Reintroduction of Pods to incentivise small depositors

Problem

Small depositors into the v4 pool have very little odds of winning. Even prior to the recent prize restructuring, a $100 deposit would win only every ~75 days. After the restructuring, that same $100 wins only every 276 days, approximately 9 months. This means small depositors almost never win anything, and have to wait extremely long amounts of time to see any return from PT, making them far less likely to use the protocol to begin with.

This problem is widespread, as the median depositor on Polygon only has $125 deposited. This means over half of depositors on Polygon will win $5 every 7 months or less after the rewards cut.

This is very much against the values of PoolTogether (PT), because even our docs say our purpose is to:

  • Encourage saving money by offering prizes
  • Direct money away from wealth destroying lotteries

And that
depositors consistently win enough small prizes to remain engaged and economically better off than a traditional savings account.

If we cannot encourage users to save via consistent small prizes, we are not achieving the goal that PT set out to accomplish. Users will not want to save with us if their chances of winning are maybe once a year.

Proposed Solution

The solution I am proposing for this issue is the reintroduction of Pods. Pods are a function that still exist in v3, found here [PoolTogether App]. The purpose of pods is for small depositors to combine their deposits together in order to win more frequently. The winnings of the pod will then be divided equally among all participants proportional to the amount they deposited.

Example of function

Let’s say 50 depositors all deposit $100 into the Pod, each owning 2% of the pod. The pod deposits all $5000 into the v4 pool. Over the next week, say the pod wins $20. It automatically redeposits the winnings into the v4 pool.
There is now $5020 in the pod. If one of the users withdraws their share of the pod, they will receive 2% of the current balance, or $100.40. The pod will then have $4919.6 in it, and the remaining 49 users will still each own $100.40 of the pod.

Benefits for players

Small depositors will see massive benefits with the return of pods. First and foremost, they will win more frequently without having to deposit more. Assuming even 50 of the 7000 Polygon players join the Pod with the median balance of $125, they will see their winning odds increased from 1 in 222 days to less than 1 in 5. Obviously each prize would be smaller, but this certainly achieves the goal of “small prizes frequently to keep depositors engaged” far better than $5 in 7 months does.

Benefits for the protocol

Every protocol at least partially measures its success in TVL. This would increase TVL as small depositors are more incentivised to stay, and perhaps even deposit more when they see the protocol granting them and their pod earned money. Especially with the recent axing of $1 prizes, small depositors have almost no reason to stay deposited in PT when they will rarely ever win. This harms TVL as well as our reputation, since it gives off the sentiment that this is a whale’s game. I’ve seen this sentiment expressed on the discord more recently.

Another potential idea is that the protocol can take a percentage of pod winnings for providing the service, and use it to fund other things. This would likely be a small source of income, but could be used as spending for partnerships, advertising, etc.

FAQs

Won’t pods be hard to build?
While I do not have experience in PT’s specific code, it appears that pods are already built for v3 here [PoolTogether App] as mentioned above. It’s likely the code can likely be repurposed for v4 after some tweaking.

Won’t pods ruin the fun of the RNG?
For most depositors, no. Obviously this is my opinion, but I feel safe in generalizing that the RNG is only fun for individuals when they have reasonable chances of getting the favorable roll. I know for myself, I find winning a PT draw more fun than losing. Had I only had a 1:277 chance to win, I cannot imagine PT being very fun to be part of. The docs say it clearly, that small winnings keep people engaged. A small win to a $125 deposit could be $0.20, and that would likely be enough to keep them engaged or even deposit more.

As for the very lucky stories, such as our $74 into $40,000 story, those will still be achievable, because depositors can still deposit into the main v4 pool if they do not wish to use a pod.

Finally, I believe to preserve the fun of RNG for small depositors, we can utilize an array of pods, which will then gather different amounts of money, giving small depositors options on if they want the ‘safer’ or the ‘riskier’ pod, meaning how often they win.

