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Just-Dice Investing: What You Need to Know

Introduction

I am actually writing this in a general sense, but using Just-Dice as the example because it is something a lot of people are familiar with. In actuality, what you will learn here works for any game that allows you to directly invest in to the site's pool and obtain your share of winnings or losses. Many people that invest do not really understand what causes all the fluctuations, or how to decide what to do, so hopefully this helps clear the air!

The Big Whale

I originally started to see the lack of knowledge people have of betting sites and how they work when a whale hit Just-Dice. If you are not familiar with what a whale is, you can think of them as being a big better. Basically we look at the normal guy as being a “fish,” and a whale is just a very large fish. Great analogy, right? But why not use a shark, or a “killer whale?” Because a whale, while they are betting more money, are still bound to the same mathematical laws as everyone else. When you are playing against the house, the house always wins (assuming you play over a very extended period and with a steady flow of bets). In poker, there is the term shark, but that is because it is a game that deals with players competing against one another, rather than the house.

So why are whales important when we are looking at betting sites? Because they can turn a major profit in to a major loss, or turn a major loss in to a major profit. It really swings both ways, and it is important to be prepared for either event. In the case of Just-Dice, we watched a whale come in and swoop tons of Bitcoins over a somewhat short period, and that led to a lot of confusion from the investors; how can a site that was growing in profit every day somehow magically go deep in to the red? The truth behind it is that the site had the same chance to go even higher in to profit. For example, if the whale won five thousand Bitcoins, they could have just as easily (technically it would have been even easier) lost that much. Over short periods, the rules of “edge” are not nearly as apparent as over the long haul, and that is something that has to be realized before making investments in to sites like this.

Safe Investing and Divesting

When it comes to investing and divesting in a site like this, timing is everything. Unlike some things where you can pay attention to up and down swings and jump in on them at the perfect time, with gambling sites it is a lot more tough. For example, while profit may be rising right now, in a matter of seconds it could instantly swing the other way. With that said, I do have my own ideas as to what I look for when doing investing or divesting, although I do want to throw out a disclaimer that this is based on my own preference and you need to make your own decisions as to what you want to do. Do not take this as being a proven science!

Investing

While it may seem a little odd, I think that investing when a gambling site is in the negatives is usually the best time to do it. You may wonder why, and this is really pretty easy: if the site is losing money due to big betters (which is usually what causes the swings), the law of numbers shows that it should start going back up.

Now, this is not always the case. For example, the site could lose so much money that it can no longer operate due to paying out too much. Or it could continue going down due to the whales winning even more. There could even be a flaw with the system that is allowing people to cash out more than they should be, or maybe someone was even able to hack the system in some way to boost their chances of winning.

These things make it imperative to keep up with the news of the site. For example, during Just-Dice's swing, it was found that there was a flaw in the website. Things like this make it seem like the law of numbers and probability will take over and bring the site up in to the positives again, when in all actuality the problems are still existent and will continue to be exploited until they are fixed. If you are not aware of the site's status and what is going on, though, you can not make an informed decision as to what is happening, and it is never a good idea to invest in a company when you do not have an understanding as to what is going on within it anyways.

In a sense, when I invest and a site is already in the negatives, I am doing it in the hopes that they will go to at least a break even point, if not in to the profit again. If either of these happen, that means I personally got a profit, as I earned part of whatever the difference was between 0 (break even) and the negative it was at when I jumped in. I feel that, at least to me, this makes me feel a lot better as I always have hopes that a site will at least break even at some point.

Divesting

Divesting is when you pull out an investment. This is by far one of the hardest things to time when it comes to gambling sites, because how do you know when the “right time” really is? Profits could continue going up, or they could go up a little more and drop, or they could just flat out drop. It essentially becomes a battle of deciding on a stopping point and then sticking with it. For example, maybe you invested 100 Bitcoins and want to boost that to 110. In that case, as soon as it hits your stopping point you divest and then move on.

Another plan some people employ is to withdraw the earnings as they come in. So if you invest 100 and in a few days it is up to 103, withdraw the 3, and keep doing that over time so that you have the 100 principal in there while you keep the profits. This is just as risky as just throwing yourself in to the site, though, as you have to be willing to keep the money in there for the long haul to make this work.

The general rule that I have with divesting is to wait until you are in the profit. If your investment goes down to the negatives, wait it out until you are a little in the profit again; in the majority of cases this will occur, as long as the site survives long enough. Throughout this time, it is important to keep up with the status of the site and what is going on with it. Otherwise, you may find that waiting it out is going to cause even more problems.

Ups and Downs

When you are invested in a gambling site, you have to be prepared for a lot of ups and downs. While you may already be familiar with the volatility of markets, such as with stocks, the gaming sites experience much more than you might originally expect. The swing frequency will depend on the volume of players and their collective bets, so a site that is more popular will experience the swings much more often, although they should theoretically all end up being the same in the end.

The big thing to realize here is that when we look at a site's edge… let us say 1% (in the case of Just-Dice) that does not mean that if you grab any set of bets, an average of 1% would have gone in the site's favor. The actual result on a small set of bets would probably not even be close to that, but what you are banking on is the big picture. Usually it is argued that even taking 100,000 bets would still not give an accurate result; instead, we usually focus on a minimum of a million or many million. The more you add in to the set, the more accurate the result should become.

