Quote from: evoorhees on November 19, 2012, 05:22:13 PM

Quote from: Stephen Gornick on November 15, 2012, 05:46:04 PM

The only reason SatoshiDICE isn't paying out 99% is because they aren't being squeezed by a more aggressive competitor offering a 98.9% payout. That day will come. Because with an increase in play, both SatoshiDICE and some other competitor(s) can still operate profitably on a lower house advantage without cheating (which isn't really an option as it would be exposed them and they'ld lose all credibility in a matter of days.)

Not true actually. SatoshiDICE doesn't pay out 99% because the luck/volatility of doing so is highly likely to result in periodic ruin for the house. I've worked with a few brilliant statisticians to come to this conclusion. Even at the current 98.1% house edge, there is non-trivial risk to the house. If a competitor came out with a house edge at 99%, I would not match it, I'd just wait for the site to bankrupt itself.

Well, it's an interesting point. Volatility is dangerous to a house in inverse proportion to the house's bankroll. Since most Bitcoin casinos don't disclose their buffer size - how much they keep on reserve - there's a very real chance that houses will collapse if they let their volatility get too high. Players should accordingly be aware of the risk and not put too much coin into a casino on a long-term basis. By and large though, players don't do this with Bitcoin - which is one of the major drawbacks from a casino's standpoint to using the currency. Even solid, non-ponzi casinos will rake off profits at some point out of the expected hold on a player's deposit if it's been sitting there for 6 months or a year. But Bitcoin casinos don't tend to hold currency anywhere near that long - usually the turnover is within the same day. This means the casino has to be much more disciplined in maintaining its reserve - we keep 5x total player funds in Bitcoin or BTC-convertable coupons at all times. There have been several times in our history where if we hadn't done this, we would have had serious problems because of the high RTP of our games and the volatility that incurs.

The rule of thumb, though, is that as long as a casino has the funds to ride out losses it will come out ahead in the end. There are several other ways to limit volatility, including limiting bet sizes and deposit amount or frequency. Capping individual withdrawal amounts is another - although much shittier - way of doing the same thing.

Bottom line, no casino should be going into business offering a 99% RTP unless they have the funds to back that up. Look, a very quick sim on our system shows that if the house has a $10,000 bankroll and a 99% RTP, and is accepting bets of up to $100, they have at least a 5% chance of going bankrupt before they double their bankroll (assuming they leave the winnings in their float). We believe that the chance of bankruptcy should be 0.1% or lower; but this is because we obviously invested so much in the production of our site that it would be foolish to lose it over $10k. So players should judge for themselves whether the sites they're dealing with have anything to lose.