[POLL] Just-Dice INVESTORS: Do you agree with lowering the max bet?

[integrity42]

As many of you know, Just-dice investors lost a lot of BTC to Nakowa.  He currently has 13,000BTC of investor money in his hands. As a result, dooglus lowered the max bet to 0.25%

Nakowa has stated that he will never play again since the max bet has been lowered.

As an investor, Are you happy with lowering the max bet?


EDIT: Some things to consider

PROS:
-- Less variance for investors.

CONS:
-- We must assume for now that Nakowa will not play again (this might change, but he said he won'y play again at this bet size). This means there is no way for investors to recover the 13,000BTC losses.
-- As BTC exchange rate rises bet sizes will drop. As time goes on without nakowa, its possible that the site will never hit +6000 profit making it impossible for some investors to recover their losses.
-- Changing bet size without notice wasn't good for gambler confidence.

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[theskillzdatklls]

nope. 1% was good.  0.5% if something has to be done.  Investors need to realize they can lose money /story.

[dmcurser]

should never have been changed without notice.

[mechs]

Who cares what anyone thinks except investors or gamblers? 

99.99% of gamblers are not effecting by a 80 BTC profit max (as it currently is and will continue to go up)
Investors did not want the variance, risk of ruin had become too high

Results of this poll are meaningless, and will probably be 1% since it makes for a more interesting show to see 400 BTC bets than 80 BTC ones.

[DebitMe]

As many of you know, Just-dice investors lost a lot of BTC to Nakowa.  He currently has 13,000BTC of investor money in his hands. As a result, dooglus lowered the max bet to 0.25%

Nakowa has stated that he will never play again since the max bet has been lowered.

As an investor, Are you happy with lowering the max bet?

You say that he has 13,000 BTC of investor's money, did he win that or steal it?  If it was won, then it is wrong to call tha tinvestor's money, if it was stolen, then you are correct.  The investor's knew the risk of where that money was going and chose to make the deposit anyway, therefor it is his money and not the investor's.  If he had lost, would you have said that you had his money?  No, it would have been your money.

But back on subject, I did not quite follow what happened and the events that led up to the max bet being dropped.  This is a weird instance though.  Technically the owners of the site are the investors and should be able to make decisions like that based on proportion of money invested.  But this is bitcoinland where company officials are not elected, and can do whatever they want with investors money, with little to no repurcussions.

Since this is bitcoinland I would say that since Dooglas started the site, he should be allowed to do whatever he wants with it.  That is not how the world is normally run, and he should probably have asked or created some polling system to get an idea of wha this investors thought.

[RationalSpeculator]

 When I discovered the max bet today:

[joesmoe2012]

A poll, discussion, or at the least notification prior to making the change should have taken place for the investors and gamblers alike. Was very impressed with the site until this. 

[mechs]

Who cares what anyone thinks except investors or gamblers?  

99.99% of gamblers are not effecting by a 80 BTC profit max (as it currently is and will continue to go up)
Investors did not want the variance, risk of ruin had become too high

Results of this poll are meaningless, and will probably be 1% since it makes for a more interesting show to see 400 BTC bets than 80 BTC ones.

Have Doog email the top 10-15 investors and let them tell you that you are out numbered 5-1, you where most vocal on this and got in Doog's ear others did not want this.

I am fine with that.

[RationalSpeculator]

Who cares what anyone thinks except investors or gamblers?  

99.99% of gamblers are not effecting by a 80 BTC profit max (as it currently is and will continue to go up)
Investors did not want the variance, risk of ruin had become too high

Results of this poll are meaningless, and will probably be 1% since it makes for a more interesting show to see 400 BTC bets than 80 BTC ones.

You are starting to resort to untrue statements.

After whale winning big 30,000 btc chose to stay invested, only 10,000 btc chose to withdraw investment.

That's how the money voted. 75% for 1% max bet and high variance in return for high potential return.

[mechs]

Who cares what anyone thinks except investors or gamblers? 

99.99% of gamblers are not effecting by a 80 BTC profit max (as it currently is and will continue to go up)
Investors did not want the variance, risk of ruin had become too high

Results of this poll are meaningless, and will probably be 1% since it makes for a more interesting show to see 400 BTC bets than 80 BTC ones.

You are starting to resort to untrue statements.

After whale winning big 30,000 btc chose to stay invested, only 10,000 btc chose to withdraw investment.

That's how the money voted. 75% for 1% edge.

I was invested and have never divested.  I am happy with the change.  I wanted less variance and so do many other investors.  Others, like me, stayed invested since so deep in the hole, was an act of desperation. Not rational but that is what it is.

[RationalSpeculator]

Who cares what anyone thinks except investors or gamblers?  

99.99% of gamblers are not effecting by a 80 BTC profit max (as it currently is and will continue to go up)
Investors did not want the variance, risk of ruin had become too high

Results of this poll are meaningless, and will probably be 1% since it makes for a more interesting show to see 400 BTC bets than 80 BTC ones.

You are starting to resort to untrue statements.

After whale winning big 30,000 btc chose to stay invested, only 10,000 btc chose to withdraw investment.

That's how the money voted. 75% for 1% edge.

I was invested and have never divested.  I am happy with the change.  I wanted less variance and so do many other investors.  Others, like me, stayed invested since so deep in the hole, was an act of desperation. Not rational but that is what it is.

Ok, but you are not all investors, please don't speak for them. You are also spamming the boards by repeating continuously the same arguments.

[integrity42]

It seems like most investors disagree with mechs.

Mechs doesn't seem to care that some investors will never recover with a 0.25% max bet and Nakowa leaving.  He's pretty selfish to be honest.   If he didn't like the 1% and variance he could have divested.  30,000BTC were happy with it. They stayed in.

Instead, mechs is happy with forcefully implementing 0.25% without consultation to other investors who are massively in the hole.

Very nice.

[Rampion]

When I discovered the max bet today:

I was watching Nakowa playing, losing big time. It was just a matter of minutes for him to go berserk and push max bet to recover his losses. When I saw the max bet going to 0.25%, I thought "OH NO!!!"

IMO Dooglus got overemotional, he was scared by the thought Nakowa could have won another big % of the bankroll. But that was unlikely. Plus, I don't understand all this talk about "making Nakowa stop playing". Nakowa was OUR BEST CUSTOMER. Every casino in the world wants the biggest whales to keep playing. If you need to change things, you do it right, you just do not take a rushed decision to STOP your best customer from playing. That's unfair and totally counter-productive.

Plus, the only chance to recoup the 25% losses we had in a few days was precisely to let Nakowa do his things. Math was on our side. Now, we will probably do not reach break even for months.

Anyhow, respect to dooglus - and full support. It might be a mistake, but he is honest, trustworthy, and very capable. I'm glad I'm invested in his product.

[integrity42]

Uhh..  Is that true?  Mechs convinced dooglus privately to drop the investment %???

If thats true it's totally unfair to other investors without consulting them. 

[Oleander]

This is a matter of math and logic.  Some people argued that the max bet was too high and the variance allowed a whale with a large enough bankroll to win despite the house edge.  There is plenty of evidence lately that this is the case.  Nakowa himself agrees with this and has said so.  Others argued that the max bet had to kept at 1% to give them a chance to recoup their losses.  But this sounds like gambler's fallacy... what's lost is lost, and there is no reversion to the mean to make things right again.

My point is that math is not a democracy.  Voting to set pi equal to 3 does not make it so.

JD is an experiment.  Let's see what happens, analyze some more data and reconsider the max bet.

[mughat]

As many of you know, Just-dice investors lost a lot of BTC to Nakowa.  He currently has 13,000BTC of investor money in his hands. As a result, dooglus lowered the max bet to 0.25%

Nakowa has stated that he will never play again since the max bet has been lowered.

As an investor, Are you happy with lowering the max bet?


EDIT: Some things to consider

PROS:
-- Less variance for investors.

CONS:
-- We must assume for now that Nakowa will not play again (this might change, but he said he won'y play again at this bet size). This means there is no way for investors to recover the 13,000BTC losses.
-- As BTC exchange rate rises bet sizes will drop. As time goes on without nakowa, its possible that the site will never hit +6000 profit making it impossible for some investors to recover their losses.
-- Changing bet size without notice wasn't good for gambler confidence.

If you want less risk simply invest less money. Simple as that. Think about it....

There is no good reason to change the max bet.

[integrity42]

Also Mechs in chat said to Nakowa , he personally does not want him betting there anymore win or lose because hes an asshole. Is this the type of investors other investors want?

+1

Can you imagine a vegas casino running at optimal kelly criterion turning away whales??  Whoever was responsible for that would probably be fired.

[Rampion]

Also Mechs in chat said to Nakowa , he personally does not want him betting there anymore win or lose because hes an asshole. Is this the type of investors other investors want?

Wow, amazing. From one side, if your only chance to quickly recoup those HUGE losses is variance, you don't want to screw up variance. Math and Nakowa's delusional attitude was on our side. From the other side, you just do not scare away the best customer you have (and that probably you will EVER have).

Nakowa has incredibly deep pockets, he is completely delusional and probably sick ("i'm not a gambler", "i found a system", "i spot patterns", "i cannot quit because i always win"), and we scare it away from "our" casino? Are we crazy?

That said, I understand Dooglus, even if I don't approve what he did. I have this attitude towards Nakowa because I am 100% ready to lose all my investment in JD, and that makes me calm and confident. On the other side, Doog has invested a HUGE amount of work on this project. Even if the chance of Nakowa winning the whole bankroll is extremely low, I guess for Dooglus that extremely low probability is high enough to make him VERY nervous. My guess is that he couldn't even stand the thought of seeing another big chunk of the roll go to Nakowa's pockets, so he took a rushed and IMO unfortunate decision.

This is a matter of math and logic.  Some people argued that the max bet was too high and the variance allowed a whale with a large enough bankroll to win despite the house edge.  There is plenty of evidence lately that this is the case.  Nakowa himself agrees with this and has said so.  Others argued that the max bet had to kept at 1% to give them a chance to recoup their losses.  But this sounds like gambler's fallacy... what's lost is lost, and there is no reversion to the mean to make things right again.

My point is that math is not a democracy.  Voting to set pi equal to 3 does not make it so.

JD is an experiment.  Let's see what happens, analyze some more data and reconsider the max bet.

No gamblers fallacy here. Nakowa was lucky, very lucky, unlikely lucky - if he had played long enough, he would have ended up losing. That's no fallacy, that's math, because you do realize that the house has an edge - right?

[Sterling]

How about .5%? Or like, .65%?

[galbros]

should never have been changed without notice.

While I understand how doing this undercut the whale's strategy since it lowered variance... +1 to the above.

It would have been nice to have seen a poll like this BEFORE the change for investors.

[mechs]

Also Mechs in chat said to Nakowa , he personally does not want him betting there anymore win or lose because hes an asshole. Is this the type of investors other investors want?

Well, the was preceeded by him insulting me.  I do not care about Nakowa.  The site needs to be fair, trusted and the best odds out their for players, while a +EV with managable variance for investors. I am thinking long-term, while many of those against change only thinking short-term.

