Reduce Chip Inflation

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Chip inflation is the decrease in value of Replay chips that occurs as more chips enter the site. It is the same as inflation in economics in which prices (i.e., the number of chips needed to play against the population of opponents) rise over time, lowering the real value of the currency. Reducing further inflation would add long-term enjoyment to the site for users and would benefit the site financially.

Every day, thousands of players log in and add 2,500 chips each to the “economy”. If 5,000 players get the bonus per day (which seems reasonable since 1,000+ are on at any given time), that is about 12,500,000 new chips introduced per day and about 4.5 billion new chips per year. When combined with other bonuses and chip purchases, that number could be far greater.

Many players do quit the site causing many chips to “die” sitting in those inactive accounts, but I would argue that most of these accounts have relatively small amounts of chips in them from players who went broke or were on a downswing. Even if the number 2 player were to leave and take 10 billion chips out of the economy, that would not actually help because the 2-3 players who win the most actually reduce this inflation by siphoning off a large portion of the chips so that there are fewer in circulation (i.e., the gap between them and everybody else is so great that they essentially act like a regulatory bank, but I digress…).

I won’t go too far into how inflation negatively impacts enjoyment of the site because it is subjective. I know that this is a social site and some players can get enjoyment from playing at the same stakes over and over again and don’t care about how many chips they have. But that is not the case for all players, and the reward, the incentive, for playing poker lies in winning or losing. I used to be excited to win 100k because it meant I could play at a higher stake level, and now I don’t care about winning 3m because I am still 300m away from the next stake level.

From a financial perspective, the site would benefit from reducing this inflation. Many players seem to think that the site wants players to go broke and for certain players to win to promote chip buying, but in reality, chip inflation decreases the value of the chips, which would make it less likely that players would buy them. I receive advertisements from the site trying to sell me 60k chips, which is 0.03% of my bankroll. Why would anybody buy 60k or even 375k when 500k are needed to be ranked 11,000? Why would anybody buy 3.75m when the high stakes games are occupied by players with 10m or 100m or 500m or 10b? By allowing this inflation to go unchecked, the site is essentially devaluing its own product.

Preventing this inflation altogether is probably impossible because poker is a game of skill and winning players will continue to increase their chip counts, but there is at least one obvious way to decrease it. Increase the rake for ring games. I am not an expert on rake or the financial side of gaming, but for a play chip site where the chips are a secondary incentive, I believe that the 10% rake for tournaments is fair. Maybe this could be tweaked, but the change would be relatively minor. Ring games on the other hand, where the vast majority of chips are on the table, have almost no rake at all.

Max rake of 100 at low stakes amounts to maybe 2.5% of the average pot at the highest level. At medium stakes, the 250 max is 0.7% of the average pot at 500/1k, and at high and elite stakes the 500 and 1k represent microscopic fractions of the average pot. Millions of chips change hands while the site removes just a few thousand, creating huge gaps between winning players and everybody else. By adding a rake of 10% or even 5% with a cap, the site would greatly reduce this problem. Winning players would still win, but their win-rate would be decreased and the removal of these chips would reduce inflation. This would increase the incentive to buy chips and give players long term enjoyment because winning chips would actually mean something rather than treading water in an ever deepening pool.

For reference, assuming 10 buy-ins of 100 big blinds are needed to play at a certain stake level (which is actually extremely aggressive from a bankroll management perspective):
The player with the 3,000th most chips (3m) should still be playing medium stakes (1k/2k)
Players in the top 1,000 in chips (11m) would be in the lower end of high stakes (5k/10k)
Only players within the top 200 in chips (100m) should play at elite stakes
And this is in a population of 1m players, at least 20,000 of whom must active users, and with more “realistic” bankroll management these numbers would become twice as extreme.

The difference between being 100th in chips and 50th is about 300m, which is 100x what the 3,000th ranked player has. And the number 2 player has 20x what the 50th player has. This gulf in chips is astronomical and has an impact from the bottom to the top of the player pool. This post is not concerned with rank (which has no objective meaning), but rather with the value of chips as means to play at certain stake levels and create an incentive to play and win.

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What a well thought out and informative post. I never looked at it that way.

New perspective for me.

Thank you my friend :+1:t2:

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Kinda like the inequality of wealth in America…

Are you a communist?

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Lol :rofl:

I worked hard to build my chip fortune. My parents didn’t leave a big chip-heritance, so all I started with was a chip and a chair. Through hard work, I have become part of the chip 1%, and I deserve it. Now, if you’ll excuse me, I am going to my chip castle to swim by myself in my olympic sized pool of chips. Enjoy swimming in the duck pond you peasants…

But seriously, income inequality is not necessarily the same thing as inflation (although I am not sure how anybody could consider too much of either to be a good thing).

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Nice post Joe

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Well, there are really a lot of people on here that would disagree…

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Yes you do deserve them Joe !!!

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Joe, you might link to the thread from a couple months ago, or have it rolled in… it might still be relevant.

