<> V3x2 </>

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V3x2

There is consensus that Pooltogether V5 is complex. This post takes a quick dive into why and shows that there are other paths possible. Considering all options can solidify our direction towards one shared goal. This is vital given our community is at a crossroads.

The V5 design was created to give Poolers:

  1. Bigger prizes by combining yield from multiple sources into one prize token

  2. Greater value creation for POOL

  3. Many yield sources, potential assets to deposit and save

  4. An autonomous protocol that can run forever without centralized service providers

In the 4 months since V5 has launched we have not seen any of these four objectives come true. I do not think anyone would disagree with that. While growth and scaling could bring these goals both to fruition, we have found ourselves at a crossroads of considering a treasury depletion plan to revise and redeploy V5. This is a direct result of the inherent complexities of the V5 protocol, with the necessity of developing the protocol to incentivize liquidation bots, prize claim bots, draw bots, and now potentially prize compounding. The protocol has become a lot more than yield and prize by intertwining POOL throughout.

In the most recent thread it has been suggested that POOL stakers would take a direct fee on yield. In my mind this busts the need for V5 to create value with POOL buybacks. POOL buybacks suffer from a loss of revenues to gas costs, and a need to potentially add more gas costs on the other end where POOL gets swapped back to tickets. It’s not just complex, but the gas costs mean less prize value to Poolers.

Integrating new yield sources with V5 is hard! Our first two attempts at an Aave integration have had bugs after multiple audits. First a rounding error and then a collateralization issue. Everyone wants to see PoolTogether have more yield sources. Our mission is yield to prize. We need the yield.

Autonomous is hard! The RNG remains custodied which means the prizes are custodied. The vaults remain custodied which means the yield is custodied.

The prize distribution is autonomous unlike V4 but I am not sold that the working design is optimal. Concerns include:

  • Prizes are too small.

  • Prizes are randomly delivered.

  • Prizes are awarded and unclaimable.

We are identifying the issues with V5 and looking to improve and address them but I think it is relevant to consider if it’s simply too complex of a beast to wrangle given our limited resources. As we stare down the runway of the treasury and peak community uncertainty I think this is an opportune time to consider any and all possibilities.

People liked V3! It sent life changing prizes out with no claim bots. It had many yield sources and partnerships. It pumped. We had two main concerns, gas and whales. The gas is resolved by moving to L2s. The whales are good, we just need more prizes. Again we can get more prizes on L2 because gas is a fraction of the cost.

V3x2 is a high-level idea that we could use a protocol like V3 to have multiple prize pools for different assets and yield sources. These prize pools would win prizes every day in their deposit asset. Imagine 5 or 10 equal sized prizes per day. A fee can easily be added on the pools for POOL stakers, or POOL stakers capturing value with a chance to win a share of prizes. We can direct a reserve cut of yield of 20% to a grand prize pool (this is the x2). The grand prize pool collects tokens from all prize pools and is awarded less frequently creating a JACKPOT (name tbd) of prize tokens. Say once a month. To participate in the grand prize pool you deposit your JACKPOT tickets that you farm while participating in any of the prize pools.

  1. Grand prize aggregation of all yield sources
  2. Win your deposit asset with meaningful prizes
  3. Engaging JACKPOT ticket farming to play in the grand prize pool and your chance can accumulate over multiple grand prizes which encourages savings and staying in the pool
  4. Prize distribution is known, not statistical
  5. Value for POOL through direct fee, alternatively POOL stakers get JACKPOT tickets as well or other ideas to gamify the whole setup
  6. Less moving parts same autonomous hurdles - RNG and yield custody

A lot of ideas can be built on this concept but the primary consideration is that if we want to simply take a cut of the yield for POOL stakers we do not need a complex system of turning yield into POOL and then back into the yield asset. There are other ways to create aggregated grand prizes that are simpler to build, simpler to understand, and more efficient. They might even be more fun.

Full credit - V3x2 is not my idea, but a culmination of TWG discussions with drcpu, BraveNewDeFi, TheRealTuna, BRONDER and others.

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Don’t forget liquidity as a concern if we want V5 deployed on many chains using POOL as prize and unified yield token: those are a lot of swaps.
And what if a grand prize of $100,000 is won but there is no liquidity to swap it?
Gas tokens (Eth on Ethereum, Matic on Polygon and so on) are probably the best tokens for the prizes or for the yield token.

I love the idea! V3 was definitely not boring!

Just this time let’s not give free POOL, and let’s try to ignore complains about whales: the more one deposits the more he is likely to win.
That is unavoidable.

If we make and anti whale policy we get what we are having in V4 and V5: the policy works, whales goes away, we miss TVL.

