RFC: Decrease draw frequency and add appropriate prize tiering with larger prizes and a wider range

Simple Summary

Switching from daily prizes to semi-weekly prizes with a draw every 3.5 days will allow for larger prizes, and a wider range of prizes on the draw date. This change will result in fewer winners winning more meaningful prizes and make it easier to reduce subsidies down the road as we move towards sustainability. It is important for the community to know that reducing the prize frequency is irreversible without redeploying the contracts which would force users to have to migrate to a new pool in the event we want to go back to daily.

Motivation

Previously, Pooltogether V3 had weekly prizes drawn every Friday during the community call. When we transitioned to V4 we focused on “prize APR” and switched focus to having lots of prizes spread to many users. One of the primary reasons for this change was the sentiment that whales were winning most of the prizes and by having many small prizes we could ensure that smaller depositors were also winning. We have subsidized the prize pool in order to achieve user growth and maintain a high APR, but this subsidy is unsustainable and the growth needle has not been moving for some time. Switching to a twice per week draw would give us an opportunity to award some larger prizes that can have a meaningful impact on someone’s life. This is what Pooltogether was all about in the beginning, foregoing a small amount of interest in order to have a shot at something much more meaningful. Satisfying your urge to gamble without gambling away your principal. Larger prizes will get us back to having the “psychological hack that helps people save more” that Vitalik Buterin once praised, and reducing prize frequency is the best way to achieve that goal.

When should we have the semi-weekly draws?

The majority of Pooltogether users are in American time zones with strong showings in USA, Brazil, and Canada. We also have relatively strong numbers in Germany, Australia, France, and many other countries around the globe. Catering our first weekly draw to the majority of our users and on the same day as our community call would make a lot of sense. We propose 4pm EST on Friday’s for draw #1 which would land shortly after the community call. Draw # 2 would then end up being 4am EST on Tuesday which would be 10AM CET(Germany is our 2nd largest user base). We strive to be a global protocol and it is difficult to get the best timing for every country in the world and we don’t need to overthink this timing too much.

Prize tiering and the prize cap
With a focus on larger prizes we should keep the prize cap at 1 to avoid too much whale domination and encourage savers over farmers.

With community support to reduce prize frequency, the Treasury Working Group will do an analysis of what the new prize tiering should be. We hope to focus on a wide range of prizes with many larger more meaningful prizes.

Do you support reducing the prize frequency to once every 3.5 days?
  • Yes
  • No
  • Other Prize Frequency(Explain blow)

0 voters

5 Likes

Thanks for writing this up @TheRealTuna!

A few thoughts from my side…

  • overall, I agree that we currently lack a “wow” prize and having that would be powerful. I’d love to have it.

  • I’d love to get more hard data informing our decisions. We are taking a big step today in having different size prizes on different chains, that should give us some data on what people prefer, we could also just ask people in surveys or pull from the research around traditional prize savings accounts. I’ve mentioned that I talked to the team at https://getprizepool.com/ before and they had done a ton of research on what prizes are most effective.

  • It is interesting to note – when Vitalik made the comment you quote, the WEEKLY prize was about $1,000 total. The mechanism of PoolTogether is very cool regardless of how large the prizes are (but of course larger prizes are better!)

  • I’ve always liked thinking of PoolTogether as an interest + model. Essentially you get 80% of the underlying yield AND the chance for infrequent large prizes. Perhaps we could try to model it like this? Daily prizes that roughly equal interest with a weekly prize that is much larger?

  • I’d be curious to hear @Brendan thoughts on how different prize tiering might interact with the prize pool network.

  • any thoughts on non-USDC prizes???

Okay, I know this is all over the place but wanted to get some thoughts out there. Overall, I like the idea of getting larger infrequent prizes but also continuing to have the small prizes to keep things engaging and provide a baseline ROI

6 Likes

I like reducing the prize frequency.
I’d probably go with weekly prizes instead of semi-weekly. Weekly seems easier to grasp for me.
If we can get data on what works well in TradFi prize savings, that would be ideal.

3 Likes

I am all for reducing the draw frequency by moving to bi-weekly or even weekly draws. In my opinion we are leaned too far into a mentality of prize farming and need to move back towards savings with a chance to win a fun prize. The data I hope to see as a result is more wins that outsize the deposit.

I do agree having some small prize offering for small Poolers will still be important. We can have smaller prizes on our favorite penny chain Polygon.

++ Bigger prizes means gas is less of a cost of the prize to Poolers. And we also save a on operational costs.