Are pods going to harm the security of the protocol?
No, I believe they can be built completely independently of the protocol, and the v4 pool can simply treat them as another player. More details in the “technicals” section.

Why is this preferable over the small APR proposed in another thread?
I believe this is preferable because it’s free for the protocol once it’s built, and significantly cheaper to build in the first place. It’s been mentioned on the discord that the small APR would involve a core change to how PT works, which could result in the introduction of a security vulnerability. The core contract has yet to be hacked once, so I believe changing it is not in our best interests.

Will this be more gas-intensive for users?
No, quite the opposite! The Pod will act as a single player, so when it wins a prize, it will simply claim it and redeposit it as another individual player would. This means that players pay virtually no gas, since the cost of claiming and redepositing is distributed among all players. This cost is usually less than $0.20 on Polygon, and dividing it across all pod users means it costs basically nothing to each player in the pod.

Won’t everyone just use a pod then?
Similarly to the ‘RNG fun’ question, I believe pods will gain plenty of use, yes. I don’t think it’s necessary, but if we want to discourage whales from entering pods to win even more frequently, we can add caps to the amount an individual can put into a pod. We can also put a cap on the pods themselves to make sure others can still win, though again I wouldn’t do this since we already have a 2-prize cap per winner.

Technicals

My idea for the pod would be that it’s a contract that acts as a single player. This means that players will deposit into the pod, and the pod will deposit into the V4 pool. While the player is deposited, the pool will own all the PTUSDC, and grant receipt tokens to the player that deposited into the pod.
This math can be derived from how LP tokens work, which is a very well tried and tested format of doing such a practice. This means that the Pod does not have to pay excessive gas in distributing dust-like rewards, and each player can simply withdraw their fair share whenever they please.

This also serves the benefit of not needing to change any PT contracts, which means no security vulnerabilities will be able to be introduced into the PT core code.

Conclusion

Overall, the reintroduction of pods is a comparatively easy fix to implement that will reduce the impact of the new prize structure to small and medium sized depositors. It will dramatically boost the winning odds of the median player from around once per 8 months to once a week even with minimal participation.
This increased winning rate even with reduced size prizes helps achieve PoolTogether’s original goal, which is to help incentivise people to save by granting them prizes, and giving them small prizes frequently enough to keep them engaged.

Thank you, and please provide any commentary or suggestions you have. I am looking forward to the discussions.

10 Likes

The numbers you’ve outlined prove that a $100 depositor is earning a much higher interest rate than the underlying yield source. Pods would be an added complication that would achieve the same end result in terms of earned amount. All that being said, maybe it would make sense to add pods to Ethereum only.

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Can you elaborate on what you mean? Which numbers specifically, and what yield source are you comparing it to? Over an infinite amount of time every depositor will make the same APY as the yield source, so I’m not sure how you (or apparently I) can derive that a smaller deposit will generally make more than the underlying yield source.

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Referring to the $100 depositor getting 1 prize every 76 days or every 276 days under the new structure. These scenarios would equal out to the $100.00 depositor earning 4.8-6.61% which is higher than Aave. Pods means depositors split the winnings so it would be effected by the prize cap as well. Pods was made to combat gas which is not as big of a problem on Polygon. I can definitely see some advantages of Pods here though as it would help batch claims but I’m just not sure if it’s worth the effort.

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These scenarios would equal out to the $100.00 depositor earning 4.8-6.61% which is higher than Aave.

While you’re right about this, this is not unique to any size depositor nor is it an issue alleviated or worsened by pods. The APR that, on average, any depositor will achieve over the long run is the Prize APR, which currently sits at ~15%. This APR deviates from Aave because of the fact that prizes are still subsidized by the treasury, so the Aave yield is irrelevant without adding in the subsidies from the treasury.

How much an individual earns over the long run closes in on the prize APR no matter what, excluding extremely large deposits. Pods do not change this, only the consistency at which it is achieved.

