
Show HN: I made a site that lets you bet against Bitcoin Hash Rate Volatility - locksley
http://www.futureblock.com/
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6thSigma
Is this legal in America?

Edit: Why the downvotes? I'm curious if they got an opinion from a lawyer on
the legality of their site.

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Romoku
The business is more than likely violating gambling regulations by soliciting
US customers. IANAL, but Satoshi Dice did block US players due to legal
concerns
[https://bitcointalk.org/index.php?topic=135521.0](https://bitcointalk.org/index.php?topic=135521.0).

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MichaelGG
Can you explain how they blocked US players? I skimmed that page and only saw
"not possible since you play via sending to a bitcoin address; there's no IP
to block".

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Romoku
Sorry for the confusion. They blocked US players from their website where they
could get information on what was currently being bet on and where to send
their Bitcoin.

IIRC Satoshi Dice worked by sending Bitcoin to a specific address for a bet
and the address changed each time which they displayed on their website. By
blocking US players from the website they could legally claim to be in
compliance with the regulation (IANAL).

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MichaelGG
Hmm the site seems to load the same for me US IP or not. You do have to click
"I agree" that you're legal, though.

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Romoku
Well some months ago it was a separate landing page, but I guess they changed
it. They still don't display the information unless you agree that you are in
a legal jurisdiction to use the service.

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downandout
The issue with this is that it appears the site is being hosted in Wilmington,
DE. Since this is not a game of skill, it is almost certainly illegal to
operate within that state and the states of all of those that bet from the US.
Since it is illegal under state laws, the federal UIGEA (unlawful internet
gaming enforcement act) also applies. It could move to a futures market model,
but as it stands right now, a number of federal or state jurisdictions could
press charges. I'd suggest, at least, that you move it offshore. That won't
make it any more legal to take bets from US residents, but it will at least
slow them down trying to track you and make it much more difficult to obtain
evidence etc. If you don't want legal hassles, take it offline.

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IanCal
I'm somewhat confused with the calculation on paying out. Betting 1 BTC pays
out:

    
    
        Bet above: 2.2284 BTC
        Bet below: 1.0903 BTC
    

So... I always win?

Edit - I'm an idiot, and forgot I'd have to bet _twice_.

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gfosco
That's the payout if you bet above and it beats the prediction, or you bet
below and it doesn't meet the prediction.

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IanCal
I completely failed at maths just now. I forgot I'd be betting twice. Time to
get off the internet, I think.

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CodeCube
Very cool! I'm curious what tech/lib/api/sdk you're using to automate sending
payments (ie. in the case you stated of someone betting over 1btc)?

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locksley
Because of the nature of this site, we are very sensitive to any security
related questions. Sorry!

Without revealing anything specific, we have a number of trigger conditions
and any bet size over or under the limit is a trigger condition. That marks
the bet as invalid and manual admin action is then required to refund the bet.

~~~
fastball
Security through obscurity is no security at all.

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oh_sigh
I don't think you understand that quote. __Only __security through obscurity
is obviously no good, but that doesn 't mean that security through obscurity
is entirely worthless. It plays an important role in a layered defense for
information assurance.

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joosters
One suggestion: The site needs to be much clearer about the betting time
period and the time period that is being bet _on_. I can't see anywhere on the
front page that explains this. I had to go to the detailed betting breakdown
to work out how the time periods even work.

If you can't tell exactly what you're betting on on the front page, you
shouldn't expect people to bet on it!

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matchu
I accidentally discovered the time period by hovering over the
open/close/payout bar.

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phogster
"After 9.10% House Fees Deducted"

Isn't that a little high?

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dedward
Well.... not really.

Parimutuel betting, not sure - but there is always a house fee - that's how
the house makes money.

A traditional bookie would have at least 5 to 10 % built into his odds as well
(like if you were betting on even odds, liek a coin toss, it would be bet $110
to win $100 for either side (so the bookie has a 5% hold if he can keep the
betting balanced, no matter who wins)

etc etc.

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bradysullivan
In this case, there is 0% fee if you bet when the round opens.

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Systemic33
I think the bootstrapping is worth more than getting an initial basefee, since
it'll likely bring more players, making it worth it towards the end.

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eloff
Is anyone else thinking with cloud computing and the right amount of seed
money, you could bump the numbers before the round ends, raking in your
winnings + whatever the cloud mines in the hour you run it for?

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locksley
You'd need ASIC Miners, but even then, you'd have a minuscule impact.

More importantly, if you have that much Gigahashing power, it's not worth
manipulating this. You're better off sticking to mining Bitcoins.

