Casino Slot Machines and Crypto Meme Coins: Why Long-Term Participation is a Sure Loss?

A player overseas recently exposed an experience of his online:

He recounted that during his participation in the LIBRA token trading issued by the Argentine president, he lost everything. From previous meme coins to the recent Trump coin, he had reaped substantial returns along the way, but all of that was wiped out on LIBRA.

To turn the situation around, he planned to sell his offline physical assets to reclaim everything he lost on-chain.

I've seen too many stories like this and have shared them with everyone in past articles. But this time, seeing such a story again, my thoughts have changed a bit. It's not that my conclusion has changed, but rather my way of thinking has shifted; I now have a more rational framework for viewing these kinds of issues.

During the Spring Festival, I came across a very interesting video that explained many intriguing phenomena in casinos using the law of large numbers and expected value regression.

For example, why do gamblers inevitably lose if they play for a long time?

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

Although I am a science student and probability and statistics were required courses during my studies, this is the first time I've seen such a straightforward explanation of these phenomena in casinos using such simple language.

So today, I would like to share the intricacies of this with you.

Let's first look at an example of flipping a coin.

We all know that when flipping a coin, the expected probability of landing on heads is 50%. However, if we operate in different ways, we will see results that are vastly different from our expectations.

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

If we flip the coin four times in a row, the number of people who can land on heads four times in a row decreases. In this case, fewer people will think that the fifth flip will also land on heads.

If we flip the coin six, eight, ten, or even a hundred times in a row, the number of people who can land on heads consecutively will drop sharply, and those who habitually think the next flip will also land on heads will also decrease significantly.

As the number of coin flips increases, we finally find that the probability of landing on heads stabilizes around 50%, rather than reaching 100% as we sometimes see with two or four flips.

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

Applying this principle to casinos, we discover some interesting phenomena:

If a gambler plays a game only once and does not participate again, even if the gambler has only a 10% chance of winning in that game, the house's advantage is not very apparent, or in other words, the gambler's disadvantage is not very significant.

However, if a gambler continues to play a game infinitely, even if the gambler has a 49% chance of winning in that game, the house's advantage will become very apparent, and the gambler will ultimately lose.

Based on this principle, casinos design games in such a way that even if they give gamblers a slightly higher expected chance of winning (as long as it doesn't exceed the house's advantage), they will find ways to keep gamblers playing indefinitely.

Slot machines are the best example. The bets placed in each round are small, and losing doesn't hurt much, plus there are occasional wins, so gamblers often sit down at the machine and find it hard to get up. Once they sit down and can't get up, losing everything and walking away becomes a predetermined outcome.

Now, let's switch to meme coins in the crypto ecosystem.

The development of meme coins in this market has reached a point where there are increasingly fewer compelling stories to tell; it has basically become a game of emotions and manipulation behind the scenes.

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

If participating in such projects is merely seen as a game, then it doesn't matter how happily one plays.

But if participating in such games is viewed as a long-term profit strategy, becoming addicted and playing for a long time—even if one doesn't lose everything in one go but can win occasionally—the final outcome will inevitably be like playing a slot machine, where assets are ultimately wiped out in a gradual, insidious manner.