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I think this is a recurring problem in PoolTogether. Numbers versus Perception. Reality versus Psychology.

Although the APR Numbers come out quite favorably, the Perception by the player is that they are losing more than 200 days in a row before they win - and then when they win it’s only $5. A long time to wait for a few bucks.

I agree pods don’t really add a mathematical benefit, or gas optimization (with exception to Ethereum). But it does add the “I won” feeling more often. I think it’d also be worth while to give the Pod Poolers a UI similar to a non-Pod Pooler where they can see that sweet sweet treasure chest explode when a prize is won for the day. I really think this conversation is about optics and the feeling of winning, not the maths and APR.

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Thank you for the response, you’re getting at what I failed to put into words. The entire purpose for pods is that they don’t change the math for anyone or the protocol, just the psychology like you mentioned.

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I actually don’t care for pods. If small depositors want a yield on their $500 or less then just deposit into an interest bearing account and collect that yield consistently - no need to “win” anything.

However, if you want to risk that yield (since the absolute amounts aren’t that big anyway) and maybe only win once in 2 years but receive the equivalent interest that you’d normally receive in 5 years, then join pooltogether, the prize based savings protocol!

Having a pod would make me want to put money in the pod as well and my solo position would get less love. I don’t want this to turn into V3 where I’m in 5 different pools paying more fees. A pod is just a half way point between an interest bearing account and what the pooltogether protocol is supposed to be.

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maybe only win once in 2 years but receive the equivalent interest that you’d normally receive in 5 years

This is simply not true. Looking at the above math, if a $125 deposit wins once in 277 days, and that prize is a $5 prize, they have achieved 5.2% APR for the year. This is a far cry from the 15% prize APR that is currently available. Again, the bigger the account the more likely this prize APR will be achieved (as opposed to over or undershooting it).

I want to again reference the post from Taliskye, that pods are about psychology, and not numbers. Pods will be to appeal to smaller investors. Frankly I think your perspective of condemning small investors because they want to participate in a game literally designed for small investors is a bit cruel.
I would like to remind you that the entire purpose of PT is to incentivise people to save as per the docs, and the people who can afford to dump thousands into PT likely already have that drive, which cannot be said about the 3000+ depositors with less than $125 deposited.

Additionally, forgive me for snooping while I was trying to understand where you were coming from, but you even said it yourself last year here, [Prevent winning all prizes in a pool - #12 by minorthreatmikey]

We need little wallets winning more, end of story.

And I agree with you! Pods are a massive step in that direction.

I want to add some thoughts here, even though I think we’re a little ways off from this.

Pods will always be relevant!

Pods allow users to band together and increase their chances of winning the big prize. That’ll always be fun, and it could be a more social experience if we create friends and family pods.

In terms of implementation, the V4 prize pool design doesn’t differ significantly from the V3 prize pool. The V3 Pods code could probably be updated quite easily to support V4. Batching could be removed, so that no admin upkeep is required. Users could then create their own Pods without worrying about running the batch system.

In terms of claiming the prizes it would be helpful to have an auto-claimer system. By paying an auto-claim fee the Pod users would effectively share the claim costs. I’ve been thinking about a design for a system that allows POOL holders to stake on high-quality autoclaim bots, but I haven’t written anything up yet.

Long story short: we should do Pods again at some point.

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I wasn’t doing the exact math - which obviously changes with every depositor during this prize subsidizing stage.

My point is, I just don’t like pods. If everyone was in the pod then the pod would just win every time and it would just be an interest bearing account. Takes the fun out of the no loss lottery protocol, imo. But the narrative seems to be shifting. It’s no longer a no loss lottery protocol, and now a “savings protocol” so I guess pods work in that sense.

Hey all, just wanted to bump this thread once and see if there was any more discussion to be had on it before I made a snapshot vote for it to get an accurate gauge of sentiment.

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