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Thanks for the interesting post. Way back in the 1940s, the person most respected for his fair, accurate poker advice was John Scarne (pronounced scar-knee). Along with his weekly advice column for the poker playing troops during the wars of the 40s and 50s, he took a very hard look at the (mostly informal and impromptu) games that set up as “the house” to run poker and other card games. His main conclusion was that with an honest 5% rake, few players would be able to win enough to overcome the rake. Even today, in live cash casinos, it is very rare to see a rake higher than 5% (most are at about 4% or 4.5%). For players at the very highest levels, instead of charging a rake, there is a “seat charge” that works out to be about the same, but charged as “rent” or a “time charge” for the seat at the table.

Replay need not go to that extreme. Simply collect the entire, full 5% rake from all stake levels and the problem becomes self-correcting. My 5% of 1000 chip pot and the 5% of your 1,000,000 chip pot is the same percentage. (You can think of it as a flat tax, if that’s the way your mind works.) Everyone pays the same percentage rake on every called chip put into the pot. They could even charge that rake on bets as they are made–which would have the side benefit of solving the bingo problem.

We don’t need to reinvent wheels, we already have them.

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Another interesting perspective :+1:t2:

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Alan , I’m sure you are correct; however, the games you speak of do not give players 2500 chips each day nor have the promotions etc, etc, etc. that push chip inflation.

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That’s what I would like to see, 5% rake with a cap of approximately 250 at low stakes, 5k at medium stakes, 50k at high stakes, and 200k at elite stakes.

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Sorry to say that I am not one of them… :>))) …

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Very thoughtful post. This is a phenomenon that I have discussed with some other top-ranked players in the past, and as a beneficiary of this supposed chip inflation, let me offer some perspectives.

The wealth inequality that you have observed certainly could be caused by chip inflation. I also believe this to be the case. However, there is another plausible explanation, namely that such large gaps in bankrolls are a function of differences in skill that have manifested themselves as a result of volume of play rather than chip inflation. In reality, it probably is a combination of both.

To determine just how large of an impact chip inflation is having, we need hard data on the change in the aggregate number of chips within the Replay economy. “Wealth creation” on Replay comes in the form of login bonuses, tournament overlays, promotions and chip purchases. “Wealth destruction”, on the other hand, is mainly due to rake but also players that have stopped playing. (Like you noted, this was the case for myself as I have become relatively inactive.)

Both pieces of information are easily accessible to Replay staff. Thus, to confirm or deny the hypothesis, it suffices to plot the aggregate number of chips over time. If this variable is largely constant, it would be safe to say that income inequality is observed due to volume of play, since stronger players will end up with most of the chips over time.

To combat this problem, if it is indeed perceived to be one, I would prefer to act on both sides of the equation rather than simply increasing rake. I agree that rake at the highest ring games is absurdly low and warrants an increase, but a rake of 5% dramatically alters the nature of optimal play in NLHE, more so than you may appreciate:

  • Preflop strategy bifurcates, with increased 3-betting frequencies and decreased defense frequencies due to a “no flop no drop” policy. Opening ranges significantly narrow from all positions.

  • Postflop frequencies are now piecewise, with the kink existing at the cap. Before the cap, risk-reward calculations are distorted as the utility of a value bet is diminished by rake.

(Side note, this also means that I believe rake in lower ring games should be decreased, but that is not the point of this discussion, which is on chip inflation specifically.)

I would recommend that Replay staff take a look at the delta between chip creation and chip destruction and aim to close that gap via 1) increasing rake on ring games to a reasonable value AND 2) removing certain sources of chip creation. As a bit of an NLHE purist myself, I dislike sources of distortion to optimal play, hence I dislike exorbitant rake. By extension, this also means that I dislike promotions because they alter ICM pressures in a tournament, where some people are playing for the leaderboard or whatever, instead of playing poker as it is meant to be played.

One last thing that I would like to point out is that there is a possibility that higher rake will exacerbate this inequality, counterintuitive as it may seem. The effect of rake decreases everyone’s winrate by some BB/100. Most winners on this site are what I consider marginally profitable players, with a BB/100 in the low single digits. Rake will thus make these players’ bankrolls stagnate since they become breakeven players, leaving only a handful of elite players who have double digit BB/100’s before rake to be the only profitable players left on the site.

Just my 2 cents.

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This is turning out to be a great informative and insightful thread.

I for one am learning a lot about chip inflation and the mechanics of it all.

