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

[zipmaster]

I'm not trying to take anything a way from Doog. If anything I think he deserves a more consistent stream of income for his services independently on whether the site wins or loses as a whole.

Charging uBTC or 0.01% fees for amounts wagered above 10mBTC should be totally acceptable. Ultimately the investor is receiving a very valuable service. Where else on the internet does one have the opportunity to play such a low house edge against such a large bankroll? There HAS to be value in that. Primedice and Satoshidice offer max profits of 20-40 btc. It's nothing compared to what JD offers.

Look, I'm not saying the amounts I'm proposing are perfect. I'm just trying to point out that there is ample wiggle room to discuss among investors and Doog what the best course of action is. Ultimately, though, the gambling profits should be totally distributed among the people who are risking the coins: a.k.a the investors.

Again, I'm not attacking Doog in any way and I value his work very much. The man is always available and present. He's knowledgeable and very able at what he does. I would him up there along with Friedcat and Mike Caldwell among the most trustworthy forum entrepreneurs. We need to ask ourselves what service is Doog offering and how should he be remunerated.

The way I see it, he gives us an awesome brokerage service to coordinate bets between gamblers and bankrollers. He deserves to be paid for that independently on whether the site wins or loses and it should be worthwhile for him also!

All I ask is that at least an investor referendum is organized so that this can be discussed more openly among all investors so that a consensus can be found.

[itod]

Look, I'm not saying the amounts I'm proposing are perfect. I'm just trying to point out that there is ample wiggle room to discuss among investors and Doog what the best course of action is.

Additional fixed fee for every bet is not a good idea, people are playing martingale like crazy and adding such a fee would totally screw their martingale calculations, bots, etc. The main advantage of JD over SatoshiDice (as players are concerned) is that you can martingale without any fees. Remove that and you would have many unhappy customers. IMHO "the best course of action" is no action.

[dooglus]

IMHO "the best course of action" is no action.

If it ain't fixed don't break it.

Assuming I'm already taking the correct amount of commission, and we just want to find a way to make it steady across the weeks instead of being 'feast and famine' style, we can fine-tune a fee, charged to investors per bet rather than on their new profits.  Ignoring the fact that that will annoy the investors who are still running at a loss and so currently not having to pay any commission, the investors end up paying me the same in the long run as they would with the current system.

The only difference is that when the site has a bad week and the investors take a loss, they have to pay out my fee on top of that loss, and so lose even more than they 'should'.

Current system:

1000 BTC wagered.
Bad: Site loses 10 BTC.  Investors lose 10 BTC.
Regular: Site wins 10 BTC.  Investors pay 1 BTC, keep 9 BTC
Good: Site wins 30 BTC.  Investors pay 2 BTC (10 BTC of the profit was recovering bad week's losses), keep 28 BTC.

New system:
1000 BTC wagered.
Bad: Site loses 10 BTC.  Investors pay 1 BTC, net loss 11 BTC.
Regular: Site wins 10 BTC.  Investors pay 1 BTC, keep 9 BTC
Good: Site wins 30 BTC.  Investors pay 1 BTC, keep 29 BTC.

So which is better?  In both cases my total take is 3 BTC.

Current system: -10, 9, 28 (sum = 27)
New system: -11, 9, 29 (sum = 27)

The new system exaggerates the variance of the site by passing it all to the investors, and none to me.  Bigger losses (-11 instead of -10) and bigger gains (29 instead of 28).

Is that a good thing?  It's not clear to me that it is.  It's good for me if I want a steady income from the site.  But I don't care about that.  It's not like I'm dependant on next week's commission for anything.  I can wait for profits, just like the investors can.

It gives me even less reason to care about the profitability of the site than I have now.  Currently if the site loses, I don't get paid.  With the new system I don't care whether the site wins or loses; I get paid anyway.

[zipmaster]

Before answering Doog I want to quickly confute the martingale argument. Charging a variable fee that is 0.01-0.1% or, more simply, a flat fee of ~10 uBTC wouldn't alter the martingale strategies at all. It would at most penalize the dust bettors of which:

a) We choose to not care since they are contributing less than 0.1% of total amounts wagered on the site
OR
b) we allow them to play for free as long as they're betting amounts that are lower than, say, 1mBTC

In either case, the most generally played martingales would be hardly affected in case of the flat fee. They would be slightly affected but not by much in case of the variable fee. (I personally prefer flat fee).