~~~
benmanns
Not necessarily. If the market is large enough and you control a significant
portion of the hashing power (e.g. pool operators), you could bet below and
then halt all hashing for the checking period. You would potentially lose a
block, but would offset that by gaining more than 25 BTC in bets.

~~~
MichaelGG
It's a daily bet on a weighted 12 hour average. So you'd probably need to lose
much more than a block.

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fmax30
Interesting , it may be illegal but it can also be cheated by a sort of
insider trading. Say i own a number of ASIC miners , I turn them off , and
then bet for a number higher than the one expected by the public at large . At
the very last moment i turn all of my ASIC miners on. I make money with > 95 %
probability.

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shawabawa3
Unless it gets huge that will never be worth it. If you have enough hashing
power to affect the difficulty that much, you'd make a lot more by just mining

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bachback
One important question is: could one create a short BTC contract at a
reasonable price? so that when I hold BTC I'm not subject to the downsides?
For every short someone holding BTC would have to find long exposure which a
BTC holder wants to give up. I'm not sure its possible, I don't think so.

~~~
locksley
Shorting will require more borrowing/lending in the BTC ecosystem. But there
are other ways to mitigate downside risks, such as hedging (put options in
particular). This is really our goal, to create a futures/options exchange.

As we get more volume, then we can do stuff like this and let the market
dictate things like "Prediction Target" or "BTCUSD Strike Price".

~~~
bachback
I don't think that will work, because selling puts on Bitcoin is much too
risky. Long puts and shorts are really the same thing (put has a delta and
vega component). So while this is a most interesting space, I don't think this
problem can be solved, at least not easily. But if the exchange system works
better it's much easier to go out of BTC and into $,€,¥.

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stuhood
@locksley: Couldn't the operator of blockchain.info game this by manipulating
the output of their API?

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locksley
Good point.

1\. Blockchain.info is relatively trustworthy.

2\. However, we have our own hash rate calculations by directly interfacing
with the actual blockchain. This isn't in production yet. This is because hash
rate is always going to be a guestimate. Depending on the time intervals that
you pick, the guestimates vary. So we asked overselves, what helps us to
maximise transparency. So we decided to go with blockchain.info's hash rate
because everyone can check that.

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taternuts
Kudo's my friend, this is really cool idea, and it's also really well done. I
think this would still be fun even if it were just for internet brownie
points, but actually being able to bet btc is awesome - maybe I'll take the
btc fortune (.3 btc) and let it ride :)

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tomw1808
Cool idea, suddenly want to buy bitcoins just to participate :)

1,648,531 GH/s is the current target. I can bet below or above that. It maybe
sound odd, because I am not really into the Bitcoins, but what (in the very
uncertain case) if the target is hit (neither below or above)?

~~~
locksley
Haha, given the daily hash rate volatility can be +/\- 300,000 GH/s, there is
a 1/300,000 chance that'll happen.

But in all seriousness, if that does happen, we'll refund all the bets without
taking any house fees.

~~~
tomw1808
Well, you know, if there is a chance that something goes wrong ...

Anyway, cool site, great idea and thx for the links above!

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IceyEC
Don't bet more than 8 Bitcoins because you can never win in your detailed
example?

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locksley
There's a max limit of 1 BTC, if anyone accidentally bets more, the bet is
refunded (without the house fee). There's also a min limit of 0.01 BTC.

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dllthomas
Is this just purely a source of mutually-verifiable entropy for pure-
entertainment bets, or is there something people can use these numbers for /
something people can use this as a hedge against / &c. ?

