF:

D= total deposit, including coins held offsite
R= deposit reserve ratio where R is % of coins held AT justice
P= expected investment growth rate
V= investment variance

THEN:

If I increase D, holding R and M fixed, then P stays constant, V stays constant (if bet sizes grow relative to it, which won't be the case, so it probably decreases) and C goes up.

If I decrease R, holding D and M fixed, then P and V stay constant (given I don't get auto-divested), but C decreases (fewer coins help at JD).

If I increase M, holding D and R fixed, then (due to Kelly Criterion):
       a) if M increases and is <1%, then P and V go up, and C stays fixed.
       b) if M > 1% and increases, then P goes down, V goes up and C stays fixed.
       c) if M < 1% and increases to >1%, then P can increase or decrease depending on the exact numbers, V goes up, and C stays fixed.

Does that make sense? If you change the definitions of DRP&V I'll redo it.

Yes, given your way of defining D (I was defining D as what you actually sign over to JD, which is why my logic table looks a bit different).  But maybe your first line is wrong:

"If I increase D, holding R and M fixed, then P stays constant, V stays constant (if bet sizes grow relative to it, which won't be the case, so it probably decreases) and C goes up."

Wouldn't increasing D lead to an increased share of the pie and thus larger values of P, V and C?

When you talk about increasing M, I noticed that you are applying the Kelly Criterion based on the sum of the reserves held at JD and those held offsite (your definition of "D").  So, I think proves that it is OK--and in fact necessary for profit maximization--to have a max bet % greater than 1% of the reserves held at JD (i.e., the number dispayed on the website).  It's OK because there are other reserves that will flow into JD should the ones currently controlled by JD become depleted.  

And participants who "fakes reserves" by more than a factor of 2, like you point out, would be expected to burn through the smaller amount of funds that actually possess and bust.  Darwinism.  

Thanks for the further info on the Kelly criterion, BTW!

Wouldn't increasing D lead to an increased share of the pie and thus larger values of P, V and C?

Going back to the first line, that's the one that gave me the most difficulty. But yeah, you're right. Sorry for the confusion.

As for your argument, I don't understand *exactly* what you're trying to say but I think I get the gist. I'll say this, for each individual person, yes, the KC requires you to think of your entire bankroll, not just what happens to be "transferred" into JD (just like if a casino is analyzing their business, they would take into account all their assets, or at least liquid assets, not just what happens to be in the cage on a given night).

However, I'll stress again what I mentioned in another one of my posts (I think on the poll thread). While (A) risking 1% of 1000 btc deposited at JD vs. (B) risking 2% of 500 btc deposited at JD and 500 btc held offsite result in the same max bet for the first bet (10 btc), that DOES NOT, hold at the investment starts to go up or down. For example, take A and B above and imagine a player comes in and loses 100 btc (site wins 100):

A) Invested goes from 1,000 to 1,100. Max profit goes from             1% *   1,000 = 10        to       1%  *  1,100 = 11
B) Invested goes from 500 to 600. Max profit goes from                   2% *      500 = 10        to        2% *     600 = 12

The same goes if a player wins 100 BTC (site loses 100):

A) Invested goes from 1,000 to 900. Max profit goes from             1% *   1000 = 10        to       1%  *  900 = 9
B) Invested goes from 500 to 400. Max profit goes from                 2% *    500 = 10        to      2%   *  400 = 8

So, while they start with the same max profit, as investment evolves, they deviate. In the 2% case, it doesn't maintain the KC with relation to your whole bankroll. As your investment grows it, it overshoots the KC, and as your investment decreases, it undershoots it.

That's why the second part of Doog's plan is so key. Allowing you to leave a fraction of your investment offsite, allows you to always keep your investment at the KC as your investment evolves.

Cheers.

[oda.krell]

anyway, looks like our best customer is back

[cowbay]

streaky as usual...

[dave111223]

just add a big disclaimer explaining them what variance is

Understanding variance is not in realm of possible for a vast majority of investors. All they want is easy and fast money but it doesn't really exist. They would have been better forgetting about JD for 2 years and then come back.

That's what I planned to do, over that long a period the variances would probably have equaled out, but not if the limits have been twiddled along the way (especially after eat massive losses).

[RationalSpeculator]

Will investors be OK with MUCH lower yearly returns but less variance? Don't think so, because the counter-party risk (eg: trusting your BTC to a third party which happens to be an unregulated gambling site) is too high for such a low return. As soon as a trustworthy competitor copies J-D's "original" model, investors will flee (mark my words).

I couldn't summarize it better.

[Rampion]

anyway, looks like our best customer is back

Yep, gambling addicts always come back - and they come back more often when they lose. Basic gambler's psychology, we should know it well as casino investors.

That said: as you can see in blockchain.info Nakowa just sent 2,000BTC to J-D. This will be a fun evening. His losing big time ATM.

[01BTC10]

At least now there is a lower limit to what he can lose. 

[wachtwoord]

Another Option

On another option that hasn't been explored much, perhaps we should have an option where investors can choose to be based on amount wagered instead of amount won - at say a substantial reduced amount - example would be at 40% house 'risk cut'.

