PoolTogether

Additional Prize Methodology to Drive Participation, Fill Pool Treasury, and subsequently increase Token Value

Make PoolTogether Sexy Again – A Grand Prize to Drive Participation, Treasury Growth, and Pool Token Value

This is an addition to the discussion of PoolTogether (PT) Tokenomics, but also pertains to an additional prize pathway on the PT Protocol. This mechanism addresses the slow bleed of treasury funds to incentivize participation in the traditional APY based lottery scheme we currently have. A scheme that will never approach the types of jackpots we need to thrive and drive PT into the real world. This addition would maintain the lossless ideals of PT.

Cliff Notes:

    • A Grand Prize that is linked to the current, traditional V4 Lotteries.
    • o Has a set odds (For instance, 1:200,000,000 which is about that of the US PowerBall, that makes winning the prize very rare.
    • o Rare prize essentially locks a large sum in PT to allow additional interest generation that serves PT and Pool holders.
    • o Government decided, preferably very small i.e., 0.1%, scalp to interest generated by TVL in the traditional V4 lottery funds the Grand Prize.
    • o Optional but highly encouraged : Locking mechanism plus limited entry to participate in Grand Prize drawing. (This would exclude traditional lottery players as having 23,000,000 tickets in the Grand Prize will likely rapidly drain the Grand Prize.)
      • § Locking mechanism grows the Grand Prize more rapidly than the .1% scalp to traditional players, but it will be in addition to the scalp.
      • § Stakers in traditional V4 lottery have the option to forego 100% interest to participate in the drawing at a 1:1 ratio, 1USDC to 1 chance.
      • § Prize is no longer dripped from PT Treasury, but solely derived from interest generated in V4 Lottery TVL.

Explanation:

I am proposing an ancillary prize on top of the current protocol. We need an infrequent and limitlessly increasing prize on the PT protocol to generate more participation, especially participation that solely favors the Pool Protocol and reduces the the need of an unsustainable drip we currently have, which isn’t capturing the participation we need to reach critical mass. The Grand Prize is generated through a tiny scalp on the current traditional players of 0.1%. By this scalp alone, we generate a prize worth 8,821USDC by the 20th week, and by 52 weeks the prize would be worth 23,000USDC. Over the year, it would only generate a total 350USDC for use by the DAO. However, if we limit participation in the Grand Prize to those who stake their tokens (forego all interest generated at a 100% scalp to the protocol) for a draw, at 1,000,000USDC staked per week we have a Grand Prize of 20,000USDC at 20 weeks and 52,000USDC by week 52, generating 800USDC for the protocol. Normally, the Polygon V4 funds would generate a prize of about 13,232USDC per week, scalping only reduces their payout interest to 12,791USDC.

These stats consider the CURRENT 23,000,000USDC in the polygon Pool and a pretty substantial guess at 1,000,000USDC staked/locked per week (For example, 100,000 people lock 10USDC each for a chance at the Grand Prize). See excel sheet in discord which shows options for distributing Grand Prize interest to Pool holders who are staking tokens on PT V3 or distributing Grand Prize interest straight into the treasury. This new grand prize will not favor Pool holders for a long time, but in the long run it could set the treasury up and eventually reward Pool Holders. Initially, this will only create an exciting and infrequent prize for users of the protocol. See Excel sheet in the discord to play with Treasury amounts, Potential future distributions from treasury to Pool stakers, %interest distribution to Pool stakers or the treasury, % scalp fee, and weekly value staked for Grand Prize tickets.

It’s clear that a staking mechanism may be necessary to generate a large Grand Prize quickly without treasury investment, that would entice those who have not participated in PT yet to dive in even with their measly stable coin holdings for the chance at a real decentralized “Jackpot”. To put things into perspective as to our potential, in the lossful lottery (PowerBall) ~30,000,000USD in tickets are bought lossfully every week. 70,000,000USD lossful tickets are bought during peak lotteries. Powerball alone rakes in ~1.6 billion every year through pure lossful ticket sales.