5 Likes

I also think adding NFTs and other non-monetary prizes should also be considered.

9 Likes

I’m 100% in favour of reducing prize frequency. If I wanted to get a consistent yield, I would deposit into AAVE. IMO, PoolTogether should be all about relatively infrequent high prizes. Obviously, it’s algo good to keep people engaged, but daily draws is not doing the trick because there is not enough interest collected in that period.

If we want to be sustainable (and this should be a high priority) we should think of will the prizes be when we completely stop the subsidies.

With some rough calculations, assuming 36.5M in TVL, and a 1% interest rate on AAVE, we know that we are generating 1K yield per day. Therefore, if we divide that into different prize tiers, the grand prize could be around 500$.

Making the draws biweekly, makes things a bit confusing in my opinion. The people that are involved in the DAO will completely understand what’s going on, but new people will surely be confused when seeing that draws are happening at different times of the day.

Weekly draws offer a simple solution IMO, and are widely used in TradFi prize savings account due to this simplicity. Also, a lower draw frequency will help us offer a bigger headline prize.

4 Likes

Thx for the write up @TheRealTuna !
We both already talked in the Discord about that topic and I think I mentioned the weekly prizes recently (Did that inspire the write up? ^^ ) :slight_smile:
I also support changing the prize frequency and would propose changing it to weekly instead of bi weekly :slight_smile:

2 Likes

I’m for reducing the frequency. The idea of daily prizes was great, but I feel over time, they diluted the collective experience of winning in a way. Daily draws have taken away the anticipation, while people also seem less likely to talk about their wins.

+1 for adding a wow-prize

I don’t have a clear opinion on the exact frequency just yet.

5 Likes

I’m a little torn on this, so I’ll abstain from voting for now, but the lack of ‘no’ votes obviously shows that people want something to change.

As was brought up during this week’s community call, the daily prizes do keep people more active, checking their prizes often, etc. and I think that has some value. I do also agree with many here that having a bigger ‘wow’ prize, regardless of its frequency, would be helpful to attract eyes.

Just throwing out random ideas here, but what if we kept the daily prizes, but those changes that were being discussed regarding ‘when we reach $50M TVL’ or any other arbitrary goalpost resulted in changes to another weekly, bi-weekly or monthly prize? This would mean having two different prize distributions essentially, but could potentially help filling the big prize gap in people’s minds.

2 Likes

Thank you for this proposal.

I like the idea of a more infrequent and bigger prize but as mentioned Leighton, I think we need more data to figure out which prize tiering and frequency are best.
We have already adjusted the prize tier a couple days ago and I feel like some prize distributions are pretty arbitrary, like the Optimism one, so it would be preferable to analyze how users invest across the different pools and base our decision on these data.

It would spread liquidity but I also think we could have two pools, one with daily prizes and one with bi-weekly prizes. I would personally prefer to deposit in a pool with daily prizes since I use V4 as a prize saving account and I don’t expect to win a large prize. So far, I am very pleased with my return since my current APR is 19% and I think it would decrease with a bi-weekly draw.

3 Likes

The problem is that PoolTogether is not about giving a 19% APR consistently as that would be highy unsustainable for the protocol. With more frequent prizes we’re basically getting closer to a yield farming protocol with a fixed % rate.

I’ve been on the Polygon pool for a long time, and I’m regularly getting $5 prizes. I love them, because I’m getting a great APR, however, this is not the behavior that we want to encourage, because we have to put an end to subsidies. I never check the website now for prizes, because the prizes are not exciting at all and I would be more frustrated than anything else.

Leighton is also talking about collecting data, which sounds really nice. Truth is that collecting data to undrestand the effect of prize frequency is incredibly hard, and even if we had the data, being able to get any conclusions would be even harder.

We “arbitrarily” put daily draws in the first place without any data analysis, so I don’t think that the lack of data should stop us to change it to weekly draws. Daily draws are not working for us, even having one of the greatest yields in DeFi we have not managed to attract as much liquidity as we would’ve wanted (obviously there are other reasons, it’s not only the problem of daily draws). However, it’s a sign that we should try different things, and having longer draw periods will give us a bigger headline prize and naturally help our marketing.

2 Likes

I agree with most of what has been said earlier. A weekly draw, as it used to be, with larger prizes makes more sense to me.

I deposited into pool together over a year ago. Even though my deposit was in the multiple thousands I did not win a single prize in the first 6 months! I stuck to it because I believed it was an amazing concept and wanted to see it succeed.
I won my first prize when V4 was launched, and somehow, I got underwhelmed.

