🏠Be the House - Explained
Last updated
Last updated
House mode allows the user to be “The House”. “The House” refers to the role of an operator of a casino establishment, of a sportsbook, or any "house" where gambling activities are hosted. Implicit in the definition of “the House”, is the operator’s role in setting the rules, providing the games, and holding a stake in the betting outcomes.
The term also reflects the casino's inherent advantage in almost all games, known as the "house edge". This advantage ensures that, over time, the casino will make a profit, as the odds are slightly tilted in its favor across various games.
Conceptually, the house edge represents the operator’s built-in advantage to secure its profits over time. The game is structured so that, even though players make their decisions and can employ strategies, the rules inherently favor the house. This slight advantage ensures that, while individual players might win in the short term, the casino will come out ahead in the long run. The house edge is designed in a way to maintain a balance between providing an entertaining experience, offering players a chance to win and ensuring the casino's profitability.
Six Sigma Sports is excited to unveil a new innovative platform, providing users with a unique opportunity to engage in sports betting as "The House," taking advantage of the inherent "House's Edge". The Six Sigma Sports application affords users the flexibility to either place bets using a familiar sportsbook interface or to participate across betting markets in the capacity of "The House." This seamless transition between roles is facilitated by a user-friendly toggle switch within our application, ensuring a smooth and intuitive experience.
In order to engage as the House, first a user must identify a specific market within a fixture they feel is attractive to participate in. Once identified, the user contributes liquidity and takes their place in a queue managed by the application. When the user selects to participate in a market, they accept all bets from bettors, up to the payout capacity contributed, at the prevailing market odds. Users should monitor odds and any other news developments that may happen leading up to a match, just as a sportsbook operator would. House users will have the option to withdraw unused liquidity at any time.
Example:
A user wants to participate as the House in the English Premier League Match - Fulham - Manchester United. In order to participate, the user selects “View Bets” to enter the House mode on this specific fixture.
Upon selecting “View Bets”, all bets that are available to participate as the House are listed. The user selects the individual market to participate.
In this particular scenario, the user has opted to engage in the "3 Way Result" market.
On the interface, three key pieces of information are displayed: "0 / 0 SGE / 154.9225 SGE."
The first value, "0," indicates the total number of bets that have been placed in this market.
The second value, "0 SGE," represents the cumulative value of all the bets that have been placed in this market.
The third value, "154.9225 SGE," signifies the amount of SGE (the platform's native currency) that all users have committed to the market in order to participate as the House.
To proceed, the user is required to deposit a sum of SGE into the market, with the minimum deposit currently set at 10 SGE. By selecting the “Be The House” option, the user will be directed to the House Slip, which summarizes the details of the transaction and prepares it to be signed and recorded on the blockchain.
The user must select “accept all odds and line changes” as a condition to participate as the House. Once selected, the user can deposit their SGE tokens into the market by selecting “Be The House”.
Upon selection, this will bring up the wallet transaction confirmation display. (This example displays a Keplr wallet). Once the user selects approve, the transaction will be processed via the SGE Network and the user will be placed into the order book for the house.
Now that the user is positioned in the order book, they will accept bets alongside other
participants as “the House”.
When a user participates as The House, the user is essentially an active liquidity provider. When they deposit SGE into a market, the user is committing to take the other side of all bets placed in the market at the prevailing odds. The allocation of bets, examined in more detail later, is dependent on the user’s position in the order book and any existing bets they have taken.
It is important to note that participating as the House does NOT guarantee a positive result nor does it guarantee offset risk. In reality, sportsbooks often do not see balanced flow and do experience the gain and loss volatility associated with any single or small group of events. The performance of a sportsbook should be measured over large number of bets and an extended period of time.
The deposited amount determines the user's maximum risk exposure (maximum loss) when participating as the House. To illustrate, if a user deposits 50 SGE into a market as The House, their potential loss is strictly limited to 50 SGE. This maximum risk exposure represents the potential payout, and therefore is likely to be reached while accepting bets that amount to less than 50 SGE.
User deposits into a market as The House are organized in a sequential order, based on the time at which each deposit was made, adhering to a first-come, first-serve principle. When a user occupies the “top” position in the order book, they are allocated all incoming bets across the various outcomes within the market, until their capacity is used. After fulfilling this initial capacity, the user’s “re-usable” capacity is calculated, before moving them to the back of the queue. This systematic approach ensures a fair and orderly distribution of bets among users participating as The House.
Odds Source: The application uses a data provider that supplies odds which we expect to be in-line with the broader market.
First let’s start with some relevant definitions:
Break-Evens: A break-even percentage, also referred to as Implied Odds, is the percentage of time a bet must win for you to neither win nor lose money making the bet over time at the odds in question.