[RationalSpeculator]

Also Mechs in chat said to Nakowa , he personally does not want him betting there anymore win or lose because hes an asshole. Is this the type of investors other investors want?

Well, the was preceeded by him insulting me.  I do not care about Nakowa.  The site needs to be fair, trusted and the best odds out their for players, while a +EV with managable variance for investors. I am thinking long-term, while many of those against change only thinking short-term.

Insults best customer - claims to think long term 

[Rampion]

Also Mechs in chat said to Nakowa , he personally does not want him betting there anymore win or lose because hes an asshole. Is this the type of investors other investors want?

Well, the was preceeded by him insulting me.  I do not care about Nakowa.  The site needs to be fair, trusted and the best odds out their for players, while a +EV with managable variance for investors. I am thinking long-term, while many of those against change only thinking short-term.

Insults best customer - claims to think long term 

lol, you've nailed it.

Sorry mechs, I don't want to be harsh on you, but scaring away the best possible customer for "your" casino doesn't sounds like long-term planning

[mechs]

Also Mechs in chat said to Nakowa , he personally does not want him betting there anymore win or lose because hes an asshole. Is this the type of investors other investors want?

Well, the was preceeded by him insulting me.  I do not care about Nakowa.  The site needs to be fair, trusted and the best odds out their for players, while a +EV with managable variance for investors. I am thinking long-term, while many of those against change only thinking short-term.

Insults best customer - claims to think long term  

lol, you've nailed it.

Sorry mechs, I don't want to be harsh on you, but scaring away the best possible customer for "your" casino doesn't sounds like long-term planning

You think me not liking nakowa and expressing that since he is a known thief and liar effects his behavior.  How many times has he said he will never come back?  If he will only play at the site under conditions which put the site's bankroll in extreme jeopardy, then so be it.  

Let's remember who we are dealing with: http://www.coindesk.com/bitcoin-gambler-cheats-satoshidice-competitor-just-dice-out-of-1300-btc/

Guy is a POS, it the truth.

[mechs]

The 1300 incident is 60/40 Doogs fault. (40 Nak)
This is 60/40 your fault   (40 Doogs)

I think you will soon regret this, as a lot of the other top 10 investors are already are.

1. I do not control Dooglus at all, whatsoever.  
2. I will take the credit, I am happy about the change. Maybe this way you will bitch more at me who could care less about your opinion, rather than to Doog who for some reason cares

[Oleander]

No gamblers fallacy here. Nakowa was lucky, very lucky, unlikely lucky - if he had played long enough, he would have ended up losing. That's no fallacy, that's math, because you do realize that the house has an edge - right?

The point is that he doesn't have to play long enough to lose.  He's demonstrated over and over again that his bankroll is big enough that he can let variance take him into positive territory, and walk away.

The Kelly Criterion applies to situations where the player with the edge can keep betting as long as he likes.  With JD, the house has the edge, but can't initiate bets.

[Rampion]

Also Mechs in chat said to Nakowa , he personally does not want him betting there anymore win or lose because hes an asshole. Is this the type of investors other investors want?

Well, the was preceeded by him insulting me.  I do not care about Nakowa.  The site needs to be fair, trusted and the best odds out their for players, while a +EV with managable variance for investors. I am thinking long-term, while many of those against change only thinking short-term.

Insults best customer - claims to think long term  

lol, you've nailed it.

Sorry mechs, I don't want to be harsh on you, but scaring away the best possible customer for "your" casino doesn't sounds like long-term planning

You think me not liking nakowa and expressing that since he is a known thief and liar effects his behavior.  How many times has he said he will never come back?  If he will only play at the site under conditions which put the site's bankroll in extreme jeopardy, then so be it.  

Let's remember who we are dealing with: http://www.coindesk.com/bitcoin-gambler-cheats-satoshidice-competitor-just-dice-out-of-1300-btc/

Guy is a POS, it the truth.

Well, the 1300BTC issue was ludicrous at best, good it was solved well by Dooglus. But the fact he is a liar and that he keeps saying he will never come back, while he keeps coming back, is in fact GOOD for you - don't you see?. Do not you realize that he has all the traits of a degenerate gambler that will end up losing EVERYTHING?

TL;DR: Unless he is cheating (and there's no evidence whatsoever on that), you want him in your casino. Precisely because of how he plays, precisely because of how he is.

[Rampion]

No gamblers fallacy here. Nakowa was lucky, very lucky, unlikely lucky - if he had played long enough, he would have ended up losing. That's no fallacy, that's math, because you do realize that the house has an edge - right?

The point is that he doesn't have to play long enough to lose.  He's demonstrated over and over again that his bankroll is big enough that he can let variance take him into positive territory, and walk away.

The Kelly Criterion applies to situations where the player with the edge can keep betting as long as he likes.  With JD, the house has the edge, but can't initiate bets.

You are implying that each time he "walks away" the "luck clock" resets? That's the fallacy. He might stop to eat/sleep/whatever, but from a mathematical point of view he is not stopping. It doesn't matter the house cannot "initiate bets", Nakowa is initiating bets non-stop. In mathematical terms, he never "walks away", he never "stops" until he quits playing for good and never plays again. Do you understand that?

As the very same dooglus wrote:

Nakowa doesn't stop playing.  He pauses to sleep when he's ahead, but then he plays again.  As far as the numbers are concerned his bets are a single continuous stream.  He's playing right now.  He didn't "quit when he was ahead", he just paused for some hours.

TL;DR: he just needs to keep playing as he is playing right now, and he will end up losing it all. End-of-the-story. There's no way of "beating the edge" with large enough numbers. You want him in your casino, you NEED him on your casino....

[integrity42]

mechs, do you even realize why most people here are disagreeing with you?

Because they understand math.  They know that 1% is the most profitable bet size.  

For someone who claims to think 'long-term' you would know that mathematically nakowa would lose all his bankroll if we allowed him to keep playing. So, you obviously don't think 'long-term', or you're not intelligent enough to understand kelly criterion or mathematica. You think short term because you are a greedy investor who wants the bet size dropped at the expense of other investors who are down and will never be able to recover their losses.

I'll say it again.  You're basically just greedy and selfish and only thinking about yourself. You want all the reward without the risk at the expense of other investors who now will never recoup their losses.   

[mechs]

mechs, do you even realize why most people here are disagreeing with you?

Because they understand math.  They know that 1% is the most profitable bet size.  

For someone who claims to think 'long-term' you would know that mathematically nakowa would lose all his bankroll if we allowed him to keep playing.

So, you obviously don't think 'long-term'. You think short term because you are a greedy investor who wants the bet size dropped at the expense of other investors who are down and will never be able to recover their losses.

You're basically just greedy and selfish.  You want all the reward without the risk at the expense of other investors who now will never recoup their losses.

Once again, I have an opinion but I am not a deicison make.  And yes, I want to make profit just as the players do.

[integrity42]

...At the expense of other investors who are down and won't be able to recover their losses because Nakowa won't play anymore.  Because of you.

You've fucked a lot of people out of your own selfishness and greed.

The 30,000BTC investors should have been given a fair chance to win back their losses from Nakowa.  They have been fraudulently robbed of that possibility without any warning.

[Rampion]

mechs, do you even realize why most people here are disagreeing with you?

Because they understand math.  They know that 1% is the most profitable bet size.  

For someone who claims to think 'long-term' you would know that mathematically nakowa would lose all his bankroll if we allowed him to keep playing.

So, you obviously don't think 'long-term'. You think short term because you are a greedy investor who wants the bet size dropped at the expense of other investors who are down and will never be able to recover their losses.

You're basically just greedy and selfish.  You want all the reward without the risk at the expense of other investors who now will never recoup their losses.

Once again, I have an opinion but I am not a deicison make.  And yes, I want to make profit just as the players do.

Well, you actually destroyed any short-term profit expectation for those of us who actually understand a bit of math and gambler's psychology, and also understood what kind of investment JD was, and therefore DID NOT DIVEST during the huge negative variance caused by Nakowa. You scared our best customer away by lowering the max bet he loves while he was playing, now we are roughly 30% down, and it will probably take many months to just reach b/e.

Man, do you realize that guy loves to make 300BTC bets? And he thinks he actually has a system that beats the house edge? And he says he is not a gambler and he just kept coming back? What would you think that guy would have done when he started to lose big? I'll tell you: he would have lost more, faster (just look how fast he lost the last 1,000BTC he sent to the site today, compared to the first 1,820BTC). That's basic human psychology at work. Nakowa is the prototypical gambler, he has EXTREMELY DEEP POCKETS, and you scared him away just because there was a minuscule chance that he could have won the whole roll?

Anyhow, anyone better than me at math could calculate what was the exact probability of him winning the whole bankroll, considering that:

• he has aprox 23K BTC
• house bankroll was aprox. 30k BTC at that moment
• house edge is 1%
• max profit is 1% of house bankroll

Mechs, I saw you in the chat: while we were all commenting how "percentage/nakowa" was gambling, you were whining. "I don't want to see this", "i feel bad", "i know how this story ends, he always starts losing big and then he goes up +6k btc", blah blah blah (I quoted you very loosely but you know that's the spirit of what you were saying). Shortly after Doog lowered the max profit.

You know what? You were just crapping your pants, you were overemotional and you didn't act rationally, triggering a -EV decision (lowering max profit, pissing off the whale). "i know how this story ends"? YES, YOU SHOULD HAVE KNOWN. MATHS HAVE NO FEELINGS. THE STORY ENDS NAKOWA ENDS UP LOSING EVERYTHING IF YOU LET HIM PLAY LONG ENOUGH. Unless you crap your pants and scare him...

[theskillzdatklls]

0.25% is way too nitty.  It was also really bad form to do it to single out the best customer of all time.

0.5% I think makes the house virtually bankrupt proof yet exposes everything to decent levels of risk.  I'd almost be in favor of lowering house edge to 0.9% with a 0.5% max bet.  I'm saying this all as an investor.

[lucasjkr]

Wait, let me get this straight.

People develop bitcoin gaming website, including all of the logic behind it;

Users comes along and play at site;

One user in particular does a lot of business on the site. I'd assume that the site didn't have any programming errors, so that generally while some months he won, others he lost.

User upped the stakes (within the parameters set up by the site), and happened to win big (against very high odds).

That seems to be expected; if the site couldn't withstand that sort of potential loss, it shouldn't have offered that sort of bet in the first place. But it accepted that bet and lost; he doesn't have the "investors" money, he has the money he won fair and square. And after taking that sort of loss, unless continuing to offer those stakes is unfeasible, the last thing you want to do chase him away from the site altogether, followed by not lowering the amount he can bet. If anything, you should have given him an even longer shot to bet at, in order to hasten the recouping of your losses.

can't really believe this, though... was site just paying out all it's income without regard for maintaining a reserve so that it could withstand an occassional loss of this size? Because if anything, this should have been a GREAT advertisement for the site (people WANT to know that it's possible to win, and possible to win big time); Just seems like this none of this should even be up for discussion, just a standard risk of doing business (again, if the site offered that sort of bet, the fact that someone actually won it shouldn't be a surprise; even the longest of long shots happen given enough time. Sometimes it'll happen on the first interation othertimes, it'll wait until the billionth.

