Since the advent of decentralized finance (DeFi), a number of peer-to-peer financial products have been built, enabling users to lend cryptocurrencies to other users and stake funds in liquidity pools to enable trading. But here’s one that might not make a lot of sense on the surface.
PoolTogether is a lottery in which anyone who purchases a ticket has a chance to win a stash of crypto—but even if you lose the drawing, you don’t lose any of the money you spent to enter. In fact, your tickets just keep rolling into the next drawing again and again. Aside from paying for transaction fees to enter, you literally can’t lose your money. But you could win. Maybe.
It’s essentially a mash-up of traditional lottery systems and crypto staking, with users sacrificing a smaller amount of potential yield in favor of a potential jackpot. Here’s how it works.
What is PoolTogether?
PoolTogether is an Ethereum-based lottery platform that lets users deposit cryptocurrency into pools to buy tickets. Each pool holds a weekly drawing that awards a prize pool to up to five winners, but your tickets do not expire following the drawing. Instead, the tickets roll over to the next drawing, the next one after that, and so on and so forth until you win or withdraw your funds from the pool.
In this sense, it’s a no-loss lottery: you might not win, but you can’t lose. PoolTogether also describes it as a “prize savings” approach, as you could potentially be rewarded for holding onto your crypto funds rather than spending them elsewhere.
How does PoolTogether work?
Many cryptocurrencies offer a staking feature that allows users to lock up their funds within the network to provide liquidity, and they are rewarded with an interest-like staking reward for doing so. PoolTogether takes that premise and executes it on a large scale as a lottery. When users deposit funds into the pools, they are staked via the DeFi platform Compound and the interest that is generated is used for the lottery rewards.
Staking rewards vary by coin, but with so many users playing and keeping their funds pooled long-term, it adds up to large jackpot sums. Automated smart contracts select the winners and keep everyone else enrolled in the latest weekly drawings without any manual action needed.
Did you know?
In one headline-making example, a PoolTogether user deposited $74 worth of DAI into a pool in March 2020 and won nearly $40,000 just over a year later.
What’s so special about it?
Just as DeFi has revolutionized other traditional financial services, PoolTogether is putting a fresh spin on the traditional lottery. But the worst part of playing the lottery—the gradually building sum of money spent on single-use tickets—is taken out of the equation.
You’ll pay transaction fees to enter and exit the pools, but your money remains yours and you’ll be continually entered in the weekly drawings so long as you keep your money in the pool.
How to get started with PoolTogether
You don’t need an account to play: simply go to the PoolTogether website and connect a cryptocurrency wallet. PoolTogether supports an array of popular options, including MetaMask, Coinbase Wallet, Trezor, Ledger, and Trust Wallet.
Go to the Pools listing and click the Deposit button to add the specified coins. As of this writing, PoolTogether offers several different pools—including for USD Coin (USDC), DAI, SushiSwap (SUSHI), Compound (COMP), and Uniswap (UNI)—each with its own weekly prize awarded to the winner(s).
Once you input how much of the selected cryptocurrency you wish to deposit, you will need to approve the transaction with your wallet and pay the transaction fee in ETH. PoolTogether requires users to keep their funds locked in a pool for at least 10 days, otherwise there’s a fee for withdrawing them early.
What are the downsides?
As of this writing, there are no apparent risks: your money is safe, PoolTogether has been functioning successfully for a long time, and it’s not a scam. There are a few downsides to keep in mind, however. Transaction fees can be costly due to demand on the Ethereum network, and if you’re only putting a few dollars worth of crypto into a pool, it might actually cost you more to pay the transaction fee.
Also, there’s an opportunity cost in locking your cryptocurrency into a pool and leaving it there. You could stake those funds or provide liquidity via a decentralized exchange and earn a small amount of yield, but instead, you’re pooling them in the hopes of winning a big jackpot. Lastly, your chances of winning grow significantly the more tickets you buy, so it potentially helps the rich get richer. Still, anyone who plays can potentially win.
Did you know?
As of this writing, PoolTogether has more than $195 million worth of cryptocurrency locked within its pools and awards more than $100,000 per week in prizes.
What is the POOL token?
Launched in February 2021, POOL is a governance token that allows holders to vote on proposals to help shape the future of PoolTogether. Users may be able to vote on how prizes are awarded, which pools the site operates, and changing the future distribution of POOL to users. The site airdropped POOL tokens to early users at launch, plus POOL is distributed to PoolTogether users on an ongoing basis.
The POOL token is live!https://t.co/LlncGMD8RD
— PoolTogether (@PoolTogether_) February 17, 2021
Where can you buy POOL?
Aside from earning POOL by using PoolTogether, you can also purchase POOL from a handful of exchanges. It’s not widely available, but you can swap Ethereum-based tokens for it on the popular decentralized exchange Uniswap, as well as buy it on exchanges like Gate.io and 1inch.
Here’s an example of how you can purchase POOL on Uniswap. You will need to swap ETH or another Ethereum-based token for it. Simply choose the amount of POOL that you want to buy, and the site will use the current exchange rate to tell you how much you will need to spend. Click swap, approve the purchase within your wallet and pay the transaction fee, and you should be set.
With the launch of POOL, PoolTogether opened up future governance of the site to the community, enabling token holders to vote on its development and evolution. PoolTogether has enlisted partners such as popular DEX SushiSwap and blockchain platform The Graph to create new integrations and pools, and held an auditing content to help verify that its code is safe.
Growing Ethereum transaction fees are one potential concern at the moment, as they can vary wildly and be very significant. During a few-hour span while writing this article, we observed fees ranging between $5 and $35 per transaction—and that was for an intended transaction adding just $5 worth of DAI into a pool.
The upcoming London network upgrade for Ethereum should help stabilize the fees, and the eventual Ethereum 2.0 upgrade could dramatically lower fees as the network scales to support more activity.
PoolTogether also launched a pool for Ethereum sidechain Polygon (MATIC) in April 2021 that has much cheaper fees than the Ethereum mainnet pools, and that could be a sign of further change to come for the platform.