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Offline Empirical1

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Lotto POS alt-coin idea
« on: March 28, 2014, 11:45:52 PM »

I had the idea in another thread of a lottery DAC that was a POS alt-coin but with 10% inflation. Where the inflation would be awarded to users in the form of lottery prizes. That way just owning shares would make you eligible for all lotteries and if the alt-coin was popular, then your shares would go up in value even if you never won.

I think people would like to own an 'alt-coin' that had daily prize draws? (Imagine instead of Bitcoin inflation going to miners there was $50 million in prizes awarded every month instead.)

Just wondering if anyone had feedback on the idea?
(obviously a major drawback is that you couldn't select specific numbers, each 'coin' would already have a number assigned to it.)

« Last Edit: March 28, 2014, 11:48:33 PM by Empirical1 »

Offline HackFisher

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Re: Lotto POS alt-coin idea
« Reply #1 on: April 01, 2014, 05:44:58 AM »
Good idea to allocate shares in genesis block as jackpot rewards, as there was not too much init jackpots in prize pool to back up the bets. This will be helpful to make this DAC popular I think.

But I didn't get your idea in the brackets, coin is decomposable, ticket might be better.
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Offline Empirical1

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Re: Lotto POS alt-coin idea
« Reply #2 on: April 04, 2014, 07:57:42 PM »
Good idea to allocate shares in genesis block as jackpot rewards, as there was not too much init jackpots in prize pool to back up the bets. This will be helpful to make this DAC popular I think.

But I didn't get your idea in the brackets, coin is decomposable, ticket might be better.

No I mean I think you should do a normal lottery like you are going to do.

But I mean another idea is to have POS alt-coin where your coins are the lottery tickets.

Maybe release a billion POS coins that are 'coloured coins' and not divisible.
(As in each coin is identifiable. 1, 2, 3... Up to a billion.)

Then every month 8 million new coins are created but they are not given to miners or to everybody equally, but instead they are the lottery prizes.

This way you don't have to ever buy a ticket.
Just buy however many coins you want and keep them in your wallet. (Everybody will hoard their coins pushing up the price.) Then when the lottery draw happens, and the winning number is 76890,
And you have coin 76890 of 1 billion in your wallet then you win some of the new coins.

(As long as demand for the lottery DAC/alt-coin increased by at least 10% a year the coins in your wallet won't lose any value even if you don't win. If the Alt-coin is popular your coins may be very valuable even if you don't win whenever you want to sell them.)
« Last Edit: April 04, 2014, 08:24:33 PM by Empirical1 »

Offline bytemaster

Re: Lotto POS alt-coin idea
« Reply #3 on: April 04, 2014, 08:43:57 PM »
Follow the money.  There is no opt out in your system.  It would be break even on average and thus materially change nothing. 

It would just be like a government taxing everyone and then randomly giving it away proportional to how much you've been taxed. 

You exclude an entire class of uses who are practical and would never play the lottery but may own shares in a lottery. 




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Offline Empirical1

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Re: Lotto POS alt-coin idea
« Reply #4 on: April 04, 2014, 09:24:39 PM »
Follow the money.  There is no opt out in your system.  It would be break even on average and thus materially change nothing. 

It would just be like a government taxing everyone and then randomly giving it away proportional to how much you've been taxed. 

You exclude an entire class of uses who are practical and would never play the lottery but may own shares in a lottery. 

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I agree with exactly what you said - 'break even on average...like government taxing everyone and randomly giving it away based on how much you've been taxed' I think that's brilliant!

That's the whole point of gambling. Never mind Break Even, People are willing to lose a lot of EV to play lotteries and casino games for the random chance to win!

My suggestion creates a frictionless lottery! (Nothing lost to shareholders, charities or operating expenses!)

Best of all there's nothing to justify charity wise like a normal lottery, because it's just re-distributed inflation.

In a normal lottery it's less than break even, the coins you've bought (lottery tickets) are being randomly given away, minus 50% in fees! So the whole company is bankrupt and a new alt-coin (lottery) starts again the following week.