[dooglus]

If you want less risk simply invest less money. Simple as that. Think about it....

There is no good reason to change the max bet.

Investing less money doesn't change the risk of ruin (ie. of the site going bust).  Whatever you invested, you were risking 1% of it per roll.

I have temporarily set the max profit to 0.25% because with it at 1% nakowa was able to take huge chunks of the bankroll over and over, as he has demonstrated time and time again.  To make matters worse, each time he takes a chunk of the bankroll, more investors lose faith and divest, resulting in the bankroll shrinking even faster.

Risking 1% of the bankroll per bet turned out to incur a much greater risk of ruin than I had anticipated, and so I made the change to 0.25% in an attempt to prevent ongoing huge losses.  At no point was it intended to be "the solution"; it's a stopgap fix until I can put something better in place.  I need to seriously reconsider allowing investors to somehow set their own risk level.  If some want to risk 0.25% per bet and others want to risk 1% then I don't see why I shouldn't let them.

If nakowa continues to win, the 1% people risk going bust, while the 0.25% people gain an ever increasing share of the remaining bankroll.  Eventually all remaining investors (the cautious ones) will be risking 0.25% and we'll be back where we are now, and the 1% investors will have had the chance they're asking for - risk big to win big.

If nakowa does blow up one day, the 1% people get the lion's share of his losses, which they will deserve for 'keeping the faith'.

Of course, maybe he'll never return whatever happens; who can say?  I know he has said many times before that he has quit.

[dooglus]

The Kelly Criterion applies to situations where the player with the edge can keep betting as long as he likes.

I don't think that's true.  It applies even when you're faced with the opportunity of a single +EV bet, and tells you how much you should risk on it.

[integrity42]

Investing less money doesn't change the risk of ruin (ie. of the site going bust).  Whatever you invested, you were risking 1% of it per roll.

I have temporarily set the max profit to 0.25% because with it at 1% nakowa was able to take huge chunks of the bankroll over and over, as he has demonstrated time and time again.  To make matters worse, each time he takes a chunk of the bankroll, more investors lose faith and divest, resulting in the bankroll shrinking even faster.

Risking 1% of the bankroll per bet turned out to incur a much greater risk of ruin than I had anticipated, and so I made the change to 0.25% in an attempt to prevent ongoing huge losses.  At no point was it intended to be "the solution"; it's a stopgap fix until I can put something better in place.  I need to seriously reconsider allowing investors to somehow set their own risk level.  If some want to risk 0.25% per bet and others want to risk 1% then I don't see why I shouldn't let them.

If nakowa continues to win, the 1% people risk going bust, while the 0.25% people gain an ever increasing share of the remaining bankroll.  Eventually all remaining investors (the cautious ones) will be risking 0.25% and we'll be back where we are now, and the 1% investors will have had the chance they're asking for - risk big to win big.

If nakowa does blow up one day, the 1% people get the lion's share of his losses, which they will deserve for 'keeping the faith'.

Of course, maybe he'll never return whatever happens; who can say?  I know he has said many times before that he has quit.

Dooglus, thanks for your (as always) level-headed and professional response.  Emotions are certainly running high.  

Would you consider raising the max bet to 0.50% as a compromise? It might allow Nakowa to come back, and give the 30,000BTC investors a chance to recover their losses.  I assume it will take you weeks or months to roll out the custom-risk feature and Nakowa will probably be long gone by then.

Also, would you consider that it would be good idea to warn gamblers ahead of time before making big changes like the max bet?

EDIT: Rumor has it that Balotelli was in the middle of a martingale strategy when the max bet was changed and ruined his play. To set a precedent like that is terrible for the site from a gamblers confidence perspective and very bad from a professionalism point of view to do it without warning.

[lucasjkr]

I have temporarily set the max profit to 0.25% because with it at 1% nakowa was able to take huge chunks of the bankroll over and over, as he has demonstrated time and time again.  

Are you saying that he does have a system that works? Have you checked your random number generator (maybe it's being run in a VM, which are notorious for not providing enough enthropy to the OS?)? It just seems extreme that the administrator of a gambling site is afraid of one gambler causing him ruin, and that that one user apparently does so consistently?

[nicolaennio]

I think dooglus did an excellent choice and was brave enough to make it on time.

Now we are having this discussion but consider a parallel universe where this afternoon nakowa was max betting 300 euros and the bankroll was down to 20K. Then we would not see "paladins of the kelly criterion", "defender of the justice of the never changing website" or the people who "disagree on lowering the max bet". We would see a mob of angry people who would claim the website is scam, nakowa is dooglus and that the bitcoins were just stolen. Dooglus would be in quite much trouble NO MATTER HOW MUCH MATH HE COULD EXPLAIN.

No one could foresee the whale betting 13M and dooglus made the wise choice of lowering the variance, at least for the sake of proving that nakowa is not cheating us.

If I were him I would have 0.001% max bet, I felt we still risked a bit this afternoon :-)

[integrity42]

That would have to be the most brilliant long-con of all time, but I doubt it.  I also don't understand the logic of pushing away the largest gambler as long as your bet limits are within kelly criterion.  Dooglus understands math, so my only explanation is that mechs caught him at an emotional time and convinced him to make a poor and emotional decision.


EDIT:  The poll currently shows that nearly 70% disagree with lowering the max bet.

[mughat]

If you want less risk simply invest less money. Simple as that. Think about it....

There is no good reason to change the max bet.

Investing less money doesn't change the risk of ruin (ie. of the site going bust).  Whatever you invested, you were risking 1% of it per roll.

I have temporarily set the max profit to 0.25% because with it at 1% nakowa was able to take huge chunks of the bankroll over and over, as he has demonstrated time and time again.  To make matters worse, each time he takes a chunk of the bankroll, more investors lose faith and divest, resulting in the bankroll shrinking even faster.

Risking 1% of the bankroll per bet turned out to incur a much greater risk of ruin than I had anticipated, and so I made the change to 0.25% in an attempt to prevent ongoing huge losses.  At no point was it intended to be "the solution"; it's a stopgap fix until I can put something better in place.  I need to seriously reconsider allowing investors to somehow set their own risk level.  If some want to risk 0.25% per bet and others want to risk 1% then I don't see why I shouldn't let them.

If nakowa continues to win, the 1% people risk going bust, while the 0.25% people gain an ever increasing share of the remaining bankroll.  Eventually all remaining investors (the cautious ones) will be risking 0.25% and we'll be back where we are now, and the 1% investors will have had the chance they're asking for - risk big to win big.

If nakowa does blow up one day, the 1% people get the lion's share of his losses, which they will deserve for 'keeping the faith'.

Of course, maybe he'll never return whatever happens; who can say?  I know he has said many times before that he has quit.

Setting your own risk % would be great! I can't wait for that to be implemented

[Rampion]

If you want less risk simply invest less money. Simple as that. Think about it....

There is no good reason to change the max bet.

Investing less money doesn't change the risk of ruin (ie. of the site going bust).  Whatever you invested, you were risking 1% of it per roll.

I have temporarily set the max profit to 0.25% because with it at 1% nakowa was able to take huge chunks of the bankroll over and over, as he has demonstrated time and time again.  To make matters worse, each time he takes a chunk of the bankroll, more investors lose faith and divest, resulting in the bankroll shrinking even faster.

Risking 1% of the bankroll per bet turned out to incur a much greater risk of ruin than I had anticipated, and so I made the change to 0.25% in an attempt to prevent ongoing huge losses.  At no point was it intended to be "the solution"; it's a stopgap fix until I can put something better in place.  I need to seriously reconsider allowing investors to somehow set their own risk level.  If some want to risk 0.25% per bet and others want to risk 1% then I don't see why I shouldn't let them.

If nakowa continues to win, the 1% people risk going bust, while the 0.25% people gain an ever increasing share of the remaining bankroll.  Eventually all remaining investors (the cautious ones) will be risking 0.25% and we'll be back where we are now, and the 1% investors will have had the chance they're asking for - risk big to win big.

If nakowa does blow up one day, the 1% people get the lion's share of his losses, which they will deserve for 'keeping the faith'.

Of course, maybe he'll never return whatever happens; who can say?  I know he has said many times before that he has quit.

In my book Nakowa just demonstrated he is up 13k, which is unlikely but very possible. And today he lost aprox. 3k.

Then, I'm assuming you calculated the "ruin risk" before taking such a decision: could you share with us what is the precise probability of Nakowa ruining the Casino, considering 1% max profit and a 23k roll for the Whale?

My "guesstimate" is that it's totally negligible.

Secondly, you speak about 1% max profit investors are "keeping the faith". In what?

In the site NOT being rigged, or in math and probability?

I've absolute faith in you, and therefore on the site. And you simply do not "have faith" in math and probability.

[tucenaber]

mechs, do you even realize why most people here are disagreeing with you?

Because they understand math.  They know that 1% is the most profitable bet size.  

For someone who claims to think 'long-term' you would know that mathematically nakowa would lose all his bankroll if we allowed him to keep playing.

So, you obviously don't think 'long-term'. You think short term because you are a greedy investor who wants the bet size dropped at the expense of other investors who are down and will never be able to recover their losses.

You're basically just greedy and selfish.  You want all the reward without the risk at the expense of other investors who now will never recoup their losses.

Once again, I have an opinion but I am not a deicison make.  And yes, I want to make profit just as the players do.

Well, you actually destroyed any short-term profit expectation for those of us who actually understand a bit of math and gambler's psychology, and also understood what kind of investment JD was, and therefore DID NOT DIVEST during the huge negative variance caused by Nakowa. You scared our best customer away by lowering the max bet he loves while he was playing, now we are roughly 30% down, and it will probably take many months to just reach b/e.

Man, do you realize that guy loves to make 300BTC bets? And he thinks he actually has a system that beats the house edge? And he says he is not a gambler and he just kept coming back? What would you think that guy would have done when he started to lose big? I'll tell you: he would have lost more, faster (just look how fast he lost the last 1,000BTC he sent to the site today, compared to the first 1,820BTC). That's basic human psychology at work. Nakowa is the prototypical gambler, he has EXTREMELY DEEP POCKETS, and you scared him away just because there was a minuscule chance that he could have won the whole roll?

Anyhow, anyone better than me at math could calculate what was the exact probability of him winning the whole bankroll, considering that:

• he has aprox 23K BTC
• house bankroll was aprox. 30k BTC at that moment
• house edge is 1%
• max profit is 1% of house bankroll

Mechs, I saw you in the chat: while we were all commenting how "percentage/nakowa" was gambling, you were whining. "I don't want to see this", "i feel bad", "i know how this story ends, he always starts losing big and then he goes up +6k btc", blah blah blah (I quoted you very loosely but you know that's the spirit of what you were saying). Shortly after Doog lowered the max profit.