On top of a virtually unlimited Grand Prize and its interest generated while waiting for a winner, the Pool Protocol could also scalp a ‘convenience’ or ‘disbursement’ fee at the time of the Grand Prize’s winning. This would be a substantial boon to the treasury every time the lottery is cleared. Consider a grand prize of 50,000 USDC, PT could take a 10% or 5000USDC profit to the treasury, and the winner still receives 45,000USDC. Winners will likely not shirk this fee because the odds have already made this Grand Prize lottery into a dream as rare as the US PowerBall.

This change gives the treasury an additional and more productive way to generate interest solely for the DAO, treasury, and Pool holders.

A treasury full of stable coins should be our goal and is absolutely what we need to grow if we want to increase the value of the Pool Token. Consider if we instituted a subsequent drip, after critical mass, from the treasury to Pool Stakers, the treasury could drip 50% of its interest after it accumulates 1,000,000,000USDC, which could generate a 6%APY to Pool holders at a token price of 50USD if ALL Pool tokens in existence were staked on the protocol. Only 766000 Pool Tokens are currently staked. If we’re taking disbursement fees on potentially limitless lotteries, this won’t be impossible especially if this encourages participation by the masses in the Crypto sphere. This may be too hopeful, but I believe we need to do something that will create ‘hype’ for the protocol before it is too late. note You may notice that a higher valuation of Pool doesn’t even make sense until our Treasury reaches a much higher value in stable coins(around 10,000,000USD).

Side thought: To generate early buying pressure on Pool Token in our current beginning stages, we could allow Pool Stakers an equal number of tickets to participate in the Grand Prize, but odds would likely need to be decreased or fiddled with to not drain the Grand Prize too early but to also maintain a sense of Justice in the Grand Prize.

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Something like this could be a very good long term plan but I don’t think it will help us much in the near term. This community is relatively small and if we used powerball odds we could grow the community 1000 times and still it would be unlikely for anyone to win in the next 10 years. I do like the idea of generating a large jackpot, I would be in favour of implementing something like this if the odds are calculated so that someone is likely to win once every 1-2 years but we will need to make some other improvements to other areas in addition to this in order to fill our immediate needs.

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Right, this is not THE solution but it’s A solution. And I actually don’t think it matters that we hit the jackpot, only that it’s visible and growing. The point IS that we hit it infrequently, because that’s money in the bank and advertisements.

Also, as the price increases, it will start making sense for whales to try and hit it too since they won’t lose their principal attempting it, which will only increase our interest accumulated further.

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To me, larger prizes make sense in attracting new users and generating interest. The challenge is that once you start to draw from user accounts to fund a prize pool, you first and foremost leave the principal of no loss, but you also can now be categorized as a lottery which opens up potential regulatory issues.

However, to riff off this idea…if you were to have say a $1 million usdc prize which was drawn for once a month and each individual entrant had say a 1 in 10 million chance of winning, so the odds are that the prize would not be won, we could use some of the yield to purchase insurance against the actual awarding of the prize. The cost of the insurance would depend on the odds of winning and the number of people entered…but if structured the right way, could cost as little as $5,000 to $10,000 USDC per month.

This would allow us to offer the potential of higher yield prizes, without loss, before we actually have those amounts in the treasury to give away.

i’m not sure I understand your reasoning against this. We already use user accounts to fund prize pools, this is just an extension of that that encourages larger infrequent prizes. After the DAO completes this sort of promotion we have going on V4, where do you think the prize funds will come from? Prize funds that are not won in their totality at each draw. We could even use the run-off instead of a scalp to fund the grand prize.

I’m just one person, but I’m totally for a bigger, infrequent prizes. It just can’t be done with the potential of loss. Scalping creates loss and makes this a lottery. But funding it from the run off would work, but only when Yield off deposits > Cost of Prize Pool

My suggestion was to actually fund it from yield and then make it a really big number via insurance.

That’s why I suggested we scalp 0.1% of yield.

Theoretically you could enter v4 and never win. That would be a loss.

Find JD in the discord. I posted an excel document that can help people play with numbers, percentages, etc.

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