Let's understand mutual betting together

Wednesday, 06 February, Year 5 d.Tr. | Author: Mircea Popescu

BitBet uses what's well known and well loved in most of the world (literally, headcount majority) as parimutuel, mutual betting. A small but vocal minority of mostly English speaking people is so well used to being fleeced by an inferior system known as line betting that they're actually clamoring for this mistreatment. Let's then take the time and put things on some sort of sane footing.

Any binary event (something that may either happen or not happen) has a probability profile (the odds of it happening), or if you prefer a risk factor (the odds of it not happening). The probability and the risk added together always equal 1, because it either happens or doesn't happen, by definition.

In line betting, someone actively sells this binary event betting. In order to justify the effort, they take a margin. If the odds of it happening are 50% (which means the odds of it not happening are also 50%), they'll sell you either side as 60% or something. That 10% difference between what you buy and what's the case adds up into their bankroll as profit. Thus, it makes absolutely zero difference whether you correctly predict the chances as being 55%, 51%, 50.05% or 50.0001%. No matter how accurate (close to the 50% reality) your prediction is, you still have to buy the bullshit 60% line the bookie (seller) is willing to sell. The spread is not fixed by your ability to correctly guess, it is fixed by whatever the bookie wants to take as profit. You're stuck.

In mutual betting, nobody sells you anything. You can buy in at whatever odds you wish. If the bet is currently at 60% and you think reality is 55%, you can put money towards the side up to either as much as you're willing to spend or as much as it takes to bring it to 55%, whichever is lower. This will net you more than you buying at 60% on a bookie's line bet.

But since the bet is open still what if, I hear you say, what if someone comes and pushes it even further down, to maybe 40% ?! My Bitcoin is now lost! I wanted in at 60% not at 40%, it's not worth it at 40%. This is not actually true : somebody is giving money away. All you have to do is take the other side, and push it back to the 55% (or as high as your capital allows, whichever comes sooner). This is in effect a hedge, and if you end up doing it you are in the brilliant position of making sure money no matter which way the bet ends. In mutual betting you have the magnificent chance of actually being the house. You can get vig, by yourself, for yourself, with no setup costs, no hassle and no trouble. All you need is to get lucky enough for someone to bounce the bet across the line once you've bet one way (and have the capital, of course).

Mutual betting isn't the "buy a ticker and forget about it" sort of thing that leaves chumps with steady losses resulting from a -EV while bookies get the bread to hookers and blow. Mutual betting isn't about imaginary spreads, completely pulled out of someone's ass vigs and fixed odds and spreads. Mutual betting is all about getting the right odds, as a collective, market effort. You don't fire and forget, you watch your bet, you adjust your wagers as often as need be. Mutual betting is probably a great place to write a bot.

Learn to love it. Mutual betting is the way to bet, if you don't want to be a chump.

Any questions ?

Category: Trilenciclopedia
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4 Responses

  1. BldSwtTrs`s avatar
    1
    BldSwtTrs 
    Monday, 24 March 2014

    That's assuming an infinite bankroll.

    In real life you have to manage your financial exposure at one event. So you end up being screwed by the moving odds.

  2. Mircea Popescu`s avatar
    2
    Mircea Popescu 
    Tuesday, 25 March 2014

    In general you can evaluate what the pool will end up being, with a little experience or a little time spent doing research. There's a thousand or so bets closed already, and you can see sports do 1-10 BTC tops, mining stuff can go as high as 1-2k etc.

  1. [...] events in this manner as well.  ↩I had bets on both sides, for reasons related to the nature of parimutuel betting, and though I realized a net loss have lost much more betting on things I care much less about [...]

  2. [...] again this was their last communication in weeks, plural.  ↩This is in stark contrast to mutual betting as exemplified by BitBet where the pot of money on both sides defines the odds. Line betting to [...]

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