Why long-term participation in casino slot machines and crypto-meme coins will lead to losses?

An overseas player recently exposed his recent experience online:

He said that he lost everything in the LIBRA token transaction issued by the Argentine president. He had reaped rich rewards from the previous meme coins to the Trump coins a while ago, but all of them were cleared on LIBRA.

In order to turn the situation around, he plans to sell his offline physical assets and then go online to get back everything he lost.

I have seen too many stories like this, and I have shared them with you many times in previous articles. But when I saw this story again, my thoughts changed a little. It’s not that the conclusion has changed, but the way of thinking has changed a little. Now I have a more rational framework when looking at this kind of problem.

During the Spring Festival, I saw a very interesting video that used the law of large numbers and expected value regression to explain many interesting phenomena in casinos.

For example, why will gamblers lose if they continue to play for a long time?

Why are the most inconspicuous slot machines in many casinos the most profitable and stable money-making machines in the casino?

Although I am a science student and probability statistics was a compulsory course when I was in school, this is the first time I have seen a case where probability statistics explains these phenomena in the casino so thoroughly in such simple and easy-to-understand words.

So today I want to share with you the secret behind this.

Let’s first look at an example of tossing a coin.

We all know that when we flip a coin, the expected value of the probability of getting heads is 50%. But if we operate it in a different way, we will see results that are very different from what we imagined.

If we flip a coin twice in a row, we will find that many people can flip heads twice in a row. In this case, many people will habitually think that the third flip will still throw heads.

If we flip the coin four times in a row, fewer people will get heads four times in a row. In this case, fewer people will think that the fifth flip will still land on heads.

If we toss this coin 6 times, 8 times, 10 times, or 100 times in a row, the number of people who can toss the head side continuously will decrease sharply, and the number of people who habitually believe that they will be able to toss the head side next time will also decrease sharply.

As we toss the coin more and more times, we finally find that the probability of tossing the head is basically stable at 50%, instead of the probability sometimes reaching 100% as we saw when tossing it 2 or 4 times.

This is the law of large numbers (the coin flips more and more times) and expected value regression (the probability of heads returning to 50%) at work.

Applying this principle to casinos, we will find some interesting phenomena:

If a gambler only plays a game once and never participates again, even if the gambler has only a 10% chance of winning the game, the dealer's final advantage will not be obvious, or in other words, the gambler's final disadvantage will not be obvious.

But if a gambler plays a game indefinitely, even if the gambler has a 49% chance of winning the game, the dealer's final advantage will be obvious and the gambler will eventually lose.

Based on this principle, casinos will try their best to design games that allow gamblers to play endlessly, even if it means giving them a higher expected chance of winning (as long as it is not higher than the casino's).

Slot machines are the best example. The bets are small in each round, and you don’t feel bad if you lose. You can also win from time to time, so gamblers often can’t get up after sitting on the machine. Once they can’t get up, losing everything is basically a foregone conclusion.

Exchange for meme coins in the crypto ecosystem.

In this round of meme coins, there are fewer and fewer moving stories to tell. Basically, there is only the game of emotions and the manipulation behind it.

In such a game, retail investors are clearly at a disadvantage.

If you just treat participating in such a project as a game, then it doesn't matter how much fun you have.

However, if you take participating in such games as a long-term way to make profits, become addicted to them and play for a long time, even if you do not lose all your money in one go but win from time to time, the final outcome will definitely be like playing a slot machine, where your assets will eventually be wiped out in the boiling frog in warm water.