Grand Prize Frequency

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Grand Prize Frequency

In DeFi, immutability should reign supreme. Unlike earlier versions of PoolTogether, once V5 is deployed, its settings become unchangeable. This emphasizes the necessity of making the right choices from the get-go. In this post, let’s examine one crucial parameter: the frequency of the grand prize.

Understanding the Grand Prize
The grand prize in V5 accumulates over an extended period, enticing depositors eyeing a life-changing win.

For both V4 and V5, the grand prize operates on a statistical basis. For instance, if we calibrate this prize to have an annual occurrence, it translates to a 1 in 365 chance of being awarded any day. However, it’s essential to realize this is a probabilistic model; the prize might be given out sooner or later. We can set it to target once a year and it might happen twice in one year OR it could take two years to see the first one.

Unlike V4, the grand prize is chain dependent. The protocol deployed on other chains will not share the grand prize.

In Beta the grand prize was set to 365 days assuming that’s what would be used in the public launch. Full disclosure, I’m bringing forward this topic because I disagree with that decision.

Let’s look at the potential advantages and disadvantages of having an annual grand prize:

Pros of annual grand prize

  • Size: The longer the prize accumulates, the more substantial it becomes.
  • Consistency: Fewer resets where the grand prize dwindles to zero and requires a rebuilding phase.

Cons of annual grand prize

  • Liquidity Challenges: Increased difficulty in providing adequate POOL liquidity for a winner to realize the prize value.
  • Fewer Winners: A reduced number of overall big winners.
  • Delayed Gratification: Extended wait periods dampen the enthusiasm and thrill for participants.

How Other Games Do It

  • UK Prize Savings: Awards two big winners with $1 million every month, effectively translating to 24 grand prizes annually.
  • Powerball Lotto (USA): This traditional lottery pays out billions in jackpot winnings annually. Over the past four years, the breakdown for jackpot wins has been roughly 6 per year.
    • 8 winners in 2022
    • 6 winners in 2021
    • 6 winners in 2020
    • 7 winners in 2019

My Opinion
I propose that the ideal duration for the grand prize should be between one to three months. If it were up to me to decide today, I’d aim for a two-month interval on Optimism. This is a fast paced world that wants results to stay engaged. While the protocol will run autonomously into the future there is a high likelihood that a new version will take over in popularity in the years to come. Just like we see with the most robust and popular protocols like Uniswap and Aave. A two month interval will build an exciting prize that brings excitement and a big win that won’t have a huge price impact on POOL if sold.

Your Thoughts?
I think this is an important community decision. What are your thoughts on the optimal grand prize frequency? And while we’re at it, any suggestions for what we should call Tier Zero also known as Grand Prize aka Headline Prize aka……

V5 Grand Prize Target Frequency
  • 1 month
  • 2 month
  • 3 month
  • 6 month
  • 1 year
  • other
0 voters
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Thank you for opening up the discussion :slight_smile:

While I’m not entirely decided on what my ideal grand prize frequency would be, I’d probably aim towards a slightly higher number than you do (6 months to 1 year). This is for a couple of reasons…

The grand prize frequency does also have a side effect of altering the other tiers’ frequencies indirectly. This is because those get assigned a value between it and 1 draw (1 day if draws are daily). Drastically decreasing the grand prize frequency does in that sense mean less monthly and weekly prizes, leading to the majority of prizes being small ones awarded very frequently (or if too small, not at all).

We’d have to run some simulations to see how those would look - maybe it would just mean less tiers due to no canary claims occuring at similar tier counts to now, and thus this discrepancy would be mostly nullified - but I’m not really convinced.

The size of the prize is extremely powerful to initiate the protocol’s perpetual growth. This can be seen as an extension of your “size” item listed in “pros”, but perhaps is only relevant in the short to medium term. Sometime during (or before?) the private beta we switched from extrapolated prize sizes to what they currently are (what they’d be if they were to be awarded right now). That was the right decision, but I do still have the code to swap between them. Last I checked the grand prize during the private beta would be about $8,500 (after a dip in POOL price) if awarded in a year ($4,250 for 6 months, etc.).

Imagine these numbers with any amount of significant TVL and maybe even better yield. Reaching a prize of $100,000 would bring so much attention to the protocol that’d it’d be ridiculously easy to rocket up to $250,000 or even $500,000. At those levels, you’d have to be willfully ignorant to not have at least a few scraps deposited into PoolTogether just in case. That sort of exponential growth gets significantly hampered by essentially cutting up the original number in half, or a quarter.

Anyhow, hope I added something to the discussion for others to chip in :3

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I voted once per year because of how the system works. If it wasnt a ‘target frequency’ I’d vote in favor of once every two months. But since we can’t guarantee once every two months will be the frequency (instead over time it will average to be that) I’d leave a cushion for that parameter to be averaged. Based on previous versions, that cushion needs to be large.

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I think once per year is the easiest path for us to get headline prizes that make people’s jaws drop and that’s mainly why I want to see it, but I can understand the desire to see more frequent, large, prizes as well.

Even with a 1 year GP period, we will still see substantial monthly or multi-monthly prizes being awarded in the low tiers. For example, in the beta we currently see two $150 prizes will be awarded per month on average and the GP is at about $1000. If the tier distributions were to remain the same, but we had enough TVL to reach a $1mil GP, then we would also be seeing two ~$150k prizes / month, which seems plenty exciting to me!

In addition, the plan is to deploy a prize pool on multiple chains. If we have 4 prize pools, all with a yearly GP, then we would technically be seeing 4 GPs per year on average across the entire ecosystem.

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I think it’s a delicate balance of what will draw the most people to add to the pot for a chance at the big number while maintaining that it’s not a whale’s game and that the prize actually gets awarded.

I think that 1 year Grand Prize hits that mark. Yes it’s slow for web3, but that’s intentional. PoolTogether as an ethos is intentionality and responsibility with a perk. In my view PT has always been the “this is where I put assets when I don’t have a plan for them” in the active times, and the savings vehicle of web3 in the inactive times.

I think it would be helpful to have a simulator that does the math for the prizes. Someone enters a target Grand Prize amount and it calculates out the monthly, weekly, and daily prizes. Maybe Brendan already dropped that somewhere, but I couldn’t find it. This kind of does it, Prize Liquidity and Incentives (public) - Google Sheets, but you need to adjust TVL and do some guessing to narrow the prize distributions. But if the numbers above hold true, $1MM Grand Prize, $150k Monthly Prize, something like $10k Weekly Prizes… I think we’re really getting people in and out of web3 interested.

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