Maintaining the BitFrog Network: Free market and Negative Rake

Bitfrog poses an interesting solution to the decentralized poker project, in that it creates a sub-chain with which “Bitfroggers” hunt for bounties and thus create a network in which decentralized games such as poker can be run on. Anyone can be a “Bitfrogger” by owning a stake in the network by acquiring a “proof of stake” much like acquiring any other (digital) asset . The solution is a great start for the technical implementation of decentralized gaming, but specifically in regards to games like poker, there is still seemingly a need for deeper solutions. In this writing the author will discuss a few of these aspects with respect to decentralized poker.

Bitfrog’s Interesting Rake Consideration

Bitfrog developers face a similar yet slightly different paradigm than the decentralized poker movement. Decentralized poker is concerned with the technical aspects of decentralized poker where as the Bitfrog project is concerned both with the technical solution to decentralized poker (and other games) as well as the implementation and sustainability of the Bitfrogger network. The key bridging factor of course is rake.
Rake is an important subject both in today’s poker world as well as the future of poker in terms of decentralization. It has a substantial effect on the economy of the game, and in fact many losing or breakeven players would find themselves winning players, if rake was reduced to. A project like Bitfrog has the opportunity to disrupt the entire poker economy if they can provide an equal or superior product that has a comparatively lower raking system. Because poker players are generally economically savvy when it comes to exchanging their monies for chips, an equal product with lower rake might be all the poker community needs to make a natural shift to the Bitfrog environment (facilitated of course by Adam Smith’s “invisible hand”).

From the developers perspective the total rake received must chosen to entice enough Bitfroggers to hunt for bounties to maintain a strong enough network to support the gaming economy. If the players pay too little rake the network will not be large enough support itself. However if the rake is set too high, although the Bitfroggers would be quite happy, the poker players will not support the network-they will leave the platform to one of superior effective rake (essentially one of lower rake). This scenario has an obviously solution-the Nash equilibrium. That is, for this particular aspect, rake should be set at the perfectly bartered price between the Bitfroggers and the players. Although only a partial solution at this point, this observation is not insignificant.

Furthermore, we can then see that if there is not enough players vs Bitfroggers to hold up the Bitfrog network then rake should decrease causing an influx of poker players looking for a better deal for their exchange of monies for chips. Conversely, if the players unfavourably out number the Bitfroggers, rake should increase thus representing an increase in the demand for Bitfroggers. This adjustment should keep the network running at an equilibrium.


How to Sustain a Poker Platform Network Through a Fair Rake Scheme

There is another aspect to the problem the developers also no doubt are facing. If we consider games all the way from the most micro to the high stakes, it can’t possibly be fair to charge the same flat % of rake for each stake. Why should a 100 buy-in for a tourney require a 10 rake fee, while a 1 entry tourney requires only a .1 rake fee? In the spirit of decentralization it makes little or no difference to the network what stake the games are played at since they all use the same computing power. The question arises, how might the incentive be kept up for Bitfroggers to hold up the integrity of micro stakes games, knowing they seemingly don’t contribute much to the net overall value of bounty collected from rake.

The author would like to propose a solution to this problem.

We can imagine a Bitfrog poker economy set up with a tournament structure replicated for 5 different stake levels perhaps with entries fees (in units): 1, 2, 3, 4, 5. We can then take the median as level 3 and use this as our anchor for the system. If we take 10% of the anchor as our rake we get .30, and let us assume then that the network needs exactly this .30 per player to satisfy enough Bitfroggers to hold up the network. Then we can see the lowest stake cannot (with 10% of 1 being .1) afford to the satisfy the Bitfroggers. They must raise their rake % disproportionately, causing effective rake to raise, and having the effect of creating a difficult environment to profit in (or not lose at an expedited rate). In fact certain micro stake levels may not be able to play at all.

However we can notice (10% of 5 being .5) the highest level contributes the exact amount extra needed to fund the most micros stakes of game play. The mechanism then simply becomes the geometric series that Guass is rumored to have developed when he was a child, used to add the numbers from 1 to 100.

The issue then becomes whether or not, for example the micro stakes players outnumber the high stakes players by a vast majority.  It might be possible to monitor and control this aspect yet their also might be an interesting possibility to deal with such an issue. If the stakes 1-5 were instead labeled A-E, games could be spawned with stake level that correspond to the micro demand.  That is to say, if micro stakes games are saturating the network, they could still be funded by spreading out the higher stake levels, thus generating the rake needed to support the level stakes on the network.

The author will explain the mechanism needed to implement a free market for this purpose in another writing.


The Negative Income Tax

The higher stakes games need not have an ever increasing rake with respect to ever increasing stakes, but instead the network is set to support a certain proportion of lower stake games to higher stake games. This can be understood much better with respect to the negative income tax explained and advocated for by Milton Friedman

The negative income tax was not an ideal or an ends, but rather a means to arrive at an ends from our given failing economic system. Ideally as a means or an ends there would be no income tax system and no redistribution of wealth, but given we are not starting at ideal so there must be then a intermediate solution which allows a change from the lesser to the greater. This was the idea behind the negative income tax. With negative income tax, wealthier people pay taxes much in the same historical form we are used to, however under this system, people that don’t make a certain amount of income are actually given a supplementing income by the government. Under this system wealthy people pay a flat tax rate much lower than today’s rate, so the system is something all sides (except government which is dissolved in the Bitfrog environment) can get behind.

What does this mean with respect to Bitfrog poker?

If implemented, rake could be redistributed in this form to represent exactly this implementation. What this means is that the most micro stakes players would not just play rake free, but in fact could be given free bankrolls to try out Bitfrog at any micro stakes tables. The cost of doing this is completely minute and controlled since it is relative to the high stakes games running at the time. One worry of course is that someone might choose to open up a ton of low stakes accounts and eat up the free Bitfrog monies meant to attract really new players to the environment.

There are a few things that keep these controls in effect. First, only a proportion of the Bitfrog currency will be “set aside”, so there is no possibility of bankrupting the network economy. Also, since the bonus’s given are only for the most micro of stakes, the incentive to create accounts to exploit this program is super small. If the free rolls awarded are only spendable on the Bitfrog network there is little incentive to amass multiple bonuses since one would just be accruing pennies. A multi-accounter planning on running multiple machines with multiple poker robots would also have to consider the benefits of simply becoming a Bitfrogger instead of trying run up 100’s of micro stakes Bitfrogger accounts.

Players in general do appreciate their privacy as well as painless and non intrusive processes to sign up to poker sites, yet players that sign up to receive a free micro stakes Bitfrog poker roll, could be asked to provide a more extensive set of information which would not impede other players from joining the community, yet could be an easy way to further curtail multiple accounts used to exploit the negative income tax system.

All this is perfectly inline with the authors’ understanding of asymptotically ideal poker which seeks to create the standardization of rake, which in effect will be created by having a free marketplace with which to barter to the optimal rake equilibrium. As this equilibrium is set players will be in a position to judge the power of the exchange of their monies for chips on any given poker platform, and given an option to move between them, they will be able to put the much needed pressure on different sites to keep rake and more importantly effective rake down to the proper market equilibrium.

Link to a Bitfrog article/interview


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