In brief

  • PoolTogether is a no-loss lottery game that gives winners rights to interest on the pooled crypto.
  • It's releasing version 3 of its protocol.
  • The new version adds in several decentralized elements, including the ability to create new games.

PoolTogether, a “no-loss” lottery that hands out crypto rewards to one lucky winner each week, is one of those projects that, at first glance, sounds too good to be true.

But if you don’t believe its premise, you don’t have to take its creators’ word for it. In its new V3 platform, PoolTogether is becoming increasingly decentralized.

The basic concept is this: Each week, people turn in their Dai stablecoin for what are essentially raffle tickets. All the money in the pool earns interest. Whoever’s name is drawn at the end of the week gets all the interest. Everyone else gets their Dai back.

According to PoolTogether, it’s already handed out $34,000 worth of Dai via this method. It indicates that its version 3 release is set to be bigger in just about every way—bigger payouts, more rewards, new assets.

But they won’t all be coming from the PoolTogether team.

While PoolTogether will continue hosting its Dai prize pool, the updated version will allow others to create pools using any asset on Compound Finance, which not so coincidentally is the protocol used to generate interest on the lottery holdings. Compound currently supports 10 tokens in addition to Dai, including Ethereum, Tether, Uniswap’s UNI, and Wrapped BTC.

According to PoolTogether co-creator Leighton Cusack, the protocol will also support assets supported by Yearn Finance’s nine vaults, which include YFI and TUSD. 

“It's sort of a Uniswap model, where anyone can create a market but only certain ones show on Uniswap.com by default,” Cusack told Decrypt

The no-loss lottery is also set to become more decentralized in other ways. The current PoolTogether relies on an administrator to manage the rewards—which may make people uneasy when pools regularly hit the $1 million mark and generate an average weekly reward of over $550. The upgraded protocol does away with that, while also transitioning randomness generation from its team to Chainlink VRF (Verifiable Randomness Function).

According to a blog draft shared with Decrypt, the protocol design ensures that “all prize games share three attributes: no loss, the ability to withdraw at anytime, and fair prize distribution.” However, the protocol can be “extended, governed, and built on top of” so that people can create games with different rewards, assets, or distribution methods.

That, along with a few other new v3 features, should ultimately will bring the protocol more in line with decentralized finance protocols. At the moment, participating in a pool may not cost anything, but unless you win, it doesn’t gain you anything either like collecting interest solo within Compound would. Version 3 of the protocol promises “deposit rewards for everyone in the pool,” neutralizing some of the lost opportunity costs.

“[Decentralization] has always been our goal,” said Cusack. “So we see this as a continuing step of a long term mission. Ultimately, it’s important because building a system that doesn’t rely on any single person or entity can have a much greater impact on the world.”

As for how Cusack and his co-creators can afford it, he said PoolTogether continues to be backed by venture capital and will approach monetization as open source software developers would. “Our main goal is to get the protocol to a spot where it can be self-sustaining and not need us,” he said. “Once that’s done, we can build services on top of the protocol.”

Maybe with a super no-loss lotto.