You know what? You were just crapping your pants, you were overemotional and you didn't act rationally, triggering a -EV decision (lowering max profit, pissing off the whale). "i know how this story ends"? YES, YOU SHOULD HAVE KNOWN. MATHS HAVE NO FEELINGS. THE STORY ENDS NAKOWA ENDS UP LOSING EVERYTHING IF YOU LET HIM PLAY LONG ENOUGH. Unless you crap your pants and scare him...

I agree completely with you.

To answer your question:

There is no way to completely beat the house since only 1% of the money can be taken in each bet. But he could take e.g. 90% or 95%.

assuming he bets max all the time, he can lose log(23000/30000+1)/log(1.01)-1 = 57 bets in a row before going bust
and he can win log(1-0.9)/log(0.99) =229 before taking 90% of investments.

So the risk of him winning 90% is (r^57-1)/(r^(57+229)-1) = 0.7%. (r=0.495/0.505)
The risk of taking 95% is 0.17%

(I think)

[RationalSpeculator]

Risking 1% of the bankroll per bet turned out to incur a much greater risk of ruin than I had anticipated...

If nakowa continues to win, the 1% people risk going bust ...

 

Dooglus, please explain how high the risk is to go bust when 1% max bet?

From the simulations done the worst case scenario was losing 80% of bankroll.

Never did it happen that the bankroll went bust and in the end the whale always lost everything.

How high are the chances for this to happen, if any?

[TheFuneral]

As many of you know, Just-dice investors lost a lot of BTC to Nakowa.  He currently has 13,000BTC of investor money in his hands. As a result, dooglus lowered the max bet to 0.25%

Nakowa has stated that he will never play again since the max bet has been lowered.

As an investor, Are you happy with lowering the max bet?


EDIT: Some things to consider

PROS:
-- Less variance for investors.

CONS:
-- We must assume for now that Nakowa will not play again (this might change, but he said he won'y play again at this bet size). This means there is no way for investors to recover the 13,000BTC losses.
-- As BTC exchange rate rises bet sizes will drop. As time goes on without nakowa, its possible that the site will never hit +6000 profit making it impossible for some investors to recover their losses.
-- Changing bet size without notice wasn't good for gambler confidence.

If you want less risk simply invest less money. Simple as that. Think about it....

There is no good reason to change the max bet.

isn't that the whole reason why the site was made this way? So it could be left alone? Looks like emotions are sneaking in.

[Peter R]

PROBLEM 1: We have mis-treated our best customer by changing the max bet as he was playing, without evidence that he ever cheated.

Is there some way we can spin this into a positive?  Admit that we mistreated him and then give him VIP status (like his name in the data stream in a more bling-bling colour, his name on a Wall of Fame or Greatest all time Gamblers, some other idea to stoke his ego???)  He asked earlier "don't you think I proved a point?"  Well, he did: he proved that we were not as confident in our advantage as we thought we were.  He deserves some cred here... 


PROBLEM 2: Are we 100% confident that 1% max bet does in fact optimize profits over the long term given fair dice rolls (e.g., does the Kelly criteria consider the dynamic nature of the max bet size and the size of the gambler's bankroll)?

If we do know this as fact, then I don't understand any rationale to make the site "sub-optimal": wouldn't you just be trading expected profits for a more stable income?  If you want more stable profits, then diversify! 

[integrity42]

The number of people disagreeing with Dooglus outnumbers those agreeing by 2:1.

I hope he reconsiders what he's done.  He listened to mechs instead of listening to 30,000BTC in investors who left their money in at 1%.

[mughat]

The number of people disagreeing with Dooglus outnumbers those agreeing by 2:1.

I hope he reconsiders what he's done.  He listened to mechs instead of listening to 30,000BTC in investors who left their money in at 1%.

+1  
Setting your own risk % is the solution to this madness.

[RationalSpeculator]

Dooglus, and all others that are for lowering the max bet:

Are you aware that expected returns are lower than 50% per year without the whale?

[Peter R]

The number of people disagreeing with Dooglus outnumbers those agreeing by 2:1.

I hope he reconsiders what he's done.  He listened to mechs instead of listening to 30,000BTC in investors who left their money in at 1%.

+1  
Setting your own risk % is the solution to this madness.

What would happen then if I always increased my risk % to something high like 2.5% when the fishes were playing, and then decreased back to 0.25% when a whale comes along?  

[integrity42]

What would happen then if I always increased my risk % to 25% when the fishes were playing, and then decreased back to 0.25% when a whale comes along?  

What will happen is that smart investors with bots will take a majority of the winnings when small fish are playing, and then will drop down to 0.25% when the whales play. Fucking the low-risk investors like mechs who will be stuck at 0.25% by diluting them.

This is exactly the bot that I will be coding.  If it is released as open-source and everybody uses it, you will see wild fluctuations  of max bet size when whales start playing.  This will have the effect of scaring away whales and large bettors who will see the max bet size drop as soon as they start martingaling or playing large.

Of course it would be fairer to all investors if the max bet was static at 0.50%  or 1%, but now investors will be gambling against each-other by diluting each-other at the right times.

[Oleander]

PROBLEM 2: Are we 100% confident that 1% max bet does in fact optimize profits over the long term given fair dice rolls (e.g., does the Kelly criteria consider the dynamic nature of the max bet size and the size of the gambler's bankroll)?

There is some disagreement on this.  I've argued that the JD situation is different enough from the Kelly model that the 1% max bet is not necessarily optimal.  And I think that Nakowa is evidence of this.  Others think the Kelly Criterion is applicable, and all we need to do is wait for Nakowa to go bust.

It's a difficult question... probabilities are notoriously counter-intuitive.

Since we have people who believe in the Kelly Criterion despite our recent experience, maybe the best solution all around is to let investors set their max bet percentage individually.  If the Kelly supporters are right, they'll prosper in the long run.

[tucenaber]

The number of people disagreeing with Dooglus outnumbers those agreeing by 2:1.

I hope he reconsiders what he's done.  He listened to mechs instead of listening to 30,000BTC in investors who left their money in at 1%.

+1  
Setting your own risk % is the solution to this madness.

What would happen then if I always increased my risk % to something high like 2.5% when the fishes were playing, and then decreased back to 0.25% when a whale comes along?  

You will lose the big wins. Think of it as a less extreme version of divesting when the whale comes along.

[Oleander]

What will happen is that smart investors with bots will take a majority of the winnings when small fish are playing, and then will drop down to 0.25% when the whales play. Fucking the low-risk investors like mechs who will be stuck at 0.25%.

This is exactly the bot that I will be coding.

This is no different in principle from divesting when the whales play.  It's not a new problem.

And really, switching between 1% and .25% is less of a problem than switching between 1% and 0%.

[jgarzik]

+1  
Setting your own risk % is the solution to this madness.

Indeed.  Let investors (the market) decide.  It is their money being risked.

[Deprived]

Either he was cheating or he wasn't.

If he was cheating (which I still believe VERY unlikely) then the solution is to fix whatever needs fixing to stop the cheating working - lowering max bet would be shuffling the deck chairs on the Titanic.

If he wasn't cheating then it's a pity to have changed J-D from being the site whose motto could have been "we welcome whales" to "we shit our pants if a whale swims anywhere near".

And mechs not wanting him to play there because he thinks the whale is an asshole is stupidity climbing to a new peak.  If I offer -EV bets then I'd FAR prefer to have assholes betting against me than people I actually like.  But I'd happily take action from either - that's what the business is for.

The problem I see here is predominantly one of fear from people who want to dump all/a large part of their investment in J-D and treat it like a bank.  Rather than treating it as just one high-variance/high-expectation item in a diverse investment portfolio.

I personally divested yesterday for the first time - but only because I needed more liquid BTC immediately after BTC-TC announced closure (to try to grab some bargains - the few hundred BTC I keep as cash having been used to buy my own investors on BTC-TC/LTC-Global out immediately at full value).  Those funds would have been returning to J-D within weeks - they still might, but if the site loses its big action then EV is going to fall a lot (I don't care about variance - my own bankroll management handles that).

EDIT:  I have no problem with the idea of investors setting their own risk level.  I wasn't keen on it - but it's far preferable to the house using a non-optimal kelly that we can't compensate for.

[Peter R]

The number of people disagreeing with Dooglus outnumbers those agreeing by 2:1.

I hope he reconsiders what he's done.  He listened to mechs instead of listening to 30,000BTC in investors who left their money in at 1%.

+1  
Setting your own risk % is the solution to this madness.

What would happen then if I always increased my risk % to something high like 2.5% when the fishes were playing, and then decreased back to 0.25% when a whale comes along?  

You will lose the big wins. Think of it as a less extreme version of divesting when the whale comes along.

OK that makes sense.  But what if I also increase to *over* 1% when the fishes are playing?  Like Oleander pointed out, would I not be diluting all the other investors that don't actively manage their account?

[integrity42]

The number of people disagreeing with Dooglus outnumbers those agreeing by 2:1.

I hope he reconsiders what he's done.  He listened to mechs instead of listening to 30,000BTC in investors who left their money in at 1%.

+1  
Setting your own risk % is the solution to this madness.

What would happen then if I always increased my risk % to something high like 2.5% when the fishes were playing, and then decreased back to 0.25% when a whale comes along?  

You will lose the big wins. Think of it as a less extreme version of divesting when the whale comes along.

OK that makes sense.  But what if I also increase to *over* 1% when the fishes are playing?  Like Oleander pointed out, would I not be diluting all the other investors that don't actively manage their account?

What stops a big investor with 10,000 coins taking their risk to 5% when small fish are playing. Then when whales play, their bot automatically drops the risk to 0.25%, diluting investors like mechs.?

So large investors with a bot that actively manages the risk will fuck smaller investors?

Either way, I think if the max bet is constantly changing so drastically, then whales won't play.

[Deprived]

The number of people disagreeing with Dooglus outnumbers those agreeing by 2:1.

I hope he reconsiders what he's done.  He listened to mechs instead of listening to 30,000BTC in investors who left their money in at 1%.

+1  
Setting your own risk % is the solution to this madness.

What would happen then if I always increased my risk % to something high like 2.5% when the fishes were playing, and then decreased back to 0.25% when a whale comes along?  

You will lose the big wins. Think of it as a less extreme version of divesting when the whale comes along.

OK that makes sense.  But what if I also increase to *over* 1% when the fishes are playing?  Like Oleander pointed out, would I not be diluting all the other investors that don't actively manage their account?

Easily fixed - only allow people to change their risk level once per day.  Then people can't game it - and have to pick the risk level they'll take for ALL action.  The house doesn't need backing for the small bets - so if you want a share of those you should also have to take a similar part of the big action.  People could still divest/reinvest when whales were around - but there's no stopping that whilst giving people control of their money.  And the people who routinely divested when he bet before at 1% risk will likely do the same at .25% risk if a whale starts winning again - so it's not a new problem.

[Peter R]

The number of people disagreeing with Dooglus outnumbers those agreeing by 2:1.

I hope he reconsiders what he's done.  He listened to mechs instead of listening to 30,000BTC in investors who left their money in at 1%.

