Pool together - no loss crypto lottery

If you haven’t yet realized the potential that blockchain tech has to revolutionize everything from finance to insurance then maybe you might change your mind when you see this. Pool together, a new way of doing lotteries where the participants don’t lose any money. This is only possible thanks to decentralized finance and the Ethereum blockchain. If you think that sounds interesting then I think you should definitely continue reading.

Traditional lotteries

We’ve all tried traditional government-sponsored lotteries right? You buy a ticket and if you don’t win you’ve lost your money. What’s even worse is that it’s impossible to make sure they are fair and square. According to this and this source, you have a 1 in 292.2 million & a 1 in 302.5 million chance of winning the Mega Millions and the Powerball lotteries in the USA respectively. And it turns out that the governments are actually very incentivized to keep fooling people into buying into these government money grabs.

“State lotteries have become a significant source of revenue for states, raising $17.6 billion in profits for state budgets in the 2009 fiscal year (FY) with 11 states collecting more revenue from their state lottery than from their state corporate income tax during FY2009.”

Source: Wikipedia

Well well, what a surprise huh? States bringing in more revenue from their state lotteries than from their corporate income taxes. The truth is > 99.9999% of the participants in traditional lotteries are losing money and will never win anything of significance. Yet most people that play these lotteries have some weird belief that they will be that lucky 1 in 300 million that wins the jackpot!

Defi lotteries

What if I told you that you could still participate in lotteries without losing any money? Actually, even if you don’t win you can make some rewards just for participating but more on that later. Lotteries like this have never been possible before but now they are. The first decentralized no-loss crypto lottery on Ethereum is called Pool Together and to be honest my mind was blown when I first discovered this project a couple of weeks ago because this is going to change lotteries forever.

How it works

First of, lotteries like Pool Together are fair and transparent thanks to open blockchain technology like Ethereum. Gone are the days where we had to trust a third party like the government to run our lotteries. Pool Together is the first of many of these kinds of lotteries that are going to be existing in this space. Why? because it’s open source & anyone can copy the code that runs it. This also means that it’s transparent and can be audited & checked by anyone to make sure that there is no foul play.

Further Pool Together is a protocol that consists of smart contracts that are deployed on Ethereum and now also on the Polygon layer 2 solution for Ethereum. Participants in the lotteries deposit funds into “pools” that are actually just smart contracts. These funds get rerouted to other protocols such as Compound & Aave. Compound & Aave are specialized in lending and therefore funds deposited into them will earn interest. This is also where the lottery rewards are coming from. All lottery participant’s funds will be earning interest in 3rd party protocols on the blockchain and the winners of the lottery will win the combined yield of all assets. By the way, these 3rd party protocols are also decentralized, trust-less, open-source, and transparent.

Tickets

When depositing funds into Pool Together you will receive pTokens back. These are your ticket receipts and also your proof of deposit. You can store these tickets like any other token in your Ethereum wallet. The more you deposit the more tickets you receive & thus also the greater your chance of winning is.

Once you’ve entered a lottery you don’t have to do anything else. If you win you will get rewarded with more lottery tickets. Whenever you feel like leaving the lottery you can exchange these lottery tickets for the real deal — the token type that you’ve deposited. If you just leave your deposited assets you will automatically be enrolled in every coming draw and have a chance to win.

Prizes

The prizes that winners receive depends on the amount of deposited funds. Remember, the prize consists of the yield from all of the participant’s deposited assets. Therefore the more funds that are deposited the bigger the prize.

But this is not the only source from where prizes come. Right now 50% of all interest earned from every pool weekly is sent to a community treasury. The funds of the treasury are deposited back into every single pool as a “sponsor fund”. These funds are contributing to the total yield prize without being eligible to win.

To get back to a topic I tapped into earlier in the post. Even if you don’t win in the lottery, right now you still earn rewards in the form of PoolTogether (POOL) governance tokens if you are participating on the Ethereum network. If you’re participating on the Polygon network you earn WMATIC rewards. The rates are pretty good too, looking at the Ethereum pools the APR seems to be somewhere in the 5-20% APR range and for Polygon the rewards are currently at 22% APR.

How often are winners drawn?

Most pools on Pool Together seem to have weekly prizes right now, however, some also seem to have daily prizes. What’s important to keep in mind is that this differs from pool to pool.

PoolTogether (POOL) token

The PoolTogether project also comes with a native governance token. The project is completely decentralized meaning the community controls it. Holders of the POOL tokens can propose changes to the protocol and also vote on them. To propose a change to the protocol you need to have 10,000 POOL tokens or have them delegated to you. Anyone who holds POOL tokens is eligible to vote on new proposals. If a proposal passes there is a two-day “timelock” before it’s possible to implement the proposal. To read more about governance and how it works in this project you can see this post.

Risks

There are multiple risks when participating in any defi project and therefore also in this one. For one, there can be bugs in the smart contracts that run the protocol. PoolTogether also uses third party protocols and these projects can also have bugs in them. The project has taken precautions to try to mitigate these risks as much as possible by only integrating very well reputable third parties like Compound & Aave. All of the contracts that run the protocol have also been audited by third party experts. You can find one of these audits here.

Conclusion

PoolTogether is a very promising new protocol for no-loss lotteries. As time passes and adoption spreads even more I think that lotteries like this will gain massive traction. If you want to try the project out you can visit its website at pooltogether.com. From there you can also find their dapp and start interacting.