Time for a POOL Party!

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Intro

It’s time for a pool party! How do we get PoolTogether to explosive growth? PoolTogether should have explosive growth because…

  • It’s a proven concept in the “real world”
  • It’s universally loved in the crypto world (even Vitalik shilled it!)
  • It’s one of the best on-ramps into DeFi
  • It’s a compelling value proposition

Looking Back

PoolTogether actually has experienced explosive growth! Between February 16th and May 18th deposits into PoolTogether grew from ~$4 million to $235 million and $2.5 million in prizes were distributed! That is explosive growth! Looking back, what drove this growth?

It was the POOL token! The graph below illustrates this crazy growth kickstarted by the POOL token distribution beginning in late February.

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BUT, as the graph shows, the growth did not sustain. What happened?

POOL distribution in V3 grew deposits but did not translate to a better protocol experience for most depositors. This was because of the design limitations of V3.

The issues were:

  1. The same whales were winning all the prizes
  2. Large depositors were simply farming the POOL token
  3. The transaction fees were too high to deposit and withdraw

In response to these issues POOL distribution was slowed by 50% in late May, again in August and completely stopped with the V4 launch in November. This stopped the ineffective POOL distribution but it also stopped our best tool to drive deposits.

Now that V4 is tried and tested, it’s time to get POOL back in the party.

Growing V4

Based on our experience with V3, we know how to massively grow TVL – use the POOL token! But won’t this result in the same outcome as before? No, because:

  • The unbounded prize distribution means even as TVL grows, depositors can still win lots of prizes! As prizes get larger, people still win!
  • Distribution parameters can limit aggressive yield farming
  • The prize cap will limit the impact of whales
  • The multi-chain V4 removes the gas fee barrier. As prizes get larger more and more normal people will get excited and deposit. We can finally have the growth flywheel!

On top of this, introducing further utility for POOL via staking will increase the incentives to hold and use the token rather than sell it! We can finally have the best of both worlds and kick off the growth flywheel!

The Growth Flywheel

Won’t this just be a short term pump of TVL? No! Because as the prizes get larger and larger, the need for POOL will be less and less.

As an example, assume we have $30 million in deposits and are getting a 5% APR, 3% of this APR is used for small prizes and 2% is used for a weekly “grand prize”. Depositors are effectively getting a 3% yield + a chance for a $11,000 weekly grand prize.

Now assume the exact same parameters but with $235 million in deposits (our old high TVL high). Depositors are now effectively getting a 3% yield + a chance for a $135,000 weekly prize. This is MUCH more compelling and the growth flywheel starts turning.

As excitement for the headline prize grows, more deposits come. At $800 million in deposits; the weekly prize is now $307,000 and all depositors are still getting the 3% APR.

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The larger prizes attract organic depositors and also companies to integrate with the protocol. This is the growth flywheel. In the short term, the POOL token can help grow deposits but in the longer term the POOL token distribution can be tapered off.

What’s next?

Unlike the V3, the V4 protocol is ready for the growth flywheel. But, for this to work, we still need to answer a question.

  • What method of POOL distribution will create the largest sustainable prizes?

There are lots of potential ways for POOL to be distributed and many variations within each method.

Instead of committing to one very specific way, our best first step is to build a system that is dynamic and supports many ways of distributing and using POOL. This gives us a way to implement POOL distribution but also flexibility to adjust and adopt as the protocol needs to.

That system is the topic of the next post.

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Time in stable coin pools should definitely be rewarded substantially. Perhaps increase pool %APR by some multiple of x after x amount of time in the pool. I think TWAB already does this from one direction, but I don’t think it’s clear enough in the GUI. A Pool incentive would be a nice addition. Edit: This delay in Max APR could also allow the protocol or prize pot to take the extra interest for that time period.

We could also incentivize a mechanism for the protocol to reabsorb distributed pool or prize value via some form or game mechanism. Staking is a form of this, but I think it could also be gamified and tip the scales in the favor of the protocol. For example, some mechanism like, ‘submit x pool tokens to increase your chance of winning this week’ or ‘submit x pool tokens to permanently increase your chance of winning by x amount for as long as the currently staked tokens are in the pool.’ This mechanism could be scaled to wallet total value as well. For instance, you may only need 1% of your stable coin value in pool tokens to increase your chance of winning to “level 2” or whatever we call it.

I personally am still a fan of scalping interest to tip things in favor of the protocol or the max prize value.

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Excited to see POOL distribution brought back and it will make the protocol much more sustainable. It will be nice to have the USDC prize be the true interest generated with the POOL being an additional supplement which would allow us to stop depleting our treasury. If we can get our TVL growing simultaneously with the value of the POOL token then there is no limit to how big we can grow. I would suggest a tier based approach where we start with a certain # of POOL planned for up to 1 year but each time we hit a TVL target it would trigger a reduction. If we reduced by 10% for each 100MM of TVL growth and relied on price growth to some extent then it could be a really nice steady growth.

I do think we need to include a little something extra for the POOL token to stimulate growth of the token and my preference would be having some supplemental prizes go to a POOL pool prize pool in the form of USDC. This would kick things off nicely and allow for both the POOL token and V4 TVL to be in a synergistic growth pattern. This supplement can also help build positive sentiment around the POOL token. :slight_smile:

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I really like the idea of having events that triggered based on hitting certain TVL goals.

That’s the only thing I miss about V3… with V3 we had the direct 1:1 relationship when a deposit was made the prize immediately increased. I think getting back to that would be crucial!

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So stoked for bringing the POOL distribution back, good usage for TWAB. Also distributing POOL upon reaching milestones (TVL, individual deposit amounts, pod deposit amounts, etc.) or special events (NFT launch, Token anniversary, etc.) would be really interesting.

I do worry that bring the POOL distribution back will bring in some massive whales, which will act as a prize vacuum and result in more unclaimed prizes, and less prizes for ‘regular’ depositors. But I’m confident we will be able to monitor that and adjust prize distributions as needed.

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This could be solved by having The Sponsorship system (deposit money and you’ll get POOL in return, but you have no chance of winning).

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Is there a way to give a boosted prize if the winner is a POOL holder? Potentially with a multiplier linked to how long they have been a holder for? For any winners not holding POOL, that premium is rolled into the next draw to boost the potential winnings even higher.

This loosely follows @JD0’s thinking about incentive mechanisms and tipping things in favour of long term value appreciation of the POOL token.

3 Likes