+1  
Setting your own risk % is the solution to this madness.

What would happen then if I always increased my risk % to something high like 2.5% when the fishes were playing, and then decreased back to 0.25% when a whale comes along?  

You will lose the big wins. Think of it as a less extreme version of divesting when the whale comes along.

OK that makes sense.  But what if I also increase to *over* 1% when the fishes are playing?  Like Oleander pointed out, would I not be diluting all the other investors that don't actively manage their account?

What stops a big investor with 10,000 coins taking their risk to 5% when small fish are playing. Then when whales play, their bot automatically drops the risk to 0.25%, diluting investors like mechs.?

So large investors with a bot that actively manages the risk will fuck smaller investors?

Either way, I think if the max bet is constantly changing so drastically, then whales won't play.

Haha!  So the logical investor strategy would be to actively manage.  Just-Dice would be a tease: advertise 500 BTC max bets, and then as soon as we attract a whale and start to dance, the max bet plummets. 

[tucenaber]

You will lose the big wins. Think of it as a less extreme version of divesting when the whale comes along.

OK that makes sense.  But what if I also increase to *over* 1% when the fishes are playing?  Like Oleander pointed out, would I not be diluting all the other investors that don't actively manage their account?

Hmm, yes. That way you could get closer the true kelly criterion. But you will not be able to react to a sudden max bet, and that will have a bad effect in the long run for you.

[Jls.]

Easily fixed - only allow people to change their risk level once per day.  Then people can't game it - and have to pick the risk level they'll take for ALL action.  The house doesn't need backing for the small bets - so if you want a share of those you should also have to take a similar part of the big action.  People could still divest/reinvest when whales were around - but there's no stopping that whilst giving people control of their money.  And the people who routinely divested when he bet before at 1% risk will likely do the same at .25% risk if a whale starts winning again - so it's not a new problem.

1 - Setup multiple JD account.
2 - Setup a bot which use inputs.io withdraws / deposits  (or any offchain wallet) to move funds from one account (0.25%) to another (1%).

If we decide to create this market of risk management, it should at least be capped to 1%.

[integrity42]

Restricting investors to change their max risk only once a day would be a terrible idea!!!!!

If they can't lower their max risk, they will just instantly divest everything, wait for the 24hr period to be over, and re-invest at a lower rate. And that would be WORSE for the max bet fluctuating!!!

[integrity42]

1 - Setup multiple JD account.
2 - Setup a bot which use inputs.io (or any offchain wallet) withdraws / deposits to move funds from one account (0.25%) to another (1%).

Brilliant.  Guess that fucks over any plan to restrict investors changing their max bet.

Also, if high-risk investors can't change their risk%, they will just divest when whales play, leading to massive fluctuations in bet size that is even worse then today.  (Dooglus can't stop people from divesting all whenever they want)

So, somene can deposit 10,000BTC and set my risk to 10%. They get most the winnings from the whole site from small investors. When whales play, they automatically divest.  If someone writes an open-source bot running this and other investors use it, the site will have massive max bet fluctuations. 

Thats TERRIBLE for gamblers.

[Peter R]

PROBLEM 2: Are we 100% confident that 1% max bet does in fact optimize profits over the long term given fair dice rolls (e.g., does the Kelly criteria consider the dynamic nature of the max bet size and the size of the gambler's bankroll)?

There is some disagreement on this.  I've argued that the JD situation is different enough from the Kelly model that the 1% max bet is not necessarily optimal.  And I think that Nakowa is evidence of this.  Others think the Kelly Criterion is applicable, and all we need to do is wait for Nakowa to go bust.

It's a difficult question... probabilities are notoriously counter-intuitive.

Since we have people who believe in the Kelly Criterion despite our recent experience, maybe the best solution all around is to let investors set their max bet percentage individually.  If the Kelly supporters are right, they'll prosper in the long run.

Thanks Oleander.  Is there a thread where you argue your viewpoint on this?

[Kupsi]

What stops a big investor with 10,000 coins taking their risk to 5% when small fish are playing. Then when whales play, their bot automatically drops the risk to 0.25%, diluting investors like mechs.?

So large investors with a bot that actively manages the risk will fuck smaller investors?

Either way, I think if the max bet is constantly changing so drastically, then whales won't play.

It can be done this way...

Let's say you invest 100 BTC and I 200 BTC. You have 0.25% risk and I 1% risk. Maximum profit will then be 2.25 BTC.

When someone makes a bet with a potential profit of 0.3 BTC. We both risk 0.1%.
When someone makes a bet with a potential profit of 0.6 BTC. We both risk 0.2%.
When someone makes a bet with a potential profit of 1 BTC. You risk 0.25% and I risk 0.375%.
When someone makes a bet with a potential profit of 2.25 BTC. You risk 0.25% and I risk 1%.

Everybody will benefit from the small players, and investors with big risk will benefit extra from the big players. Big investors have no reason to increase the risk only when small fish play because it don't increase their profit.

[geofflosophy]

The number of people disagreeing with Dooglus outnumbers those agreeing by 2:1.

I hope he reconsiders what he's done.  He listened to mechs instead of listening to 30,000BTC in investors who left their money in at 1%.

+1  
Setting your own risk % is the solution to this madness.

What would happen then if I always increased my risk % to something high like 2.5% when the fishes were playing, and then decreased back to 0.25% when a whale comes along?  

You will lose the big wins. Think of it as a less extreme version of divesting when the whale comes along.

OK that makes sense.  But what if I also increase to *over* 1% when the fishes are playing?  Like Oleander pointed out, would I not be diluting all the other investors that don't actively manage their account?

Easily fixed - only allow people to change their risk level once per day.  Then people can't game it - and have to pick the risk level they'll take for ALL action.  The house doesn't need backing for the small bets - so if you want a share of those you should also have to take a similar part of the big action.  People could still divest/reinvest when whales were around - but there's no stopping that whilst giving people control of their money.  And the people who routinely divested when he bet before at 1% risk will likely do the same at .25% risk if a whale starts winning again - so it's not a new problem.

I think you guys are missing the point. We're talking about the max risk, which, assuming a fixed payout of 1:1 (which is how Nakowa always gambles), is essentially the same as a max bet size. If you have your risk tolerance set to 0.25%, you will be invested in all bets below 0.25%. Increasing this to 2% when there is no one betting > 0.25% of the roll will not give you increased returns. So the max bet would actually be a weighted average of people's investment and tolerance, but everyone would get equal returns on all bets, with the return being capped on large bets to the level of their risk tolerance; i.e. every bet on the site other than Nakowa's.

This actually wouldn't be that difficult to implement mathematically, only slightly more so than the current investment math. You could even set it up with two or more baskets of risk like the design of Betterment: one basket where you're willing to risk say 0.25% and another where you're willing to risk maybe 10%.

Two more points of emphasis:
1. In gambling, specifically poker, a whale is a "big fish." This is not the same as a "shark," who eats fish and whales. <-- Point being they're both prey animals
2. You guys are all barking about how we've chased Nakowa away, yet most of these posts came after he shipped 3k back today at the lower levels; there was only one post in the whole thread that acknowledged this. Now, the losing might scare him off, but if he's as addicted as we all believe he is he'll be back, he has nowhere else to go. Where else will he be able to get such high max bets with such low edge.

P.S. For the record, I voted "No" to the thread poll, I don't think the size should have changed
P.P.S. Kupsi made this point as well before I published, but I'd already type it up so maybe some people will benefit from my explanation vs his.

[Rampion]

I believe there are two factors we should consider when discussing this matter:

MATHS:

Kelly Criterion works just fine, but the fact is that Nakowa's bankroll is many orders of magnitude bigger than the average player's, and so is his average bet. He is virtually the only one going nowhere near the "max bet". This just means that himself alone can provoke huge variance - but if he plays long enough, it will even out.

PSYCHOLOGY:

From one side, its definitely the casino's ally. If you understand this business, you simply know that Nakowa is either a) a cheater or b) the absolute best customer you can probably EVER have. Let's remember that there's absolute no evidence for a), and that:

Nakowa is the kind of guy willing to gamble $40k every 5 seconds during 3/4 hours

From the other side, you have a mob of whiners or angry "investors" who treat JD as a bank, and these guys are obviously ready to spread FUD about JD and Dooglus if they see their investment shrink by %25 in a few days due to variance. Some of this "investors" are ready to crap their pants by disinvesting probably because they do not understand in what they were investing in the first place, and this could create a "bank run" effect if the whale has another lucky strike.

The latter is something difficult to factor when calculating the probability of "bankruptcy of the house", but anyhow I'm sure Doog took his decision considering also this difficult to weight but very real "bank run" scenario.

IMO, a "market for risk" is a brilliant concept. I also hope more investors understand now what does it means to invest in a gambling site: who is your average customer, who is your STAR customer, and how your expected result can fluctuate wildly.

[jgarzik]

From the other side, you have a mob of whiners or angry "investors" who treat JD as a bank, and these guys are obviously ready to spread FUD about JD and Dooglus if they see their investment shrink by %25 in a few days due to variance. Some of this "investors" are ready to crap their pants by disinvesting probably because they do not understand in what they were investing in the first place, and this could create a "bank run" effect if the whale has another lucky strike.

And then you have investors who thought JD was a, quote unquote, "long term stable investment"

[VTC]

If any investors wanted a max bet .25% of their roll they could have divested 3/4ths of their investment.

If all investors wanted this than the investors bankroll would be about 8,000 with 1% max bet , which is the same thing as 32,000 invested at .25%.  Both give a max bet of 80 BTC.

Why couldn't Doog just divest all accounts by 75% if he was scared of whales placing too big of bets. 

It would be less risky for investors to keep 8,000 with the site at 1% max bet than 32,000 at .25% max.  Now we have to trust Doog with 4x the amount in cold storage.

Now with a .25% max bet as soon as the steady profits start new investors will come which will further dilute all the current investors making it harder to recoop loses.

Whales should be treated like VIP, regardless of how they act, as long as they continue betting.  Each 300 btc bet was an expected gain of $360 to investors.

[mike_c]

Some simple risk of ruin math introduced here.

Assumptions:
- The whales have enough capital to try and break the bank without going broke.
- JD is considered "ruined" when the bankroll drops from 30,000 BTC to 5,000 BTC.  Considering the panic already seen among investors, this is a very conservative estimate.

With a 1% max bet the risk of ruin is surprisingly high:  18.2%

With a 0.5% max bet it drops drastically to: 3.3%

With a 0.25% max bet it is miniscule: 0.11%

Also, Kelly criterion does apply for the best long-term ROI, but with kelly betting you can never go broke.  Just eventually the max bet would get into the satoshis and nobody would play.

[geofflosophy]

If any investors wanted a max bet .25% of their roll they could have divested 3/4ths of their investment.

If all investors wanted this than the investors bankroll would be about 8,000 with 1% max bet , which is the same thing as 32,000 invested at .25%.  Both give a max bet of 80 BTC.

Why couldn't Doog just divest all accounts by 75% if he was scared of whales placing too big of bets. 