We can keep PT alive with a V3 on steroids (or just V3 vanilla) while we take time to identify what went wrong with V5 and make all the fixes needed.

:wave:

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I’m not particularly convinced giving up on V5 and deploying a revised V3 protocol is the way to go - I believe we’d run into very similar issues, and once again rediscover why we wanted a V4 years ago, and why we’re working so hard to build V5.

Yes, V5 is hard, but all the problems you listed are solvable either through further development or, as you said, scale. This may seem farfetched, but building the future of global prize savings on a decentralized ledger kinda has to be.

To be a little more nitpicky though on the design of this revised V3:

  • How do you determine the distribution of JACKPOT tickets between the prize pools?
    • …and how do new prize pools permissionlessly get attached to this system?
  • How is a prize pool’s fee converted to POOL?
  • What incentivizes the prize pool to keep awarding?
    • (V3 pools haven’t been awarded in a long time, regardless of prize size)

And to provide a bit of a defense to the outlook of V5:

  • I do think we’ve seen bigger prizes by combining yield from multiple sources into one prize token. At least bigger than each individual vault’s prizes would have been otherwise (as it would have been in V3).
  • There is substantial value accrual to POOL within the hyperstructure, but we haven’t communicated or put this on display efficiently yet, and at current TVL and liquidity the effects aren’t immediately felt.
  • V5 follows “automate what you can, incentivize what you can’t”, which I really resonate with, at least when it comes to building something decentralized.

Can you expand on what you mean by this?

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Start by saying thanks for taking time to reply. My opinion about centralization and custody is that it is all or nothing. The RNG is an issue in both instances.

Could be by staking. POOL staking determines JACKPOT allocation per prize pool because it also gets JACKPOT tickets.

What I outlined I think could be launched with V3 right out of the box. However it includes centralization around the yield without some improvements. Like V5 centralized the yield this is less of a concern until yield scales.

Also want to say this idea is not limited to V3. TWAB has its clear benefits and is a cool development! I do not think the withdraw lock on V3 is a big issue on a 1 day prize pool. However TWAB could make this system more interesting in other ways. The key to my post is to say if we remove the POOL buyback scheme from the current protocol direction then we save a lot of efficiency that then is distributed to winners and stakers.

How is a prize pool’s fee converted to POOL?

Staking could be for a cut of the actual yield. Using prize split to direct some to the grand prize prize pool and some to stakers by percentage.

What incentivizes the prize pool to keep awarding?
With RNG on L2 the cost of this is peanuts really. With V3 it is already permissionless and yield builds across draws that are not awarded. We could allocate some of the reserve to a draw auction but not sure that’s needed.

Of course. This does the same with a basket of all the yield tokens instead of pool. You still have a headline $ value of aggregated yield.

Gotta see the numbers. I’ve done napkin math projections and its pretty far off to really be realized if you just mean supply and demand given the total supply. It actually helps that the value keeps going lower tho. Like if you start the experiment from zero it can’t go down.

This aligns with my values as well. What Im proposing is that the POOL token is not the key to decentralizing the prize protocol, it’s the key to obfuscating revenues but comes with an efficiency issue and complexity. V4 was a detour on decentralization. V3 makes prizes autonomously and pays them out when anyone pushes the button. You can set it up so you can change the number of prizes or prize period but you can also set it to 5 and one day and burn the keys. Also I will say I don’t buy into the forever protocol meme. This tech is changing. Migrating is cheap these days. A shorter grand prize becomes easier to replace.

Prizes are set. However many you want and at whatever frequency you want. Prizes in V4 and V5 are statistical. We have no idea when they will hit or even if we have the liquidity to pay for them. We can just do our best based on simulations. At scale this becomes another efficiency issue where the reserve should hold extra tier prizes that could be won on any given day when the prize printer makes more prizes than there is tier liquidity for. It’s also just hard to hype around. I believe something like a once a month grand prize that happens on a known day becomes exciting to rally around. We used to see this with the weekly draws on V3. That thing printed like $200k in prizes some weeks. Thats not even counting the OHM mani where we had a $1m prize. Because yield integrations are key to growth!

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Thx for the gov post!
I share your love for V3, support some things in this idea, some things are a bit unclear and some I am against!
We need higher prizes and in my opinion should stop the small prizes alltogether.

We don’t even need daily draws in my opinion, weekly draws like V3 are fine imo. Weekly draws distributing most of the yield and a yearly Grand Prize distributing the rest would be great. Can even have a monthly are quartly prize for in between if we want.
Daily small prizes are not exciting and cost gas to award and manage.

