You haven't answered my question, you keep explaining that 1% Kelly is better than 0.5% Kelly. Let me rephrase it: Suppose my investment setting is 0.5% Kelly, and yours is 1% Kelly, and we have invested the equal amount of BTC. The bettor bets 1BTC and looses. Does that mean that you get 2X the profit from that bet than I get? Or are you proposing something much more complicated? Once again - please give us one good example, it's far from obvious what exactly is your idea.
This has been discussed, with much detail, a few months ago over several pages of this thread. Here's a summary.
There are two competing philosophies: 1) distribution proportional to risk, and 2) classify bets into tiers and only expose those that volunteered for that level of risk.
Here are two implementations of (1)
1a) The most straight forward system is that every user contributes to the overall bank roll, UserContribution = UserBankroll*K, where K is the percentage a user sets as the maximum they can lose and can be set to any value. The overall bankroll is the sum of UserContributions, and each user then gets UserContribution/Bankroll times the amount won or loss per bet. This approach, however, has been shown to be too computationally difficult as it requires constant calculation of every user's contribution. Right now the site only calculates it when money is invested or divested.
1b) An improved idea (and the one Doog was favoring) was to ask users to select one of a few options for maximum bet. For example, you would chose if you want 0.5% maximum wagered per bet or 1%. The site then just has to calculate the percentage of the bank roll owned collectively by those two bins after every roll since the percentage a single investor owns of either bins remains a constant unless there is an invest or divest event. You get a return proportional to what you choose for maximum wager (1% gets 2x the losses and gains as 0.5%). This, for now, seems to be the way it may be implemented.
Here is the implementation of (2)
The argument for (2) above is that some people that wanted lower variance felt like they would get a much lower return than they are currently getting if distribution is proportional to risk since max bets are placed very rarely. They proposed a system where people choose their risk and are placed in bins like 1b. However, they want to implement betting "tiers." In this example, the two bins are 0.5% and 1%. If a bet would win <=0.5% of the bankroll, then everyone shares the winnings just like it is now, which is proportional to the bank roll. If a bet is placed that would win > 0.5% of the bankroll, everyone shares like they currently do for the first 0.5%, but all winnings/losses between 0.5% and 1% are only shared amongst those that are are in the 1% bin. They want effectively 2 bankrolls: one that covers from 0-0.5% of the bankroll and the other that covers 0.5-1%.