When a (no-loss) lottery becomes a deposit account with a predictable APY/APR, it loses (a great amount of) its magic IMO. So I’m all for returning to a larger prize, even if that means I won’t earn as much.

The idea of having a base APY + prize isn’t bad either, but it should be lower. Perhaps 1.5-2% vs 5.5% average APY currently.

Speaking of gathering data, I believe those who gamble with a chance to win big are a VERY different crowd to those who save with a fixed/predictable APY. Perhaps we could have 2 pools to cater for both groups.

8 Likes

Changing the draw frequency actually goes really well with the recent change of prize distribution. The new prize distribution gives Poolers this great opportunity to choose their prize frequency.

If you are like @Pierrick and want to ensure you win your share of the prizes then you go to the network with more prizes. In this way you are choosing a higher prize frequency. If like @Dr.Pouf and others have said, you want to have a chance to win an exciting prize then you go to a network with less prizes. Thus choosing a lower prize frequency.

The choose your own adventure of prize frequency is unlocked now! @TheRealTuna is not proposing changing the prize frequency options for Poolers. He’s actually suggesting enabling us to widen it further with bigger prizes. On the other end of the spectrum, if we do $5 prizes once per week on Polygon instead of $1 prizes daily we are widening it further.

I also want to point out that it was clarified this week on the community call that we CAN change the draw frequency in either direction. Meaning it can be changed to biweekly or weekly and then changed back to be daily, without any migration.

I really think slowing down the draw frequency is a relatively easy change for us that makes a ton of sense and moves us in the right direction.

6 Likes

I believe what @Loitering_Gorilla mentioned could be very powerful.

What if one of the daily/weekly prizes was a good quality/designed hoodie?

This can be a very effective marketing campaign at a limited cost. :grinning:

2 Likes

Voting yes to less frequent prizes. I would start with bi weekly for 2 reasons:

  1. As far as data goes, the only other time(I think) that we had bi weekly(ish) was also our largest prize pool ever…may not be correlated…but also may very well be correlated.

  2. 270 straight days of prizes to 7 days between prizes is going to seem like an eternity.

I can understand the idea behind lengthening the draw frequency to incentivise saving, but I found during the CELO trials, not winning was a bigger discouragement than winning was an encouragement. That discouragement was subdued by the nice rewards, but if we don’t have rewards, I see a weekly draw being a bit too long.

The only argument a weekly draw will always win vs bi weekly is that the prizes are effectively doubled in size or quantity. Celo was weekly, and even though the prizes were second only to our current grandprize, waiting a week to open an empty chest would have been difficult without the rewards.

1 Like

The whole conversation resonates a lot with me and we discussed Jackpots long time ago. How difficult would it be to for instance shave 50% from the interest generated and park that in a separate contract until it hits a certain sum when it gets drawn on top? This leaves a base APY which is viewed as appealing by one camp and adds the catchy main prize.

5 Likes

I think we need weekly prizes not bi-weekly. Let’s focus on getting to larger prizes which could be life-changing. They need to be $10,000 minimum or more - i.e. five figures.

Then, we can use a “barbell” approach - where we have multiple very small prizes from $1 to $10.

We have seen that in Argentina for example in Anita’s Community Interview, $1 and $5 prizes can make a difference. So, this way we cover all markets.

We must move away from the APY argument. It has not worked and as has Leighton has said on the Community Call, people can get that elsewhere. Our USP is the Premium Bonds style possibility of winning big. The sooner we can get to $100k or $1m weekly top prizes (not total prize money, the actual top prize) the sooner we will get more people interested in depositing plus maybe get the CEXes more interested in joining.

The UK Premium Bonds works because of the excitement of winning the top prize. They don’t say to the 21 million people invested, oh you can get X% interest in a year if you win the smaller prizes, it is all about the £1m ($1.2m) top prize each month. At this point, monthly is too long for us to wait so let’s do weekly and make sure the top prize is a minimum five figure prize, scrap the medium prizes and have lots of smaller prizes.

We are looking for the “magic” which Dr. Pouf talks about in his comment above.

Our market is to get big with the “crypto-curious” i.e. normal people not DeFi degens or whales looking for yield. Let’s please keep our eyes on the prize.

3 Likes

Let’s scrap the talk about APY completely. People can go elsewhere for this.

Just focus on the top prize that people can win. Like the UK Premium Bonds.

4 Likes

This is very interesting. Thank you for contributing. It is this “magic” we are looking for.

Great perspective, thanks for sharing this! Just saw this now.