There's two basic models to use for allowing increased risk:
1. The one you describe - where those willing to risk over 1% only get 'extra' action on bets exceeding 1% of all capital.
2. Allocating ALL bets based on ALL risked capital - so those who risk more get a bigger slice all the time.
There are indeed. Do we fill 1% of everyone's capital before allocating the remaining risk to those prepared to accept it (1), or do we allocate the risk in proportion to the amount people are willing to risk (2)?
It strikes me that (2) results in those sensible enough to use a sane bankroll management strategy getting very little action as the wild "risk it all" guys soak up nearly everything.
For the sake of stability in the max-profit offered to players, (1) seems like the way to go to me, only using the excess capacity offered by riskier investors as it is needed.
Thoughts?
1) removes the rationale of "being your own cold storage".
For example, I was thinking rather than having 100 BTC invested at 1 percent, having 10 invested at 10% and leave 90BTC in my wallet, ready
to adjust the investment whenever needed. Now this won't work with 1.
Also, this strategy means that one would risk more than 1% only on highest bets - a strategy that is strictly less profitable than 1% fixed.
2) may push more "sane" investors to increase their stake to get any share at all. Indeed, with many risky investors
the max profit increases uncontrollably (think something like 1000 BTC) and hardly anyone will ever challenge that;
so those invested at 1% will never be getting their 1%, and will have to increase their stake.
I think this kind of game of who invests more is highly undesirable, because it can eventually ruin everyone.
So actually I'm coming to the conclusion that 1% fixed rate may be better for all...