The first post in this series outlined the growth flywheel for the protocol and ended with the question “What method of POOL distribution will create the largest sustainable prizes?”. This post does NOT yet answer that question. This post expands on what prizes are in the context of the protocol. This post enables a better foundation for understanding how the POOL token can improve the protocol.
At the core – the PoolTogether protocol is financially empowering. It’s designed to improve financial health. It helps people save by offering a mechanism that is economically and psychologically better than alternatives. Economically the protocol offers a higher variance of returns and psychologically the protocol is simply more fun.
The image below shows how depositors can get higher variance.
The protocol is loosely mapped on to the concept of “prize savings” in traditional finance. However, being open source and composable means the protocol can far exceed what is possible with traditional prize savings accounts. How?
The core invariants of the protocol are 1) no loss on deposits 2) the ability to withdraw your deposit at any time 3) the ability to receive prizes. Other protocols offer no loss and the ability to withdraw at any time, so what makes PoolTogether unique – it’s the prizes.
Expanding the core value proposition of the protocol means expanding the prizes. Historically, “expanding the prizes” has simply meant “making the prizes larger”, making the prizes larger is important. That was the thesis of the first post. However, it’s not the only tool the protocol has – we can also have more prizes. What does that mean?
The chart above shows unique deposits on Polygon. There are two notable periods of spikes. One was the launch of the valentines NFT campaign and one was the launch of Season 1 NFTs. In short – the protocol was offering more prizes. The NFT prizes were not strictly financial but they still fit the core value and drove engagement.
Looking back over the last five months, the theme of more prizes has been emergent in the community and protocol development:
- The prize distribution being adjusted to have more unique prizes
- The “TWAB Rewards” being created enabling any token to be distributed to depositors, creating more prizes
- @McOso post on “Swim Points”
- The Valentines NFT campaign
- The Season 1 NFT campaign
- The “Multi-Delegator”, enabling the distribution of prizes even to people who don’t have a deposit
The prizes don’t have to be random – the TWAB rewards contract distributes tokens uniformly to all depositors. They also don’t have to be strictly financial – the NFTs show this. But fundamentally, people who use the protocol want prizes!
This trend has been emergent so far and we can accelerate it by giving it more focus. Technically speaking the prize distribution itself can be opened up so that anyone can add prizes to it!
This post and the last give us a framework for thinking about how to grow the protocol – prizes! And those prizes can grow in depth (by making them larger, the first post focused on this) but also in breadth by having different types.
So again, the question for the tokenomics is – how can the POOL token support this core value of the protocol? Making sure we have both the largest sustainable prizes and the widest variety.