Now, on to Doog. You wouldn't be disincentivized by the new profit scheme. With a flat fee being paid, your job becomes that of enabling large amounts of bets which, ultimately, benefit the investors also since the 1% house edge is more and more guaranteed the more bets (not necessarily wagered amounts) are placed on the site. One variant of the flat fee could even be that when the bankroll wins a bet, the investors pay the fee for that bet while when the player wins the player pays.

It is not true that overtime investors would be paying the same amount. The current scheme places friction on the upside of the bankroll while exposing us investors to a larger downside. If some whale comes in and chooses to place subsequent 100+ btc bets, we the investors are risking huge downside. This is especially true since large bets are few and far between and the law of large numbers doesn't really apply to them. In these circumstances the investors are just stuck with the variance of the whale's betting strategy. If we have to pay a 10% fee on any profit we make in these circumstances, the EV for the investors is easily made negative.

Just follow the math. Let P be the probability of a bank win off of a given bet and Q be that of a loss. For convenience let M be the multiplier of the bet. The 1% house edge boils down to a very simple relationship between Q and M, namely:

QxM=0.99

In the absence of a Doog fee, the EV of a bet is (in units of the betting amount):

EV = P-(M-1)xQ = P-[(0.99/Q)-1]xQ = P-0.99+Q = P-0.99+(1-P) = 0.01

Where the normalization condition P+Q=1 was used in the last step. Let's now factor in Doog's cut:

EV = 0.9xP-(M-1)xQ = 0.01-0.1xP

It's easily seen that whenever P is greater than 0.1 (i.e. anything less than 90% bet from the bettor's perspective) the EV for the bankroll is negative. This would confirm the general perception in the trollbox that 90+% betting schemes have been very profitable for the house. Mind you that this doesn't imply anything for the gambler... he's playing the normal house odds with negative EV=-0.01.
Hence, at the current state of affairs, the investors can expect to lose money whenever gamblers bet at less than 90%.

The EV calculation shown above can be generalized for a different "Doog tax" which I will denote as G. Currently, G=0.9. Repeating the calculation results in:

EV=0.01-(1-G)xP

which is negative whenever P>0.01/(1-G).
Clearly, unless G=1, there will always be percentage threshold beyond which the EV for investors is negative. Considering that a lot of gamblers bet at probabilities that are less than 90%, this is something which should be seriously addressed.

Now, in Doog's defense, one might argue that this EV calculation which already considers a large number of bets being made, also assumes that a cut is being taken whenever the house wins. In reality though, Doog takes his cut only once a week thus allowing us to play at a positive EV for a week at a time and, only on sundays, paying the cut to Doog.

This argument can be easily confuted though by compounding all weekly bets into one average bet after which, in case of a bank win, Doog takes his cut. We can then reproduce the same exact calculation for the investor EV as before. The one key parameter that we need is the average betting probability weighted by the bet wager size. DOOG... if you could supply me with this number I'd be very grateful.
In other words, for every bet made on a weekly basis denote P_1,2,...,n the probability at which each bet was placed and K_1,2,...,n the amount wagered. Then the average betting probability is:

<P>=SUM{P_nK_n}/SUM{K_n}

If <P> is less than 90% then we have a serious problem on our hands!

Last but not least, I'd like to tackle the all too easy standard of "if it ain't broke, don't fix it".
Lets stop for a moment and discuss honestly about what it means for something to be broken.

The house profit is a quarter of what it should be. Granted that this was due to a "very lucky" streak by the biggest whale bettor of all times (Nakowa), and that the biggest loss the site incurred happened on a timescale of about a week, the above mathematical EV argument shows that the investors risk to incur a larger burden than they should granted the money that they put up. In some circumstances they even stand to lose with a higher probability than the bettors themselves!

It is for all these reasons that I continue to press for a serious consideration of a flat betting fee in exchange for full profit in the pockets of the investors.

I look forward to receiving the piece of data I requested.

[SebastianJu]

Before answering Doog I want to quickly confute the martingale argument. Charging a variable fee that is 0.01-0.1% or, more simply, a flat fee of ~10 uBTC wouldn't alter the martingale strategies at all. It would at most penalize the dust bettors of which:

a) We choose to not care since they are contributing less than 0.1% of total amounts wagered on the site
OR
b) we allow them to play for free as long as they're betting amounts that are lower than, say, 1mBTC

In either case, the most generally played martingales would be hardly affected in case of the flat fee. They would be slightly affected but not by much in case of the variable fee. (I personally prefer flat fee).

You really underestimate the impact of the word "fee". First... people dont want to pay a fee when they can play for free. They will use the free version elsewhere regardless how high the fee is. Only because there IS a fee.
On top... the player already pay a fee. Its only not a fixed one. Its a mathematically proven fee that enables all casinos worldwide to live. And its a hidden fee that the player dont see. Its the game itself. It would be grotesque if players have to pay a fee to play gambling games. Thats so very much no gambling anymore.