So why is this so important? You can actually do a test on your own to help illustrate it. Take a quarter and flip it twenty times, recording the results. You will often find that the ratio between wins and losses is far less than half, despite the theoretical chances. Now do it another eighty times and you will see the results getting closer to what you expect. If you kept doing this thousands of times, you would be able to do checkpoints and see as you go along that the more tries you do, the more accurate your results are.

Gambling is the same way. We may see a loss of 50% or more over a period of days or even weeks, but it should even out over the long run. Because of this, investing in sites like this is to be considered as a long term investment (potentially spanning months or years); the longer the investment is held, the lower the risk vs reward becomes (at least theoretically). While you can most certainly jump in and jump out at any time, taking a bit of profit in the process, you should not go in to it with the idea that you will be making profit quick.

Site Edge and Its Importance

I think a lot of people get too tied up with what the site's edge is. For example, Just-Dice offers up 1%, while some other sites will do higher, such as 1.9%. This number represents the theoretical amount of the bets that the site should be earning (for example, if there are 100 thousand Bitcoins bet and the site has an edge of 1%, theoretically they should earn a thousand Bitcoins in profit). Again, though, this is over the long term, rather than the short term, and it also has a couple of other things you need to be aware of.

The first thing is the differentiation between small bets and whales. While I used the Bitcoins wagered as the baseline for determining how much the site should earn, that does assume one thing is consistent: the bets made. For example, most bets made are going to be pretty small, rather than very large. If someone were to make a couple large bets and win money off them and then leave the site, this would offset this number by a bit. Over time it should even out due to all of the small betters, but that could take quite a while to happen. On the other hand, the same better could have done a couple large bets and lost them, in which case there was a massive increase in profit as well. It is a door that swings both ways (although as an investor it is most definitely pretty painful to suffer massive losses – it does hurt morale).

The other thing you need to realize is that the difference between 1% and 1.9%, for example, is massive. It is not a small difference just because it is less than a percent apart. When you actually compare the numbers, the latter is almost twice that of the first! In comparison, let us look at a couple of scenarios:

  • Site A has a 1% edge and 100,000 Bitcoins wagered. Their profit is at 1,000 Bitcoins
  • Site B has a 1.9% edge and 100,000 Bitcoins wagered. Their profit is at 1,900 Bitcoins

If you are too caught up in the percent itself, it is easy to see how that is a mistake. In fact, with the latter scenario your profit would theoretically be twice that of the former! It is not often that people will skip something with a 90% higher profitability, so keep that in mind when you are looking at the sites. It also leads to something else… smaller variability.

So when we are looking at the up and down swings, the higher the house edge is the less swings should occur. When they do occur, however, the house will usually comes out a bit ahead (due to the higher edge), lowering the blow that occurs on the site's finances. This in no way means that there is no risk here; there is still a lot of risk and a site can still tank due to some massive wins, but the higher the house's edge is the lower this risk becomes.

Less Risk, Less Reward

If you are looking for a game type that has less of a risk attributed to it, but also less of a reward, going with something where players are against one another, rather than the house, is the way to go. In these situations the house always wins (as they get a cut of the proceeds regardless, and can therefore not lose money on bets), but the amount earned is also usually significantly lower. Along with this, there are still some costs associated with keeping the games running, so if they do not have enough traffic or enough bets coming in, the site can still tank. Even so, they are much safer in the risk area in that they can not lose a ton of their profits regardless as to how much a player bets in a single go.

Games that work like this are those such as poker or the “bomb” games (where a player buys a timed bomb and has to hope someone else buys it before it blows up), although there are many other games that work in similar ways. Generally speaking, if the game relies on players competing against one another, you are looking at minimal risk. But at the same time, there is also less reward. It is really something you will have to balance and decide how much risk is too much for your situation.

Even if we just look at the dice games, those with the higher house edge will have much fewer bets than those with lower house edge. This means that their risk is lower (due to having a higher percentage of house wins) but their reward is also lower (since other sites will take a majority of the traffic). Again, this is just something that has to be balanced and each person is different. You could also take the approach of splitting between multiple investments so that there is some variability in case one site has problems but the others go up.

Playing it Safe(r)

An investing method we commonly use that we consider as being “safe” (or at least as safe as you can reasonably get when dealing with investments) is to spread them out across multiple stocks. This means that if one of them tanks, you can usually count on the rest to help subsidize that. You can also view this as being the “do not put all of your eggs in one basket” scenario. It in no way means that you can not lose everything, but you minimize the risk because the chances that every project is going to tank is a lot smaller than the chance that a single one might.

Conclusion

Sites like Just-Dice can be a good investment, as long as you fully understand what you are getting in to and realize the various fluctuations sites like it will be going through. Any site can tank at any point, and this is something you just have to accept as a part of business, but when you understand the ups and downs the site can make, it should help make you feel more comfortable about your profit going up and down as well. If you end up investing in a gambling site, it is very important to keep in mind that they are designed (because of their “house advantage”) to win over the long haul; not necessarily a short period. As a result, if you are looking for something to deposit in to now and withdraw in a week or two, it is probably a better idea to look elsewhere.

Investing


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