The problem with this is that those investors aren't risking anything at all.  When the house needs coins to pay out a winner, these investors aren't going to give up their coins.  They may as well not even bother depositing their coins, because we're just going to put them into cold storage and then give them back, with interest.

My point is, what do such investors bring to the table?  What use are they?  We pay them (60% of 1% of some percentage of all bets) but in return they give us nothing.

A similar idea was suggested in the JD chat some months ago, I think by uvw, but maybe by somebody else.  He proposed having 3 tiers of investors, the regular ones we have now, the "coward" tier (like the ones you propose) and the "hero" tier, who take the 40% 'risk cut' that the cowards don't get, but also pay the cowards when the house loses.  This idea fails for the same reason - the 'cowards' are effectively parasitical at the expense of the 'heroes'.  They get a guaranteed return on their investment, but we're not free to use their investment for anything because we've promised never to lose it.

First off, all this attention brought this investment opportunity to my attention. I invested last night.

Everyone: You weigh the risk your willing to take by changing the amount of money you have invested. Want half the risk for half the gain? Easy, cut your investment in half.

I have invested a number of Bitcoins I can stand losing in a positive EV investment with a large volatility. If I weren't willing to lose this amount I would invest less. Thanks Dooglus and don't let these people influence your decision making in the amount of the bankroll that can be at risk in a single bet. Kelly's criterion is the only rational approach, don't let people convince you to take an irrational approach because they are emotional.

[Rampion]

At least now there is a lower limit to what he can lose. 

We should have left the limit alone. Let him bleed. If he loses today, he will justify it by saying we "screwed" his system by changing max-bet. Plus, as we said over and over, changing it when he is way UP is retarded. Not because maths (the probability of him winning or losing is still the same regardless of previous sessions), but because of psychology: if he start losing he will lose his temper and will start to make bad choices. His personality indicates that, and we are "protecting" him from himself by lowering the max profit - that's how I see it.

[01BTC10]

At least now there is a lower limit to what he can lose. 

We should have left the limit alone. Let him bleed. If he loses today, he will justify it by saying we "screwed" his system by changing max-bet. Plus, as we said over and over, changing it when he is way UP is retarded. Not because maths (the probability of him winning or losing is still the same regardless of previous sessions), but because of psychology: if he start losing he will lose his temper and will start to make bad choices. His personality indicates that, and we are "protecting" him from himself by lowering the max profit - that's how I see it.

I agree.

[Rampion]

Another Option

On another option that hasn't been explored much, perhaps we should have an option where investors can choose to be based on amount wagered instead of amount won - at say a substantial reduced amount - example would be at 40% house 'risk cut'.

The problem with this is that those investors aren't risking anything at all.  When the house needs coins to pay out a winner, these investors aren't going to give up their coins.  They may as well not even bother depositing their coins, because we're just going to put them into cold storage and then give them back, with interest.

My point is, what do such investors bring to the table?  What use are they?  We pay them (60% of 1% of some percentage of all bets) but in return they give us nothing.

A similar idea was suggested in the JD chat some months ago, I think by uvw, but maybe by somebody else.  He proposed having 3 tiers of investors, the regular ones we have now, the "coward" tier (like the ones you propose) and the "hero" tier, who take the 40% 'risk cut' that the cowards don't get, but also pay the cowards when the house loses.  This idea fails for the same reason - the 'cowards' are effectively parasitical at the expense of the 'heroes'.  They get a guaranteed return on their investment, but we're not free to use their investment for anything because we've promised never to lose it.

First off, all this attention brought this investment opportunity to my attention. I invested last night.

Everyone: You weigh the risk your willing to take by changing the amount of money you have invested. Want half the risk for half the gain? Easy, cut your investment in half.

I have invested a number of Bitcoins I can stand losing in a positive EV investment with a large volatility. If I weren't willing to lose this amount I would invest less. Thanks Dooglus and don't let these people influence your decision making in the amount of the bankroll that can be at risk in a single bet. Kelly's criterion is the only rational approach, don't let people convince you to take an irrational approach because they are emotional.

"They" have convinced him already. Optimal Kelly criterion is gone, we are now at 1/4 Kelly (0,25% max bet instead of 1%).

[wachtwoord]

"They" have convinced him already. Optimal Kelly criterion is gone, we are not at 1/4 Kelly (0,25% max bet instead of 1%).

Too bad. Especially as I think Dooglus is a very rational person himself.

[Rampion]

Good old Nakowa losing 1,750BTC today. 250BTC more to go before he wipes out the 2,000BTC deposit he did today.

Math never lies. Irrational fear is NOT your friend.



(take back the max profit 1% so he can TRY HARD to cover his losses, came on doog...)

[GOB]

"They" have convinced him already. Optimal Kelly criterion is gone, we are now at 1/4 Kelly (0,25% max bet instead of 1%).

Yeah, but temporarily until he implements variable risk for each investor. Have a little patience! Just a few more days...

[Rampion]

Nakowa just lost his 2,000BTC.

3k yesterday + 2k today: Nakowa is only UP 11k from 16k.