----
Maybe it's easier to see if I calibrate an example of my POS exactly to a current lottery.

My POS guarantees the exact same payouts as the current big lottery, the disadvantage is that in mine your can't choose your numbers as the coins have a value pre-assigned, the advantage is mine is frictionless.

$100 million goes into the normal lottery this week
$100 million goes into my lottery this week

In the normal lottery $50 million is randomly awarded in prizes & $50 million is lost on various running expenses. So in a normal lottery you either won a prize or lost your money.

In my lottery $50 million is randomly awarded in prizes & $50 million is left over because it's frictionless. So in my lottery you had the same odds of winning exactly the same prizes for exactly the same cost, except if you lose your ticket is still worth 1/2 it's purchase price! (Which you can sell or keep for next weeks draw.)

Can you see how after a few weeks my lotteries jackpots would get bigger & bigger? And my losing lottery investments would be worth more and more each week too. It's the same as the current model, it's just frictionless.

---

The calibration can be tweaked but I simply tried to calibrate it closer to Bitcoin inflation, because at that level with fairly little new demand your coins or in this case frictionless lottery tickets should retain or increase in value while still offering exciting prizes.

Edit: My calibration was also designed for exactly the people you think it might exclude, people who want to own shares in a lottery, because the lower the % weekly payout the more of your ticket value your coin will retain, and the more people that are attracted to a POS frictionless lottery with a low % weekly payout the more valuable the alt-coin and your investment will become. Obviously the art would be finding that level that is exciting to gamblers and attractive to investors too. (Even though gamblers will inadvertently be investors and vice versa)

I hope I can sway you on this one.


« Last Edit: April 04, 2014, 09:41:53 PM by Empirical1 »

Offline Empirical1

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Re: Lotto POS alt-coin idea
« Reply #5 on: April 04, 2014, 10:30:32 PM »
Another point onceuponatime brought up in the other thread is that shareholder margins will be squeezed by future forks of the current lottery DAC, that seek to maximise player/charity value with no incentive for loyalty to the original.

However with the frictionless lottery if you get the calibration anywhere in the ball-park of optimal, then the value of both holding the alt-coin and the weekly payouts will increase rapidly,  meaning that soon we will have really huge jackpots which will be an insurmountable attraction to gamblers (& therefore value-investors too) vs. any fork/alternative that wants to start fromscratch.

« Last Edit: April 04, 2014, 10:33:14 PM by Empirical1 »

Offline etherbroker

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Re: Lotto POS alt-coin idea
« Reply #6 on: April 04, 2014, 11:08:41 PM »
Where is the pot of money coming from to give out?  You can only sell all the coins once, to raise funds, then you do a lotto.  But how do you do the 2nd lotto?

Offline Empirical1

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Re: Lotto POS alt-coin idea
« Reply #7 on: April 05, 2014, 12:14:43 AM »
Where is the pot of money coming from to give out?  You can only sell all the coins once, to raise funds, then you do a lotto.  But how do you do the 2nd lotto?

Issue a lottery POS alt-coin let it find a market value.

The first lotto will be X% inflation distributed randomly in a lottery payout structure.
The next lotto will be X% inflation " " " .
Etc.

If there is not enough new money flowing into the alt-coin then the market cap of the coin will decrease. If there is new money flowing in & it's faster than the rate of inflation the coins market cap will increase.


Offline etherbroker

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Re: Lotto POS alt-coin idea
« Reply #8 on: April 05, 2014, 05:24:27 AM »
Ahh, I see.

It's a good idea.

It is far enough away from sound money for me that my head would spin if I bought a ticket.  It's just pure digital speculation, and though we see tons of this behavior in alt-coin markets today, it remains to be seen if people are just going to speculate on digital assets forever.