True-Odds: True Odds, in theory represents the actual probability of an event happening. In practice, bettors and sportsbooks utilize various proprietary methods to arrive at what they believe are the “True Odds” of an event. One can also estimate the True Odds implied in a set of published odds. The first version of the House functionality on Six Sigma Sports utilizes the equal margin method to do so, which simply applies the total margin equally to each betting outcome to arrive at the True Odds.
Summing the Break-Even (Implied Odds) percentages across outcomes on a market will typically add up to >100%. We know the probabilities of an event cannot be greater than 100%, and the difference between the observed implied probabilities of the odds offered by a sportsbook and True Odds represents the Vig (House Edge) of the Sportsbook.
Applying the above concepts to the Six Sigma Sports House:
At the time of contribution to the House, the user’s submitted amount is split and allocated across the potential market outcomes in what we refer to as a “True Odds Ratio”. Mathematically speaking, if the sportsbook were to accept bets at those odds and in the True Odds Ratio, it would yield a risk-free positive result; No matter the event outcome, the sportsbook would earn the Vig implied in those odds; the House, including a user’s house deposit, would be a winner in any scenario. It is important to note, odds change and betting flow is unlikely to be “perfectly” balanced. The chances of achieving offset risk is highly dependent on one’s position in the House order book, the amount of betting flow in the book, and the volatility of the odds.
The order book further optimizes the process for every participant by treating each “outcome vertical” independently, even when evaluating overall risk and capacity. Once House participants start engaging in bets, this benefits users by maintaining their position in the queue to accept offsetting risk.
Let’s look at an illustrated example:
· Here we have a hypothetical SouthHampton (H) v. Manchester United (A) football match. For the provided odds, we can calculate the break-evens and estimate the True Odds. As you see here the House Vig is approximately 7.6%.
· The first House User contributes 2,000 SGE into the order book, which net of a 50bps fee, creates a capacity of 1,990 SGE. Remember, this represents the user’s max loss and payout capacity.
· In order to ensure the supplied payout capacity cannot be exceeded, the capacity calculation is first “anchored” to the outcome with the longest odds. Here we see that the bet capacity implied by a max payout of 1,990 SGE, if fully engaged on a single outcome, would be most limited by the 4.2 odds for Southampton to win, allowing House User 1 to accept a maximum of 622 SGE in bets for Southampton. From there, the available capacity for each other “outcome vertical”, Draw and Away (ManUnited), is calculated based on the True Odds ratio previously discussed.
· As you can see in the box titled House User Exposure, the red line illustrates the max loss if a user took only single-direction bets in each outcome. The P&L line below illustrates how the House wins under any scenario (+199 SGE), if the sportsbook accepts bets in the True Odds Ratio with the odds unchanged.
· The last section titled House Order Book, illustrates what happens in an order book of 3 House Users that is engaged by 2 different bettors. In particular, note that when Bettor 1 takes all the capacity of House User 1 for the Home team, the order book is updated to reflect this reduced capacity, but maintains House User’s 1 position under the other outcome verticals (Draw & Away) in order to be prioritized to benefit from offset risk.
· The allocation of capital across outcomes is updated for both executed bets and changing odds.
· This positioning is maintained until the user’s remaining capacity in the other outcomes is engaged OR the odds change to such a degree that capacity is reduced to 0 because taking additional bets on those outcomes would no longer be risk-reducing. At the realization of either of those 2 outcomes, the user is recycled to the back of the order book with any remaining capacity they have, thus creating capital efficiency and the opportunity for the House user to engage additional bets. [Note this capacity calculation is equal to the user’s original contribution, less the max loss possible from the bets they have engaged. Hypothetically, if perfectly offset risk was achieved in a true odds ratio, the user would be able to re-use 100% of their original contribution).
· A few notes regarding withdrawals of House liquidity:
o A house user will be able to withdraw unused liquidity at any time.
o There are no partial withdrawals. Currently, if withdrawing, it must be for 100% of unused liquidity.
o Once a user’s capacity has been fully engaged, and is therefore “recycled” to the back of the queue, withdrawal is no longer possible.
Participating as the House is still betting; It is not guaranteed to be risk free, but you can never lose more money than your deposit.
First come, first serve. Those who deposit first receive the first bets.
Odds changes can limit or reduce the value of bets allocated. Odds changes are unpredictable. Our design ensures our first principle is always maintained, even if this reduces the maximum amount of risk allocatable to each user.
You can, and are likely, to end with some directional risk. Flow is rarely perfectly balanced, even if you are early to contribute liquidity to a market.
It is the user’s responsibility to monitor odds changes and market news just as a sportsbook operator would.
The more often and earlier a user engages as the House and the more bets are placed, the more profitable a house depositor can be over the long term. The key to success is to participate frequently and to encourage bettors to bet in markets where you provide liquidity.
Good luck !
