PoolTogether: A No Loss Lottery Built On Ethereum Blockchain and Compound
It is hard for most people to figure out how investors in Facebook’s stablecoin Libra will make a profit from their venture. However, there is a project called PoolTogether which can help us understand the business model on a small scale.
PoolTogether’s creator, Leighton Cusack says:
“What excites me is that I think it can actually move the needle on economic health for a lot of people.”
How Does It Work?
When a customer joins a “pool” on PoolTogether, they get an opportunity to win a prize but even if they don’t win, they get all their money back. This is possible because the prize is funded by the interest accumulated from the money contributed to each pool.
In Cusack’s own words:
“At a basic level, it works by taking all the capital from the purchased tickets, earning interest on it, and then using that interest as the reward.”
Notably, PoolTogether is based on the proven concept known as “No Loss Lotteries” or “Prize-Linked Savings Accounts” which can divert money from traditional lotteries and increase savings.
They have three distinguished advantages over traditional prize-linked savings accounts:
- Efficient: Leveraging smart contracts to run each “pool” means more money goes towards the reward.
- Global : Because Dai is used as the currency anyone can participate anywhere in the world.
- Auditable : Because everything is done on the blockchain the system can be monitored and verified.
PoolTogether has a solid business model and is not a charitable organization. They take a 10% cut.
A Safer Alternative To Lottery
Cusack says that lotteries are one of the most used financial products in the world but also one of the most damaging. A healthy alternative to the lottery, such as PoolTogether can be a healthy alternative to lottery tickets which will help people feel economically safe and secure.
Although Cusack admits that they are in the crypto business and he admits that in these early days, nothing is too safe. Even though they have been audited by smart contract security firm Quantstamp, there are chances of the platform being buggy, which no one would have detected till now.