It would be less risky for investors to keep 8,000 with the site at 1% max bet than 32,000 at .25% max.  Now we have to trust Doog with 4x the amount in cold storage.

Now with a .25% max bet as soon as the steady profits start new investors will come which will further dilute all the current investors making it harder to recoop loses.

Whales should be treated like VIP, regardless of how they act, as long as they continue betting.  Each 300 btc bet was an expected gain of $360 to investors.

Lowering the max bet to 0.25% is not the same as divesting 75%, except in the face of bets >0.25% of the roll, which are only one user. This max bet system is a cool idea, I think that doog will definitely implement it as quickly as he can.

[geofflosophy]

Some simple risk of ruin math introduced here.

Assumptions:
- The whales have enough capital to try and break the bank without going broke.
- JD is considered "ruined" when the bankroll drops from 30,000 BTC to 5,000 BTC.  Considering the panic already seen among investors, this is a very conservative estimate.

With a 1% max bet the risk of ruin is surprisingly high:  18.2%

With a 0.5% max bet it drops drastically to: 3.3%

With a 0.25% max bet it is miniscule: 0.11%

Also, Kelly criterion does apply for the best long-term ROI, but with kelly betting you can never go broke.  Just eventually the max bet would get into the satoshis and nobody would play.

This would actually be pretty easy to calculate using the simulator and excel, but I'm feeling pretty lazy now to verify. The one thing I will note is that I think that your assumption about the size of Nakowa's bankroll is likely flawed, and the probability of the house bankrupting should go down significantly if say he only starts with a bankroll of half the size of the house.

[RationalSpeculator]

Some simple risk of ruin math introduced here.

Assumptions:
- The whales have enough capital to try and break the bank without going broke.
- JD is considered "ruined" when the bankroll drops from 30,000 BTC to 5,000 BTC.  Considering the panic already seen among investors, this is a very conservative estimate.

With a 1% max bet the risk of ruin is surprisingly high:  18.2%

With a 0.5% max bet it drops drastically to: 3.3%

With a 0.25% max bet it is miniscule: 0.11%

Also, Kelly criterion does apply for the best long-term ROI, but with kelly betting you can never go broke.  Just eventually the max bet would get into the satoshis and nobody would play.

If your assumptions are not realistic the rest is not either.

What if you take a more realistic assumption and for example say that the whale has double the stack of the house?

What if you consider the bankroll ruined when it's ruined?

How high is the risk for ruin then?

[tucenaber]

Some simple risk of ruin math introduced here.

Assumptions:
- The whales have enough capital to try and break the bank without going broke.
- JD is considered "ruined" when the bankroll drops from 30,000 BTC to 5,000 BTC.  Considering the panic already seen among investors, this is a very conservative estimate.

With a 1% max bet the risk of ruin is surprisingly high:  18.2%

With a 0.5% max bet it drops drastically to: 3.3%

With a 0.25% max bet it is miniscule: 0.11%

Also, Kelly criterion does apply for the best long-term ROI, but with kelly betting you can never go broke.  Just eventually the max bet would get into the satoshis and nobody would play.

I don't think this is right. Even if the gambler has infinite capital the probability I get is 2.8% to take 25k out of 30k.
With a max bet of 0.5% I get 0.08%.

[Peter R]

If any investors wanted a max bet .25% of their roll they could have divested 3/4ths of their investment.

If all investors wanted this than the investors bankroll would be about 8,000 with 1% max bet , which is the same thing as 32,000 invested at .25%.  Both give a max bet of 80 BTC.

Why couldn't Doog just divest all accounts by 75% if he was scared of whales placing too big of bets.  

It would be less risky for investors to keep 8,000 with the site at 1% max bet than 32,000 at .25% max.  Now we have to trust Doog with 4x the amount in cold storage.

Now with a .25% max bet as soon as the steady profits start new investors will come which will further dilute all the current investors making it harder to recoop loses.

Whales should be treated like VIP, regardless of how they act, as long as they continue betting.  Each 300 btc bet was an expected gain of $360 to investors.

Lowering the max bet to 0.25% is not the same as divesting 75%, except in the face of bets >0.25% of the roll, which are only one user. This max bet system is a cool idea, I think that doog will definitely implement it as quickly as he can.

I think there may be some deeper insight in what VTC is saying above.  

He says investors invested at 32,000 BTC and 0.25% max bet is the same as investors at 8,000 BTC and 1.0% max bet: in both cases the max bet is 80 BTC.  In both cases the investors, in aggregate, earn the same profits, no?  But in the 0.25% case the investors risk a larger amount due to counter-party risk.  

Did I understand you correctly, VTC?

[Rampion]

If any investors wanted a max bet .25% of their roll they could have divested 3/4ths of their investment.

If all investors wanted this than the investors bankroll would be about 8,000 with 1% max bet , which is the same thing as 32,000 invested at .25%.  Both give a max bet of 80 BTC.

Why couldn't Doog just divest all accounts by 75% if he was scared of whales placing too big of bets.  

It would be less risky for investors to keep 8,000 with the site at 1% max bet than 32,000 at .25% max.  Now we have to trust Doog with 4x the amount in cold storage.

Now with a .25% max bet as soon as the steady profits start new investors will come which will further dilute all the current investors making it harder to recoop loses.

Whales should be treated like VIP, regardless of how they act, as long as they continue betting.  Each 300 btc bet was an expected gain of $360 to investors.

Lowering the max bet to 0.25% is not the same as divesting 75%, except in the face of bets >0.25% of the roll, which are only one user. This max bet system is a cool idea, I think that doog will definitely implement it as quickly as he can.

I think there may be some deeper insight in what VTC is saying above.  

He says investors invested at 32,000 BTC and 0.25% max bet is the same as investors at 8,000 BTC and 1.0% max bet: in both cases the max bet is 80 BTC.  In both cases the investors, in aggregate, earn the same profits, no?  But in the 0.25% case the investors risk a larger amount due to counter-party risk.  

Did I understand you correctly, VTC?

In my opinion VTC nailed it in all the points. JD is not a bank, it's an unregulated BTC CASINO, so you obviously want a high return on what you invest, expecting high variance especially in the very short term. And you definitely need whales for that.

[RationalSpeculator]

In my opinion VTC nailed it in all the points. JD is not a bank, it's an unregulated BTC CASINO, so you obviously want a high return on what you invest, expecting high variance especially in the very short term. And you definitely need whales for that.

+1

[Deprived]

Some simple risk of ruin math introduced here.

Assumptions:
- The whales have enough capital to try and break the bank without going broke.
- JD is considered "ruined" when the bankroll drops from 30,000 BTC to 5,000 BTC.  Considering the panic already seen among investors, this is a very conservative estimate.

With a 1% max bet the risk of ruin is surprisingly high:  18.2%

With a 0.5% max bet it drops drastically to: 3.3%

With a 0.25% max bet it is miniscule: 0.11%

Also, Kelly criterion does apply for the best long-term ROI, but with kelly betting you can never go broke.  Just eventually the max bet would get into the satoshis and nobody would play.

Those figures are clearly wrong.
Did you happen to forget to reduce max bet when the whale wins?

[Deprived]

If any investors wanted a max bet .25% of their roll they could have divested 3/4ths of their investment.

If all investors wanted this than the investors bankroll would be about 8,000 with 1% max bet , which is the same thing as 32,000 invested at .25%.  Both give a max bet of 80 BTC.

Why couldn't Doog just divest all accounts by 75% if he was scared of whales placing too big of bets. 

It would be less risky for investors to keep 8,000 with the site at 1% max bet than 32,000 at .25% max.  Now we have to trust Doog with 4x the amount in cold storage.

Now with a .25% max bet as soon as the steady profits start new investors will come which will further dilute all the current investors making it harder to recoop loses.

Whales should be treated like VIP, regardless of how they act, as long as they continue betting.  Each 300 btc bet was an expected gain of $360 to investors.

Perfectly valid points - and ones which were belaboured at length the first time nakowa had big wins.  Unfortunately some invesotrs *cough* mechs) seem to have some reason to want as much capital as possible left with dooglus rather than manage their own bankrolls, risk and variance.  It's not so much that THEY want low variance (but high CP-risk compared to likely profits) but that they want to insist on everyone else doing the same - despite 1% being optimal Kelly and thus giving investors the most ability to adjust.

[Keyser Soze]

If any investors wanted a max bet .25% of their roll they could have divested 3/4ths of their investment.

If all investors wanted this than the investors bankroll would be about 8,000 with 1% max bet , which is the same thing as 32,000 invested at .25%.  Both give a max bet of 80 BTC.

Why couldn't Doog just divest all accounts by 75% if he was scared of whales placing too big of bets. 

It would be less risky for investors to keep 8,000 with the site at 1% max bet than 32,000 at .25% max.  Now we have to trust Doog with 4x the amount in cold storage.

Now with a .25% max bet as soon as the steady profits start new investors will come which will further dilute all the current investors making it harder to recoop loses.

Whales should be treated like VIP, regardless of how they act, as long as they continue betting.  Each 300 btc bet was an expected gain of $360 to investors.

Lowering the max bet to 0.25% is not the same as divesting 75%, except in the face of bets >0.25% of the roll, which are only one user. This max bet system is a cool idea, I think that doog will definitely implement it as quickly as he can.

I think there may be some deeper insight in what VTC is saying above. 

He says investors invested at 32,000 BTC and 0.25% max bet is the same as investors at 8,000 BTC and 1.0% max bet: in both cases the max bet is 80 BTC.  In both cases the investors, in aggregate, earn the same profits, no?  But in the 0.25% case the investors risk a larger amount due to counter-party risk. 

Did I understand you correctly, VTC?

While the expected profit amount would be the same, the 8,000 and 1% would be higher in percentage terms (what actually matters). This, of course, comes with higher risk due to variance. I am intentionally ignoring counter party risk since it is hard to quantify and may differ for each investor.

It really comes down to what kind risk/reward investors are looking to achieve.

[Peter R]

If any investors wanted a max bet .25% of their roll they could have divested 3/4ths of their investment.

If all investors wanted this than the investors bankroll would be about 8,000 with 1% max bet , which is the same thing as 32,000 invested at .25%.  Both give a max bet of 80 BTC.

Why couldn't Doog just divest all accounts by 75% if he was scared of whales placing too big of bets.  

It would be less risky for investors to keep 8,000 with the site at 1% max bet than 32,000 at .25% max.  Now we have to trust Doog with 4x the amount in cold storage.

Now with a .25% max bet as soon as the steady profits start new investors will come which will further dilute all the current investors making it harder to recoop loses.

Whales should be treated like VIP, regardless of how they act, as long as they continue betting.  Each 300 btc bet was an expected gain of $360 to investors.

Lowering the max bet to 0.25% is not the same as divesting 75%, except in the face of bets >0.25% of the roll, which are only one user. This max bet system is a cool idea, I think that doog will definitely implement it as quickly as he can.

I think there may be some deeper insight in what VTC is saying above.  