Yes, V5 yield and RNG is currently custodied but could be made ownerless at any time asfaik, if we move to V3x2 we should make sure it was the same way at least, making centralization necessary for it to work without no way easy way to move away from it (like V4 is for example) is not good imo, yes V5 is centralized atm but could be made decentralized at least.

I am against a fee going to the protocol/POOL holders.
I know this is maybe not the majority opinion right now, especially regarding POOL price, sustainability and revenue discussion but I am not voting for it even though I am a holder with quite a bit of tokens. At an optional vault level I am fine with it but not at a protocol/prize pool/Grand Prize level.

As I understand in your idea, the normal daily/weekly prizes would be only the single vaults yield and only the Grand Prize would be shared across vaults, I’m not a fan of this as well. I rly like at the current V5 that all vaults share the same prize pool, people shouldn’t be punished for not using the big main vaults and only have the Grand Prize as the exciting prize.

Where I agree is that statistical prizes are not good, awarding prizes without the needed liquidity and generally the missing hype cause we don’t know when it happens, that’s something I liked about V3, high, predictable prizes.

Moving RNG to Witnet and/or to L2 for less costs makes sense imo. Makes awarding it and “incentivizing” it also a non issue, let’s just throw 500$ into some automated contract and it covers the next 100 years awarding cost xD

I also agree that we should focus on yield sources, Aave is overall not a good long term yield source, yes it is safe but yields are often not competitve, we are diluting it and people use it for borrowed leverage which is not possible through PT.

I’m sceptic regarding the Jackpot Pool and Jackpot Tickets, determining tickets by POOL staking sounds hard long term with lots of different pools and tokens which have different values.

It’s also a bit unclear then how my deposit yield translates to chance of winning. This is something that bothered me with V4 and also now with V5 but that I liked with V3. It was very clear that when I like distributed 100$ to a 1000$ Prize, then I have like a 10% chance of winning it. This makes it fair and easy to understand and has a neutral expected value.

Now I have no clue how my yield translates to chances of winning tbh. V4 was fine cause we subsidized it for a long time and I knew, well it’s even more than Aave, so idc . Right now V4 DPR is less than Aave which makes it unattractive and V5 has so many “fees” with liquidations, RNG and claiming and also a “Reserve” (that takes more than it actually needs long term and then kind of “burns” the tokens? Not sure about that though) that is probably has a pretty negative expected value without our current OP incentives.

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V3! What a throwback. The smart contracts were simple, but the product and maintenance didn’t scale :frowning: That’s why we moved on. Adding each new prize pool required a ton of maintenance and was costly, and there weren’t enough prizes when TVL and depositors went up.

The number of prizes in V3 is limited

We found that users didn’t like V3 because they never won prizes. V3 prize pools do not scale. The number of prizes is severely limited; the gas cost to award the prize was silly high even for a few dozen prizes. If a vault grows to tens of millions in TVL, there will still be the same number of prizes. Prizes must scale with the TVL so that people have a decent chance of winning.

There are a ton of expensive maintenance operations for each prize pool*

  • Who will run the draw transaction for each prize pool? How will you incentivize this expensive transaction? Who will pay the RNG costs?
  • You will need to run this transaction for every single prize pool you deploy!

You’re suggesting a gauge system to combine yield

You’re suggesting that people stake POOL for a cut to determine how jackpot odds are distributed across all of the assets. We actually considered that for V5! We decided against it because we could automate it. We preferred automation because it scales better than manual staking, requires less coordination, and avoided fees. Imagine having hundreds of vaults.

If you wanted to pursue this you’d need a custom gauge staking system as well as what essentially amounts to a modified V5 prize pool for the jackpot. This would be a ton of custom work!

And you’d still need maintenance functions:

  • Who runs the transactions to transfer yield from all of the prize pools into the jackpot? how often do they run? are they incentivized? These transfer transactions would have to occur for every single prize pool.
  • Who runs the draw tx on the jackpot? Is it incentivized? How does it handle the unbounded number of prize assets? What if some prize assets are dust? Do users pull out their prizes? How does it track past prizes?

You wanted to retire the executive team…but this would create a ton of off-chain work to do! Going back to V3 isn’t a practical option.

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We found out how?
Squeaky wheels get the grease.
I think we just had many people crying but the majority was voting with their money and high TVL showed instead that we were liked.

You don’t have to ask people still here, this is a classic application of the survivorship bias: ask people who left PT why they left, not they few that are still here!

They left because they don’t care those tiny little prizes.

Are we trying to print money out of thin air? Prizes MUST be limited or they will become irrelevant $0.20 prizes and almost no one likes them: TVL speaks clearly.
With V4 and V5 we are only having TVL when we burn money to pay for it with OP. And still less than $2.0M

And there is a ton of money in the treasury that we are wasting in other ways. OP did not asked to have V3 forever, he asked to have V3 while we build V5.
And V3 could partially refill the treasury too if we feedback some yield to it.

