DeFi PoolTogether Explained

DeFi PoolTogether Explained

By D3F1 | DeFi Box | 12 Aug 2020


Have you ever played the lottery? I bet you have. You can buy tickets at any gas station, convenient store, drug store, you name it. They’re everywhere. 

Now for my next question. Have you ever won the lottery? I bet your answer is no. 

The chances of winning your standard 6-number lottery are roughly 1 in 14 million. Yeah I know, those odds suck. 

And guess what? In most countries, the lottery is a state-run biz. 

So, when you buy your standard lottery ticket, a portion of that money goes into the lottery pool while the rest goes to the governing state. 

Did you know that in America the lottery is a significant source of revenue for states? Many states raise tens of billions of dollars in revenue from the lottery every single year. 

I don’t know about you, but you won’t catch me playing today’s traditional lotteries. That’s because today, we have something called ‘decentralized finance’ or ‘DeFi’.

DeFi is a gamechanger not only for basic money operations such as payments, trading, lending and borrowing, but a whole new set of rules can be introduced as well. Such rules that enable innovative new lotteries where no one can lose.

Yes, that’s right. Welcome to PoolTogether, a lottery where no one loses. 

How can PoolTogether be a no-loss lottery?

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PoolTogether App Interface

In the decentralized Ethereum-powered no-loss lottery, PoolTogether, there are no losers. Whether you win or not, you get all of your money back. That’s because, with PoolTogether, you’re not simply buying a lottery ticket, you’re depositing crypto into a pool that builds interest.

Everyone who participates in the lottery by depositing crypto into the pool gets tickets (ie. for every 1 Dai you deposit you get 1 ticket). The pool of crypto funds then earns interest and the interest built gets awarded to the lucky ticket holder. 

As for everyone else, they get all their money back by simply withdrawing their deposited crypto funds. Alternatively, if they want a shot at winning the next lottery they can just keep it in there for another chance. 

This innovative new lottery system is made possible by decentralized finance powered by Ethereum. 

The History behind PoolTogether

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PoolTogether founder, Leighton Cusack

PoolTogether was founded by its CEO Leighton Cusack and co-founded by Brendan Asselstine, who together launched the no-loss lottery in September of 2019. 

Prior to launching PoolTogether, Cusack spent many months reading and researching different types of financial products and how they came into being. During this time, he came across the idea of prize-linked savings accounts and immediately knew this idea would work best on the blockchain. 

Some months later, Cusack’s idea for PoolTogether was first brought to light at ETHDenver 2019 when he pitched the idea to the crowd. During the event, Cusack met his eventual co-founders and together went on to create a self-funded Rinkeby prototype of PoolTogether. 

With a successful prototype built, Cusack and his team were able to get a grant from Maker to take PoolTogether to mainnet. From there, PoolTogether was able to raise a small venture round totaling $1 million in funding from ConsenSys, IDEO CoLab Ventures, and DTC Capital.

PoolTogether became the world’s first no-loss savings game/lottery and as of August 11, 2020, it has accrued interest on nearly $1 million for its lottery winners. 

Where does the money come from?

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Compound.Finance logo

The money paid out to PoolTogether lottery winners comes from the interest earned on the lottery pool. Every participant in the PoolTogether lottery must deposit crypto into the pool to get tickets. Each ticket is a chance to win weekly prizes and for every 1 Dai you deposit you get 1 ticket.

The PoolTogether protocol transfers all of the participant’s deposited money into Compound.Finance, an open money market. From there, the funds are lent out to other users of Compound.Finance and interest is then earned over the timeframe of the lottery. 

When the lottery is drawn and a prize is awarded, all the interest that has been earned since the last prize is pooled and given to the winner. If you join a pool you can check if you won by checking your “account page” and you will also be notified by email when the pool concludes and a prize is drawn. 

If you do happen to win, your winnings will automatically be converted into more tickets which will increase your chances of winning again. Or if you prefer to take your winnings out, you can do so at any time. 

Thus far, PoolTogether has two separate lottery pools, a weekly pool made up of DAI, and a daily pool made up of USDC. The weekly pool’s prize currently averages around $600 while the daily pool’s prize averages around $10. 

As PoolTogether grows in popularity and more people deposit DAI or USDC into the pools, the pools will earn more and more interest and the lottery prize will get bigger. 

The potential of decentralized no-loss lotteries

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(Source)

Let me start off by just saying outright, the potential is huge!

But let’s be real here, PoolTogether’s ~ $600 weekly prize at nearly $1M at stake is not something most people want when it comes to lotteries. 

However, let’s take a look at the fact that it’s no loss. I mean, who wouldn’t want the chance to win money for free? And secondly, let’s talk a bit about its future. 

Imagine if all the Cash App (US) or Revolut (EU) users had a checkbox in their mobile wallets to participate in a no-loss lottery. Now imagine the number of people that would play this game. 

We’re talking millions upon millions of potential users who would more than likely like a shot at winning some money for free. 

That said, the potential is huge and PoolTogether is most definitely here to stay.

Have you ever joined a PoolTogether pool? What do you think of the no-loss lottery concept? Let me know in the comment section below.


D3F1
D3F1

Yet another defi fan


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