He says investors invested at 32,000 BTC and 0.25% max bet is the same as investors at 8,000 BTC and 1.0% max bet: in both cases the max bet is 80 BTC.  In both cases the investors, in aggregate, earn the same profits, no?  But in the 0.25% case the investors risk a larger amount due to counter-party risk.  

Did I understand you correctly, VTC?

In my opinion VTC nailed it in all the points. JD is not a bank, it's an unregulated BTC CASINO, so you obviously want a high return on what you invest, expecting high variance especially in the very short term. And you definitely need whales for that.

Yeah, I really like VTC's line of reasoning too.  Let me try to take this a bit further:

At a given level of aggregate profits, decreasing max bet from 1.0% to 0.25% increases investor exposure to counter-party risk (as they need to deposit 4X as much to earn the same profits).

The profits that JD earns depends on bet-volume x house-edge.  And while bet volume depends on many things, I can't see how it depends on the total amount invested.  

So, does this mean that decreasing the max bet below the optimal value increases our aggregate exposure to a counter-party failure but does nothing to improve total profits?

[RationalSpeculator]

So, does this mean that decreasing the max bet below the optimal value increases our aggregate exposure to a counter-party failure but does nothing to improve total profits?

affirmative

[jgarzik]

So, does this mean that decreasing the max bet below the optimal value increases our aggregate exposure to a counter-party failure but does nothing to improve total profits?

affirmative

Correct.

[Deprived]

So, does this mean that decreasing the max bet below the optimal value increases our aggregate exposure to a counter-party failure but does nothing to improve total profits?

affirmative

Correct.

Yes - with a minor caveat. 

Whether it ACTUALLY improves or reduces profits depends on what specific bets everyone makes that are different to what would have happened had the max bet not changed.  But it reduces expected profits (unless someone has a reason why they think betting volume would INCREASE).

[mike_c]

If your assumptions are not realistic the rest is not either.

What if you take a more realistic assumption and for example say that the whale has double the stack of the house?

What if you consider the bankroll ruined when it's ruined?

How high is the risk for ruin then?

You can't consider it's "ruined when it's ruined".  If the bankroll got down to 5 BTC then the max bet would be 1% of that = 0.05 BTC.  It never goes to 0, but when it drops low enough the site is out of business.  A whale with double the stack as house is almost the same as whale with infinite stack.

What you guys don't quite seem to understand:  A 1% max bet is INSANE for the house.  You just suffered a 25% drawdown.  With a 1% max bet that is going to happen often at these bankroll levels.

Could you walk into any casino in the world and bet 1% of their bankroll on a spin of the roulette wheel?  Not even close.  And smaller real world casinos have still been cleaned out.

If you want a long term business in JD, you need to lower the max or be fully prepared to get wiped.  If you are just looking for a fast buck, well, good luck!

[willphase]

If you want a long term business in JD, you need to lower the max or be fully prepared to get wiped.  If you are just looking for a fast buck, well, good luck!

this.

if you're looking for a fast buck, just gamble

Will

[adamstgBit]

maybe if you increase the house edge, this will make investors more able to handle lucky whales?

[adamstgBit]

So, does this mean that decreasing the max bet below the optimal value increases our aggregate exposure to a counter-party failure but does nothing to improve total profits?

affirmative

Correct.

Improving profits, is not the point.

they want to decrease the max bet to limit the risk of being ruined by a lucky whale.

[Vexual]

maths. maths. maths. maths. maths. maths. RUN!

[julz]

The 1300 incident is 60/40 Doogs fault. (40 Nak)
This is 60/40 your fault   (40 Doogs)

I think you will soon regret this, as a lot of the other top 10 investors are already are.

I was one of the top 10 investors.. though I happened to be lucky and divested before the latest couple of big site losses.
As I'm probably one of the very few larger investors who happened to still make a profit from investing - perhaps my input doesn't count much - but the risk as it stood was too high for me and I pulled my entire investment out.

Now that the max bet has been lowered.. I'm back in - but I only put 10% back in.

For those trying to get out of a hole, I can see why they're upset.. but to me it's a more reasonable investment now.
I guess this could be a double whammy for existing investors if new investors now find it more appealing and so dilute the share of existing ones.

[RationalSpeculator]

If your assumptions are not realistic the rest is not either.

What if you take a more realistic assumption and for example say that the whale has double the stack of the house?

What if you consider the bankroll ruined when it's ruined?

How high is the risk for ruin then?

You can't consider it's "ruined when it's ruined".  If the bankroll got down to 5 BTC then the max bet would be 1% of that = 0.05 BTC.  It never goes to 0, but when it drops low enough the site is out of business.  A whale with double the stack as house is almost the same as whale with infinite stack.

What you guys don't quite seem to understand:  A 1% max bet is INSANE for the house.  You just suffered a 25% drawdown.  With a 1% max bet that is going to happen often at these bankroll levels.

You are right, but even if you consider it ruined when only say 1000 btc is left, chances are negligible for that to happen.

Ok, bankruns may get you there quicker but bankruns are avoided by assuring investors that the investment continues to make sense. That would be the job of dooglus, which he failed miserably to perform during the whale episodes (pulling his own investment, remaining quiet after a whale win, accusing whale of cheating, giving irrational explanations why whale is exception, ... ).

So now the idea is to let investors choose their own maxbet. If executed there will be a high max bet again, and a whale doing the same sooner or later. Will doog believe in his system then? Or will he bail out again? And how, by changing the rules yet again screwing all previous investors? Or by forgetting to assure investors and let a bankrun happen?

  

[VTC]

Thank you guys for understanding me.

That's why if Doog divested everyone by 75% when Nakowa was playing, it would lower his max bet to 80 btc as the total invested amount would drop to 8,000.  But this would also leaving 24,000 spread out in player balances.

And then those that want to invest more that .25% of there balance can feel free to do so from their account player balance.  

Now investors are at the mercy of Doog's change.  It would have been much easy to divest everyone by 75% so it can free up our coins instead of keeping them at cold storage.  Now the only way to get back to 1% risk is to buy 3 times the amount of BTC we have invested off of an exchange and invest more, introducing more counterparty risk, and a more cumbersome process.

The best would be set max bet to a flat 2%.  And you can invest 1/2 of what you would have invested for 1% risk, or 1/8 of what you want to invest for .25% risk.  Thoughts?

(I am an investor with a triple digit amount of BTC in JD)

[VTC]

The previous 1% max bet makes it exciting and dangerous for both investors and gamblers, whales and those that choose to martingale up to max bet.

This is a great form of advertising.  Now the max win is only 80BTC, which you can buy a 2nd hand Kia, not 300BTC that wins you a brand new  BMW.

Nakowa has cause quite a stir and more people are spending time on JD.  His big win will bring other gamblers.

Investors didn't have to invest in JD.  Mech could have divest 75% if he wanted less risk (and reaccordingly adjust his invested balance daily to reflect 25% of his total account).  Now everyone is punished, investors and whales.

[canth]

The previous 1% max bet makes it exciting and dangerous for both investors and gamblers, whales and those that choose to martingale up to max bet.

This is a great form of advertising.  Now the max win is only 80BTC, which you can buy a 2nd hand Kia, not 300BTC that wins you a brand new  BMW.

Nakowa has cause quite a stir and more people are spending time on JD.  His big win will bring other gamblers.

Investors didn't have to invest in JD.  Mech could have divest 75% if he wanted less risk (and reaccordingly adjust his invested balance daily to reflect 25% of his total account).  Now everyone is punished, investors and whales.

Nice insight for a guy with only a handful of posts. Maybe everyone should lurk for 7 months before posting. Seriously - it's a really smart way to frame the argument and makes it clear that Dooglus' implementation of the .25% max bet should definitely be a temporary 'fix'.

[GOB]

Thank you guys for understanding me.

That's why if Doog divested everyone by 75% when Nakowa was playing, it would lower his max bet to 80 btc as the total invested amount would drop to 8,000.  But this would also leaving 24,000 spread out in player balances.

And then those that want to invest more that .25% of there balance can feel free to do so from their account player balance.  

Now investors are at the mercy of Doog's change.  It would have been much easy to divest everyone by 75% so it can free up our coins instead of keeping them at cold storage.  Now the only way to get back to 1% risk is to buy 3 times the amount of BTC we have invested off of an exchange and invest more, introducing more counterparty risk, and a more cumbersome process.

The best would be set max bet to a flat 2%.  And you can invest 1/2 of what you would have invested for 1% risk, or 1/8 of what you want to invest for .25% risk.  Thoughts?

(I am an investor with a triple digit amount of BTC in JD)

Hey VTC. I totally understand your point and I think the CP risk is an important aspect to take into account as an investor. I'll address this again in a moment.

However, I just want to quickly point out that while divesting everyone 75% when we were at 32,000 would make the max PROFIT (not max bet) 80 just as it did by lowering max profit to 0.25% of invested funds, these are not actually mathematically equal. Remember these numbers are dynamic. For example, let's compare these two scenarios, A and B respectively if the site a player comes in and loses 1000BTC (site wins 1000 BTC):

A) Invested goes from 8,000 to 9,000. Max profit goes from             1% *   8,000 = 80        to       1%  *  9,000 = 90
B) Invested goes from 32,000 to 33,000. Max profit goes from     0.25% * 32,000 = 80        to   0.25% * 33,000 = 82.5

The same goes if a player wins 1000 BTC (site loses 1000BTC):

A) Invested goes from 8,000 to 9,000. Max profit goes from             1% *   8,000 = 80        to       1%  *  7,000 = 70
B) Invested goes from 32,000 to 33,000. Max profit goes from     0.25% * 32,000 = 80        to   0.25% * 31,000 = 77.5

Thus, what Dooglus actually did (reduce max profit to 0.25%) is fundamentally different-- it reduced risk, not just adjusted the max profit downward.

Now, having said that, I wasn't thrilled either about him reducing the max profit, and I still believe going 100% Kelly Criterion is the way to go. HOWEVER, I understand his motivation (trying to avoid what would essentially be a bank run), and I think his new plan is fantastic!

The new plan is a combination of allowing an investor to change their Max Profit percentage to a number between, say, 0.001 and 2% (less than 1% being fractional Kelly and over 1% being a multiple of Kelly) AND also allowing players to have what I will imperfectly call fractional investing.

Fractional investing is a little confusing at first, but makes a ton of sense. Say you want to invest 100 BTC in Just Dice at 1%. Fractional investing will allow you to, say, deposit 10 BTC in Just-Dice, and tell JD that you have 90 BTC more off site. Since your total investment is 100BTC, you will be risking up to 1BTC on that first bet. If your investment increases, no problem. If it decreases, no problem as well, because if it ever dips to below 10BTC, you'll be auto-divested until you desposit more funds.

This goes back to the Counter Party Risk, VTC, that you mentioned. By allowing you to have part of your investment off site, you reduce your CP risk with sacrificing returns. For Doog this is win-win because it allows risk-seeking investors to get the returns they want while protecting more risk-averse investors. Finally, this is great for gamblers and whales, as this will tend to increase the Max Profit back up to the levels people love to play and spectate (Also, don't forget that it's max PROFIT: whales make 300BTC bets, but plenty of people make long-shot bets to try to win that much, kinda like a lottery)

tl;dr: new variable investment risk doog is implementing is great. Let's bear with him as he implements it.