Thank you

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Not to take away from the excellent holistic discussion, I would suggest a mostly painless way of “removing certain sources of chip creation”. Replay could end the 2500 daily chip bonus for players who carry a bankroll of 500,000+ chips. My back-of-the-envelope calculations say that would result in 25-30 million less chips per day injected into the supply.
To me, the daily bonus serves two legitimate purposes:

  1. Encouraging new/low-skilled players to continue playing.
  2. Encouraging all players to log on daily.
    While the elimination of daily bonuses for larger bankrolls might cause concern with #2, that could be mitigated by a different but less inflationary bonus. Instead of a log-on bonus, the higher bankroll players could be offered an “activity” bonus. Maybe 500,000+ bankroll players could be rewarded with 5,000 chips for every week they exceed 10 hours of actual play, and 10,000 chips for every week they exceed 20 hours of actual play.
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I think you need to take in to consideration that the majority of the players receiving the 2500 daily chips, are spending much more daily on tournament fees and rakes. I spend the 2500 free chips on 1 tournament fee and I play many. Just my 2 cents…

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Thanks for your response. Those are all great points. I hadn’t fully considered how increasing rake would affect strategy.

I agree that it is important for the site to look at the whole picture of how/how many chips are added and removed from the economy (assuming that anybody from the site is actually reading this and considering some type of action). I don’t presume to know the level of true inflation versus inequality based on actual skill differences. I was making an assumption that the huge variation in skill level within the site leads chips to flow to the top players, and that inflation is occurring because the site provides bonuses to keep players coming back in spite of losses. All of that would need to be supported by actual data.

I am familiar with your argument that increasing rake increases inequality by turning players with marginal winrates from winners into breakeven players or losing players, and I think it is a valid point. I was about to make a counterargument that the skill levels here are so low that winning players could find a stake level low enough to win, but I realized that the passive way that many players here play and the multiway pots that frequently occur at lower stakes probably mean that there are many of these players who count on hitting a big hand to win who may subsequently find themselves going from winning to losing with a significant rake increase. I think it is up to the site to figure out what the reality is and how to address the situation; I don’t know the answer. Maybe the rake would only need to be increased slightly (even 1% would be a large increase at higher stakes).

I imagine that someone from the site might argue that this chip inflation only really impacts a few hundred of the higher stakes players. Players with 25,000 or 250,000 total chips can have fun playing 5k or 25k games without worrying about going broke (it would be easy to recover their bankroll from bonuses anyway). But I do think it has a real impact on the perceived value of chips that players may want to purchase and it reduces the replay (no pun intended) value of long-term players. I have almost quit on numerous occasions because I am not motivated enough to chip up from 10m to 100m to go from 2k/4k to 10k/20k or 20k/40k, and now I am not that motivated to go from 175m to 500m. Beating a stake level in terms of skill but being confronted by a bankroll gap to the next level is discouraging. I believe that when I joined 3 years ago, the top players only had 1/5th of what they have now and 20m would put one in the top 300 instead of the top 600. The rank is not important, but it appears that the number of chips in the economy has increased.

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Joe, I have no clue how to link this, Chip Inflation

When talking about Rake, I agree ist way too low on Ring tables… a standard SnG is 10% rake, most MTTs are about the same… Then we look @ Ring… so if you are paying .1% (not 1% or 10%) … you are paying that in only the hands you don’t fold preflop… Also that rake seems to be only what is a portion of the pre-flop betting. as the pot grows the initial rake stays the same… Unranked and others will quickly correct that if I’m wrong…

Take a 2 hr period … a SNG player might get 2 games, a MTT player 1 MTT, so thats paying 10% for 1 or 2 hrs of play… whereas a Ring player is paying that EVERY hand they try to play… if you pay 1% , and you’re playing40 hands outta 70 hands the table played in that hour, then you are paying 40x that 1%, perhaps much more than your 10% in a MTT…

Unranked also brings up “level of skill”, and while yes better players will amass larger bankrolls than average players… whats insidious is that you regularly have players sitting @ a table with a vastly different % of thier bankroll “in play” or “@ risk” … Being a bully with your chipstack, only takes knowledge of how to play from a certain advantage, not necessarilly meaning greater skill, just a bigger bankroll.

If player A sits with .0001% of thier bankroll, and another sits with 10% of thier bankroll … both players sit with the same starting chips… Thats why in a casino you can’t just see into the person next to you’s wallet… knowing how many “chips behind” a person has , or doesn’t have, can & will directly effect gameplay.

While bankroll specific limits for tables( that players can join ) should be offered, they should not be manditory becuase it too severely limits some players’s ability to even get a game going, or just go play for fun… Conversely , while increasing the Rake for Ring games is need’d , that small sinkhole for chips will not solve the inflation, nor is treating your players differently… with say those 2500 bonus each day…

Sassy_Sarah

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I play on freepoker.org also their chip bonus is over 7’000 chips a day plus bonus it is a very small site having under a 1’000 people playing at one given time.They also sell chips.They are not even talking about chip inflation.I like replay poker and play quite a bit. My goal is to be in the top rank of my friends. I would like to know how much replay poker makes a year selling chips that is real money that know body on this site will ever get know mater what rank you are.Back in the old days these fake money chip sites gave you so much money to start as a new player and if you lost it you could not play until the next day.I don’t know if you think that is good or bad but I can tell you know one hardly ever heard of bingo players.