~~~
locksley
Great question.

That's exactly what we want to eventually do. For an efficient market to run,
there needs to be a way to manage risk.

However, if you mention "derivatives" to any normal BTC user, the mostly
response of "huh?", or "aren't those the things that made the world collapse
in 2008?".

Future Block, as it currently stands, is an entertainment site to bet on
something novel. However, our hope is that:

1\. It serves as an education tool to introduce people to derivatives, because
derivatives are essentially about taking one position or the other.

2\. To build liquidity for a derivatives exchange. Parimutuel applications are
great for this because you don't have the 'chicken & egg' problem where you
need 2 types of customers for it to work.

Hope that answers your question!

~~~
dllthomas
More or less, thanks!

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knodi
Big enough player can guarantee a result. Luckily only 1 coin limit so far.

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ZirconCode
Big enough player won't have one coin limit...

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jrochkind1
Hmm, I'm not sure what you meant, but it does occur to me that, obviously, one
has to trust the house to be honest here.

I'm not sure there's any way to be sure the house is really paying out the
entire pot -- let alone to be sure the house isn't intentionally manipulation
the actual market itself!

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sida
Good work. Pretty cool site.

This is cool: "Our long term goal is to build an open derivative platform that
anyone can participate in. "

Not that I don't trust you guys. Is there a way that I can test the site?

~~~
locksley
Thanks!

Well the nature of Bitcoin is that all transaction are anonymous but
transparent at the same time. For example, you could check out all the bets
we've received and payouts we've made. e.g.
[http://blockchain.info/address/1DXa2tKkoKiR1p7nbt2xSCFdUxzGd...](http://blockchain.info/address/1DXa2tKkoKiR1p7nbt2xSCFdUxzGdm1sYq)

I'd encourage you to place a small 0.01 to 0.02 BTC bet just to test out the
site, and see that it'll update the pool/odds dynamically.

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benmanns
How does the parimutuel betting work? If I bet now, am I guaranteed the
"Betting X Pays Out" amount if I am right, or does that change with more bets
on either side?

~~~
locksley
Parimutuel betting is where all the bets are placed in a pool and when the
pool closes we then distribute the winnings amongst the bets. [1] In fact,
this is how a lot of horse racing works

This means you are not guarranteed betting X pays out Y. And this does change
as bets are made on either side. And so one may think, why not just bet the
last minute? House fees are initially 0% at 6 AM (PDT) but roll up linearly to
20% by 6 PM (PDT). This is to encourage betting early and discourage bet
sniping at the last minute. [2]

Having said that, we do plan to move towards a floating model, more similar to
the futures market as we gain transaction volume.

Current prediction targets are set by us. And bettor bet on either sides. As
we gain liquidity and transaction volumes are increased, we plan to then turn
this into a real time exchange so that the transactions are settled real time
and we essentially have a moving prediction target.

In fact, this how we got our name at future representing futures market and
block representing bit coin. :p

[1]:
[http://en.wikipedia.org/wiki/Parimutuel_betting](http://en.wikipedia.org/wiki/Parimutuel_betting)
[2]: [http://www.futureblock.com/how-it-works](http://www.futureblock.com/how-
it-works) [3]:
[http://en.wikipedia.org/wiki/Futures_exchange](http://en.wikipedia.org/wiki/Futures_exchange)

~~~
foobarqux
Futures markets typically have value outside of speculation. Do you see any
such value in a hash rate futures market?

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drakaal
Illegally bet on a possibly illegal currency the same week Silk road gets
raided... What could possibly go wrong?

~~~
josephagoss
Except Bitcoin has not yet been declared illegal anywhere in the world and two
of the strongest economies on Earth (USA and Germany) have recognised Bitcoin
as some type of currency/commodity at least.

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grogenaut
Good way for mining groups to make money during downtime: bet then go for
maintenance / upgrades.

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dllthomas
Is "Locksley" meant to be a play on Dread Pirate Roberts (characters played by
Cary Elwes)?

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jboggan
What country are you operating from?

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tpainton
one thing I have learned. proving your legal is very, very expensive .

