Over the last couple of years Ethereum, and more specifically DeFi has truly revolutionised the way we as people are able to interact with our everyday finances. Whether that’s investing in particular projects, yield farming, or simply swapping one asset for another in an easy and efficient manner without needing a third intermediary to do it for us. That’s right, we are now really starting to harness the ability of being able to manage the entirety of our own personnel investment portfolio using smart contracts built on Ethereum technology.
A few months into diving down this crypto rabbit hole filled with endless opportunity I stumbled on this protocol called ‘Pool Together’. This protocol is known as a ‘no loss lottery’, and to be honest, the first time I read that, I immediately thought that this kind of protocol must be simply too good to be true. However, I then remembered that within this very same ecosystem I recently taught myself how to take out a self-repaying loan using the Alchemix protocol. So, I quickly dismissed the thought and dived right in.
What I learned from this project was really quite remarkable, and quite frankly it was mind bending. Using the ‘Pool Together’ protocol, the user is literally able to deposit a wide range of crypto assets of their choice into a liquidity pool that acts as a ‘lottery pool’ (for each token you deposit, you will receive one ticket), and in doing so, enter into the running’s to win a hefty prize if one of the tickets are chosen. But what really makes this protocol so special and so incredibly revolutionary compared to how lotteries typically work in the traditional world, is the fact that you cannot lose. That’s right, you legitimately cannot lose. Even if your ticket isn’t chosen and you didn’t win this week’s prize, you can either leave your assets in the pool in order to try and win the following week, or you can simply withdraw your assets from the pool and exit the protocol completely. Its literally that simple, and I truly believe that technology like this is going to change the world, and more importantly change the way we interact with financial services today.
Gone are the days where people need to be paying ridiculous prices for a lottery ticket with a less than 1% chance of ever winning a significant prize. Even though I have always personally thought that lotteries in the traditional world are a total scam, some brilliant developers in the DeFi industry have found a way to offer people the same service, but with little to no risk. Amazing right!
Well, if you think that’s amazing, then let’s take a look at some of the prizes currently up for grabs. Currently the USDC pool is the largest and is offering up $48,000 USD. This particular pool splits the prize money evenly across 5 winners. Oh, and by the way, this is a weekly raffle. That’s the power of DeFi for you.
Now, I’m going to use a deposit that I made when I was first learning how to use this protocol as an example. The first time that I used this protocol was when the pooltogether x Sushi pool launched. I deposited 7 sushi tokens that were worth about $50 AUD which is not much, definitely not good odds to win the raffle by any means, but I wanted to first learn how it worked. However, those Sushi tokens are still in the pool to this day, and are now worth $97.50 AUD. Even though I haven’t won because I don’t have many tickets, not only have my Sushi tokens grown in value since I deposited them, but I am also earning an APR of 9.1% based on the value of the drip tokens that are being distributed (I believe these tokens vary per pool).
Okay, but how does it work? Where does the Prize money come from?
Well, I’m very glad you asked, because now I get to brag about the power of DeFi. Since the pools that you deposit your assets into are basically just regular liquidity pools it actually makes it easier to explain. So, this is also how the prize money also varies each week. Basically, all of the funds from different users that are deposited by the shutoff time each week get invested into specific protocols in order to generate a yield. So essentially the yield generated by everyone’s deposited funds becomes the prize money that is awarded each week (the sushi pool uses the sushi bar). It’s almost like taking an advance out on future yield of an asset and giving it away. If that doesn’t blow your mind, I don’t know what will!
This is the true power of what DeFi can do, and we have really only just scratched the surface of what we will one day be able to achieve using Ethereum technology.
Thanks for reading everyone!
This newsletter is for educational purposes only and should never be considered as financial or investment advice