[mughat]

Thank you guys for understanding me.

That's why if Doog divested everyone by 75% when Nakowa was playing, it would lower his max bet to 80 btc as the total invested amount would drop to 8,000.  But this would also leaving 24,000 spread out in player balances.

And then those that want to invest more that .25% of there balance can feel free to do so from their account player balance.  

Now investors are at the mercy of Doog's change.  It would have been much easy to divest everyone by 75% so it can free up our coins instead of keeping them at cold storage.  Now the only way to get back to 1% risk is to buy 3 times the amount of BTC we have invested off of an exchange and invest more, introducing more counterparty risk, and a more cumbersome process.

The best would be set max bet to a flat 2%.  And you can invest 1/2 of what you would have invested for 1% risk, or 1/8 of what you want to invest for .25% risk.  Thoughts?

(I am an investor with a triple digit amount of BTC in JD)

+1

I for one is goin to devest if I only get .25%. The turnower is to small for this.
Hopefully we will get the option to set the risk % individually soon.

[Peter R]

The best would be set max bet to a flat 2%.  And you can invest 1/2 of what you would have invested for 1% risk, or 1/8 of what you want to invest for .25% risk.  Thoughts?

I think I am coming around to this logic.  Let me know if we are on the same page:

The Kelly-criterion says that the optimal max bet is 1% of bankroll, but the "effective bankroll" is not what it says up there on the just-dice.com website.  The effective bankroll must include the available funds from all the people that would jump in if the "posted" bankroll got small.  Of course they would jump in (assuming no security breach) because each marginal bitcoin reinvested buys a larger slice of the pie than what it did before the whale attack.  Thus, the first investors that move in to help battle the whale will have a higher-than-normal return until enough people re-build the site's "posted bankroll", thereby diluting things back to equilibrium.

Earlier in this thread, we showed that, under certain assumptions, reducing the max bet % has no advantage for the investors in aggregate.  Total expected profit is simply volume * house_edge.  We showed that instead, reducing max bet % has the effect of increasing the aggregate exposure to counter-party and legal risk (as a larger volume of BTC must be deposited to JD cold storage to support a given bet volume [aggregate profits]).  Investors can pick there level of risk exposure simply by how much they invest.  But they need to appreciate the expected variance of their investment in order to gauge how much exposure is appropriate, given their personal financial circumstances.

I am thinking that the optimal max bet % is high, but still low enough so that investors can jump in quickly after a whale attack to prevent the max bet (in absolute BTC terms) from jumping around too much [so that we don't annoy the whales].  I think 2% would be a good start too.

[Peter R]

Hey VTC. I totally understand your point and I think the CP risk is an important aspect to take into account as an investor. I'll address this again in a moment.

However, I just want to quickly point out that while divesting everyone 75% when we were at 32,000 would make the max PROFIT (not max bet) 80 just as it did by lowering max profit to 0.25% of invested funds, these are not actually mathematically equal. Remember these numbers are dynamic. For example, let's compare these two scenarios, A and B respectively if the site a player comes in and loses 1000BTC (site wins 1000 BTC):

A) Invested goes from 8,000 to 9,000. Max profit goes from             1% *   8,000 = 80        to       1%  *  9,000 = 90
B) Invested goes from 32,000 to 33,000. Max profit goes from     0.25% * 32,000 = 80        to   0.25% * 33,000 = 82.5

The same goes if a player wins 1000 BTC (site loses 1000BTC):

A) Invested goes from 8,000 to 9,000. Max profit goes from             1% *   8,000 = 80        to       1%  *  7,000 = 70
B) Invested goes from 32,000 to 33,000. Max profit goes from     0.25% * 32,000 = 80        to   0.25% * 31,000 = 77.5

Thus, what Dooglus actually did (reduce max profit to 0.25%) is fundamentally different-- it reduced risk, not just adjusted the max profit downward.

Now, having said that, I wasn't thrilled either about him reducing the max profit, and I still believe going 100% Kelly Criterion is the way to go. HOWEVER, I understand his motivation (trying to avoid what would essentially be a bank run), and I think his new plan is fantastic!

Would this analysis change if we assume that the marginal investor sitting on the sidelines, waiting to get in to a lucrative investment, can jump in quickly?  He has incentive because each new BTC invested after the whale attack gets a bigger-than-normal piece of the pie (until it reaches equilibrium)? 

If we assume the marginal investor (waiting on the sidelines) can respond instantly, then perhaps the two cases *are* mathematically the same?  (Well except for the fact that with the lower max bet % comes increased counter-party and legal risk.)

[GOB]

The best would be set max bet to a flat 2%.  And you can invest 1/2 of what you would have invested for 1% risk, or 1/8 of what you want to invest for .25% risk.  Thoughts?

I think I am coming around to this logic.  Let me know if we are on the same page:

The Kelly-criterion says that the optimal max bet is 1% of bankroll, but the "effective bankroll" is not what it says up there on the just-dice.com website.  The effective bankroll must include the available funds from all the people that would jump in if the "posted" bankroll got small.  Of course they would jump in (assuming no security breach) because each marginal bitcoin reinvested buys a larger slice of the pie than what it did before the whale attack.  Thus, the first investors that move in to help battle the whale will have a higher-than-normal return until enough people re-build the site's "posted bankroll", thereby diluting things back to equilibrium.

Earlier in this thread, we showed that, under certain assumptions, reducing the max bet % has no advantage for the investors in aggregate.  Total expected profit is simply volume * house_edge.  We showed that instead, reducing max bet % has the effect of increasing the aggregate exposure to counter-party and legal risk (as a larger volume of BTC must be deposited to JD cold storage to support a given bet volume [aggregate profits]).  Investors can pick there level of risk exposure simply by how much they invest.  But they need to appreciate the expected variance of their investment in order to gauge how much exposure is appropriate, given their personal financial circumstances.

I am thinking that the optimal max bet % is high, but still low enough so that investors can jump in quickly after a whale attack to prevent the max bet (in absolute BTC terms) from jumping around too much [so that we don't annoy the whales].  I think 2% would be a good start too.

I was just reading up on the Kelly Criterion (KC) and saw something interesting. Just as the KC maximizes bankroll growth, apparently risking 2x KC (in our case 2%), results in ZERO expected bankroll growth. Beyond 2x KC, expected bankroll growth is negative. So just keep that in mind when speaking of setting max profit to 2%.

[Peter R]

The best would be set max bet to a flat 2%.  And you can invest 1/2 of what you would have invested for 1% risk, or 1/8 of what you want to invest for .25% risk.  Thoughts?

I think I am coming around to this logic.  Let me know if we are on the same page:

The Kelly-criterion says that the optimal max bet is 1% of bankroll, but the "effective bankroll" is not what it says up there on the just-dice.com website.  The effective bankroll must include the available funds from all the people that would jump in if the "posted" bankroll got small.  Of course they would jump in (assuming no security breach) because each marginal bitcoin reinvested buys a larger slice of the pie than what it did before the whale attack.  Thus, the first investors that move in to help battle the whale will have a higher-than-normal return until enough people re-build the site's "posted bankroll", thereby diluting things back to equilibrium.

Earlier in this thread, we showed that, under certain assumptions, reducing the max bet % has no advantage for the investors in aggregate.  Total expected profit is simply volume * house_edge.  We showed that instead, reducing max bet % has the effect of increasing the aggregate exposure to counter-party and legal risk (as a larger volume of BTC must be deposited to JD cold storage to support a given bet volume [aggregate profits]).  Investors can pick there level of risk exposure simply by how much they invest.  But they need to appreciate the expected variance of their investment in order to gauge how much exposure is appropriate, given their personal financial circumstances.

I am thinking that the optimal max bet % is high, but still low enough so that investors can jump in quickly after a whale attack to prevent the max bet (in absolute BTC terms) from jumping around too much [so that we don't annoy the whales].  I think 2% would be a good start too.

I was just reading up on the Kelly Criterion (KC) and saw something interesting. Just as the KC maximizes bankroll growth, apparently risking 2x KC (in our case 2%), results in ZERO expected bankroll growth. Beyond 2x KC, expected bankroll growth is negative. So just keep that in mind when speaking of setting max profit to 2%.

So, what do you think about the idea that the "effective bankroll" is not what is displayed on the JD website, but is actually a greater number due to the "sideline" money that would come in should the JD bankroll become depleted?

This was my argument for why it may make sense to have a max bet % greater than 1% of the funds physically held by JD.  

[GOB]

So, what do you think about the idea that the "effective bankroll" is not what is displayed on the JD website, but is actually a greater number due to the "sideline" money that would come in should the JD bankroll become depleted?

This was my argument for why it may make sense to have a max bet % greater than 1% of the funds physically held by JD.  

I don't know if you can make assumptions about that money. We don't know what would happen if funds became depleted. A reasonable assumption of what sideline investors would do if investment drops 30% might not be the same as if investment drops 99%. My point is it's non-linear. I like Doog's fraction reserve/investment thing because it makes it explicit.

I just wanted to give you a heads up that making a default 2% max profit sets you in high-variance no-expected investment growth territory, and that's scary shit!

[enquirer]

Risk perception of a casual investor who has only few BTC invested is very different from risk perception of site owner, or of an investor who put his life savings into the site. Hope the risk selection feature will be implemented soon.

[Peter R]

So, what do you think about the idea that the "effective bankroll" is not what is displayed on the JD website, but is actually a greater number due to the "sideline" money that would come in should the JD bankroll become depleted?

This was my argument for why it may make sense to have a max bet % greater than 1% of the funds physically held by JD.  

I don't know if you can make assumptions about that money. We don't know what would happen if funds became depleted. A reasonable assumption of what sideline investors would do if investment drops 30% might not be the same as if investment drops 99%. My point is it's non-linear. I like Doog's fraction reserve/investment thing because it makes it explicit.

I just wanted to give you a heads up that making a default 2% max profit sets you in high-variance no-expected investment growth territory, and that's scary shit!

OK, I think it we are on the same page, just differing on semantics.

- I am saying that the "effective bankroll" = what is actually deposited + the sideline cash ready to jump in.

-You are saying that the "actual bankroll" = what is actually deposited + what has been pledged but held offsite.

We are both applying the Kelly criteria to the same thing and that thing is the sum of what JD holds and what is sitting off site ready to be transfered to JD should the need or opportunity present itself. 

And I think this proves again that the % max bet *must* by greater than 1% of what is actually deposited at JD in order to maximize earnings. 

[wickedgoodtrader]

Risk perception of a casual investor who has only few BTC invested is very different from risk perception of site owner, or of an investor who put his life savings into the site. Hope the risk selection feature will be implemented soon.

The whole point is that they wouldn't have to put their life savings on there, you could put less and add more if you lost some. It's all relative. The big upside to 1% is you don't have to put as many coins at 3rd party risk. I would say the downside is it would be easier to see if the system is being cheated at a lower %. Although I guess that is relative too.