[BayAreaCoins]

If a casino tried to charge me a fee for gambling. I would tell them to fuck off and I would go across the street

ANY "fee"

[zipmaster]

Then charge the fee on the investors, who gives. As long as the fee is flat Doog will be incentivized to push more volume on the site.

5% of all bets made wager an amount larger than 1 mBTC. Considering that all bets placed on this site up to now is ~500 million, 25 million bets have been placed with wagers greater than 1 mBTC. Of these, about 51% have been won by the house... so roughly 13 million.

If the investors paid a 1 uBTC for every bet won by the house whose wagered amount was greater than 1 mBTC, Doog would have earned 13 BTC. Now, granted that this is nothing compared to the 1.2k he's made up to now but it still stands that about 100 million bets are consistently placed each month. This would allow him to profit a cool 2 BTC month without risking anything and consuming a very low amount of electricity compared to what your average miner uses to mine that same amount.

http://imgur.com/R2y04mo

The flat fee can be further discussed and refined, I'm just proposing a proof of concept!

[zipmaster]

Doog.... if you could publish a chart with the average weighted betting probability as a function of time since JD opened up shot I would very grateful. I'd like to see how much we deviated from my 90% prediction.

I'm willing to bet that when Nakowa played we dropped wayyyyyy below my threshold!

[SebastianJu]

zipmaster... dooglus dont need a flat fee. There is already a flat fee. Its mathematically proven that dooglus over time will get his share. If its not hard for investors when a week is negative and the next week gets the profit from last week then dooglus gets the same. I dont see why its a problem. Its not a problem for me too that profits arent linear...

By the way... if someone have doge coins you might check the doge price... i sold them now for a nice profit. At doge dice i had no movement and came out with a small profit only. But i sold since i dont trust that doge will keep that price or will even go higher.

[zipmaster]

Sebastian... it's a problem because, depending on how players are betting, the odds are not in our favor. The house edge doesn't mathematically make us a profit in the long term if Doog takes the 10% cut and players bet on average at lower than 90% chance of winning.

[dooglus]

Just follow the math.

Are you thinking that I take 10% of every winning bet?  I don't.  Only new net profits.

Does that change your math?

Suppose every bet was at 50%, paying 1.98x for a win.

After 2 million bets of 1 BTC each, we expect players to have lost 1,000,000 and won 980,000 for a net loss of 20,000 BTC (1% of wagered), and for me to have taken 2k BTC as commission.  That's less than 90%, yet is +EV for investors.

Doesn't that prove your math wrong, since a series of bets less than 90% are still +EV for investors?

[SebastianJu]

Sebastian... it's a problem because, depending on how players are betting, the odds are not in our favor. The house edge doesn't mathematically make us a profit in the long term if Doog takes the 10% cut and players bet on average at lower than 90% chance of winning.

Thats not correct. Dooglus is taking 10% of the profits only. It doesnt change the chance of winning at all.

[dooglus]

You should pay those guys just for the entertainment they create... 

How much is this one worth, do you think?

http://www.reddit.com/r/Bitcoin/comments/1w397k/justdicecom_a_bitcoin_gambling_site_is_very/

[eltopo]

That guy is only annoying for posting his crap all over the web, but never answering your arguments.

Entertaining are those guys pretending they have found a glitch in the JD matrix and they would deplete the bank if you don't pay them a bounty...

[nicolaennio]

You should pay those guys just for the entertainment they create... 

How much is this one worth, do you think?

http://www.reddit.com/r/Bitcoin/comments/1w397k/justdicecom_a_bitcoin_gambling_site_is_very/

Funny guy :-)

But lets say the truth dooglus, would you invest in a dice site like just-dice if you weren't the owner? I think no since you are against risk :-D

[dooglus]

But lets say the truth dooglus, would you invest in a dice site like just-dice if you weren't the owner? I think no since you are against risk :-D

Well, I'm not invested in it much at all any more even though I AM the owner.  So probably not!

Although I was invested with both BS&T (Pirate's ponzi) and Starfish (Patrick Harnett's fund) for a while...

[zipmaster]

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.

[SebastianJu]

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)=-22BTC

The investors can expect to lose 22 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.

Are you an investor at all? If so why didnt you find that dooglus is only taking his fee when divesting?

And he wont take a double fee. So when you are 10 profit, back to 0 and back to 10 profit he still only takes the fee for 10 profit once.

[zipmaster]

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!!!!

[zipmaster]

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