That doesn't mean other people won't like it though.
« Last Edit: April 05, 2014, 05:27:05 AM by etherbroker »

Offline FreeTrade

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Re: Lotto POS alt-coin idea
« Reply #9 on: April 05, 2014, 07:46:13 AM »
It's a fine idea - it has a precedent in the real world - something called 'Prize Bonds' -
http://www.prizebonds.ie/

Essentially interest is paid on cash investment - but the interest is not awarded uniformally, but rather each bond has a chance of winning some of the prizes - so potentially you might have a very small investment, but win a very large prize.

You might implement it in a DAC so that each player has a small chance of winning, but a small chance of losing too - or a small percentage reduction of balances each drawing. You might also have two classes of coin in the system - one that plays for prizes, one that doesn't - that would address BM's important point.

Overall, it would be easier to implement than the lottery, but the lottery would generate more excitement and interest.
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Offline Empirical1

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Re: Lotto POS alt-coin idea
« Reply #10 on: April 05, 2014, 02:15:57 PM »
It's a fine idea - it has a precedent in the real world - something called 'Prize Bonds' -
http://www.prizebonds.ie/

Essentially interest is paid on cash investment - but the interest is not awarded uniformally, but rather each bond has a chance of winning some of the prizes - so potentially you might have a very small investment, but win a very large prize.

You might implement it in a DAC so that each player has a small chance of winning, but a small chance of losing too - or a small percentage reduction of balances each drawing. You might also have two classes of coin in the system - one that plays for prizes, one that doesn't - that would address BM's important point.

Overall, it would be easier to implement than the lottery, but the lottery would generate more excitement and interest.

Thanks FreeTrade, yes prize bonds are a great example of the concept in action and I see they're popular in many countries. 
That could even be a useful model for the conservative implementation of the concept. (I think launching a conservative, normal and aggressive model of the concept would be a good idea, so we cover all markets and will have a stake in whichever one takes off - and once it takes off - it should ensure a competitor would have difficulty catching up or forking.)

Quote
You might also have two classes of coin in the system - one that plays for prizes, one that doesn't - that would address BM's important point.

Bear in mind for the lottery coin to be sustainable it would on average have to pay out less in prizes (via inflation) then there is new money coming into the system. Therefore with all but the most aggressive calibrations, even though your % share of the total coins would decrease each week,(if you didn't win anything), the $ value of your investment should be increasing,

but yes I would also want a more investor geared option & I think the simplest way to do this (& address BM's important point) and still have it remain frictionless is to have an 'opt out' option where your coins just increase with the rate of inflation but don't stand a chance to win any of the prizes. (Hmm. that's pretty much what you said, good idea.)
(Ie. If you owned 1% of the total at the beginning you'd still own 1% after each draw - if the lottery proved profitable the rate of return on this would be astounding!)

Thoughts:

If we distributed it to Bitshares holders initially it would be pretty pointless as we're all mainly investors, so either the 'opt out' option should take a few months to come into effect or/& a large % of the coin is also air-dropped elsewhere - perhaps Dogecoin holders would be a good demographic.

We (Bitshares) could seed it with a few $ in guaranteed prizes for the first 4 weeks helping it to reach X value.

I also realised it's not as simple as designating X% inflation for the coin that will dominate this market because a popular coin will grow rapidly in the beginning but then the rate of growth relative to the base will slow even with large $ inputs, so the inflation metric used to award prizes would have to take account of that. (It (inflation) also needs to be high in the beginning to be attractive and it needs to slow as the coin matures to avoid being unsustainable, so somehow it would have to be designed/dynamically adjust.)


Quote
Overall, it would be easier to implement than the lottery, but the lottery would generate more excitement and interest.

We could for the aggressive implementation aim for similar metrics as normal lotteries (aiming to give up to 50% of average* new weekly growth as prizes via randomly distributed inflation - how that could be implemented though, I have no idea, unless the coin could self-track it's price and other metrics.) but leaving the remainder of value in the coin, (which is lost in normal lotteries) so it would be just as exciting and rewarding as a normal lottery but it would build on itself and you wouldn't lose everything if you lost and still have a chance to win future lotteries.   