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By talking to them and hearing their complaints in Discord.

It was Defi summer and the age of liquidity mining; we were mining the POOL token. People dumped it into oblivion.

No; and this is why the Prize Team tuned V4 to have $1 prizes. They were small, but brought people enough joy to stay in the pool. Have you seen people tweeting their small wins? It makes them happy.

It’s about both money and the need for active management. There were a lot of maintenance functions; which required money and maintainers. A protocol with longevity must run without an “admin”. You want to lower overhead? Eliminate the need for a developer to maintain the software.

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You see them but you don’t see those who silently left: those are seen in the TVL. That is a metric that cannot be faked on the long run.

This is temporary solution to keep PT alive while and bridge us to an effective V5. This will keep us relevant and bring potentially some more money and time to G9 to do its work.

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Costly how? I don’t see how deploying the contracts for a vault is much different. On L2 it’s not that pricey and partnerships are the key here. Either system needs partnerships and integrations, which we have not seen since V3.

I think it’s really important here to distinguish that we are talking about L2 here. The gas costs were the primary issue with V3 on mainnet from my perspective. Those are not an issue on L2. We can award a prize pool for $1 that includes the RNG and sending out all the prizes. The permissionless button to do so is already built-in to v3 and if its not pushed the draw rolls over smoothly and prizes build.

We had 5 prizes per week on mainnet because of gas. But we can have 50 prizes per day if we want on L2 because gas is not nearly the factor. I probably would not go with that many because I tend to agree that $1 prizes do not drive meaningful growth let alone < $1 prizes. Still 5 prizes a day is 7x the prizes we had the weekly mainnet draws and again cost is not a factor.

Remember we have this awesome thing PT Inc developed for V3 called pods! On L2s its even cooler man.

Same concern again, cost is not an issue. 10 pools, $10 per day. If you are worried about costs…We are paying $50 a day at 20gwei for the RNG alone on V5. That’s gonna be brutal if the bull really starts raging.

What are the others?

Can be done with prize split as outlined in original post so the yield cut is sent to the jackpot prize pool with the draw awarding. Decentralized and no additional tx.

I don’t think so. But until all custody of V5 yield is relinquished I don’t think there is a competitive argument against the idea here even if there is yield custody.

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I don’t think so again. Correct me if im wrong here but I think you can contribute any erc-20 to a v3 prize pool and its sent out to the first winner, the JACKPOT winner! Like the COMP tokens. Can even include NFTs!

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I’m with @Ncookie here 100%. Generation Software hasn’t had the opportunity to build out the V5 they envisioned. There’s bumps in the road, sure. Calling them “bumps” is generous, but whatever. @underthesea Throwing out an unrealized version of V5 in favor of an inferior V3 just seems backwards to me.

I’ll always give the PT dev team the benefit of the doubt. I’ve used every iteration of their product, some more than others. I’ve used V5 the most, in terms of funds deposited. I’m willing to take the risk and help them fund and realize their V5 vision. It’s compelling to me and compelling to them. I trust their lead. I get the conservatism, but I am against going back to any other version. It’s V5 to me or bust.

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I feel this discussions have been very productive and this topic of small vs large prizes is something I’m very passionate about.

Part of the excitement of buying tickets in a lottery is dreaming about what you would do if you captured the life changing grand prize. Here in Canada when the LottoMAX rises to the $40MM+ range, I hear people talking about it at work and more people buy tickets. The odds of winning are so low and tons of profit goes into the pockets of the lottery corporation, but it does not stop people. This is what Pooltogether can capture without users losing their principle. This is what made me think Pooltogether can be huge when I got my POOL airdrop. The idea of being “the house” in a multi-million dollar no loss lottery made POOL very exciting. So far being the house has meant funding depositors and developers and receiving nothing in return.

I agree that the prize structure of V3 was limiting but it seems we’ve gone polar opposite of the V3 prize structure and the result is that in most cases we are turning negligible interest into negligible prizes. V4 was propped up by Optimism incentives and subsidy where as V3 had at least some aspect of sustainability via whales battling for the grand prize. That being said we did not slow the drip of POOL quick enough and made decisions with V3 that were not sustainable.

If there is any flexibility to adjust the V5 prize structure with the launch of our new vaults, I’d like to see at least 50% of the yield going towards larger prizes. I think the answer is to meet in the middle of V3 and V4 in terms of prize size and frequency. We need incentives to act as the negligible interest and life altering prizes to be the psychological draw.

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