Other thought: Someone should make a BitUsd icon, that would be cool to use instead of $ in these Bitshares forum posts, (Like the  +5%)


(* Average new weekly growth - because we still want there to be the same level prizes in weeks where the value may have dropped, due to bad news for crypto in general, speculation etc. so it would have to be some algorithm that also tries to maintain a minimum level of inflation not just distributing increases in value in any one particular week.)

« Last Edit: April 05, 2014, 02:33:59 PM by Empirical1 »

Offline Empirical1

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Re: Lotto POS alt-coin idea
« Reply #11 on: April 05, 2014, 03:44:14 PM »
This graph shows your odds of winning and the percentage of the prize pool, various prizes make up.   



In an ideal world, (The one lottery coin to rule them all) to appeal to investors, conservative gamblers (prize-bond holders FreeTrade mentioned), average lottery players and aggressive gamblers you'd want to be able to calibrate your odds on the prize structure above.

It would be set to a default.

But if you were aggressive you might move all your prize fund into the big jackpots category to give you the most chance of hitting it big.

If you were conservative you might move more of your personal prize fund into the lower prizes.

(Also bear in mind because it's frictionless and there are no expenses your odds of winning should be double shown here? I think?)

If that's the case your odds of winning the smallest prize would be 11.5-1 and as a conservative investor you can put 100% of your personal prize fund in this group then your odds of winning on all your coins would be 2-1. (I.e. with a reasonable amount of coins this would give you the same result as 'opting out' in the medium term.) But at least we'd all look like gamblers & the total prize fund would look the most impressive but really people in this category would be banking on the value (popularity) of lottery coin increasing. (Average new money in exceeding pace of inflation.)

As a sidenote:

It might even be possible to incorporate the distributed inflation model with the ability to use your coins as tokens that let you choose traditional lottery numbers.
Prizes are awarded in new coins (inflation) which can be sold or used as tokens for new tickets. Same as before where even if you lost your token would still have a value (probably worth more than before if lottery growth outpacing it's inflation) and can still purchase future tickets it would just make up a smaller % of the total than before so your odds of winning would be lower.

Other: if it was applied to the calibration model above...

Then 1 token would let you choose 1 normal lottery ticket and payout is as graph.

Agressive strategy would get you 3 tickets for one token but you only win if you match 5 numbers+

Conservative investor strategy - would get you 6 tickets but you only win the small prizes for matching 2 numbers (you could also choose the most unpopular numbers, see below)

To be even more confusing, if you could incorporate the traditional lottery number option and the calibration approach conservative investors, could also focus directing their tokens to non-popular numbers -

http://en.wikipedia.org/wiki/National_Lottery_(United_Kingdom)
 
Quote
In their book "Scenarios for Risk Management and Global Investment Strategies", ISBN 978-0-470-31924-6 (HB) John Wiley & Sons Ltd 2007, academics Rachel E S Ziemba and William T Ziemba say with regard to 6/49 lotteries, "Random numbers have an expected loss of about 55%. However, six-tuples of unpopular numbers have an edge with expected returns exceeding their cost by about 65%. The expected value rises and approaches $2.25 per dollar wagered when there are carryovers [UK term: rollovers]. Random numbers, such as those from lucky dip and quick pick, and popular numbers are worth more with carryovers but never have an advantage." They conclude that, due to the time that would be required to achieve success, "except for millionaires and pooled syndicates, it is not possible to use the unpopular numbers in a scientific way to beat the lotto and have high confidence of becoming rich; these aspiring millionaires will also most likely be residing in a cemetery when their distant heirs reach the goal".

That's a pretty big edge considering in the examples they are referencing -

Quote
the average percentage return is the share of the ticket sales devoted to prize funds, about 45%


- so a 65% edge even when over half your investment is lost in fees is pretty astounding. I'd imagine a frictionless lottery would give people an edge even on two number payouts by choosing unpopular ones.
« Last Edit: April 05, 2014, 05:15:30 PM by Empirical1 »

 

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