Crypto lotteries have gained a lot of popularity in the last few years. Since they are blockchain-based, they are more transparent. They also operate on a global level with large pay-outs that are easy to access. These benefits have made them an attractive option for the traditional lottery aspirant.
However, one particular lottery house — PoolTogether — is sweetening the pot even further. The Ethereum-based, MakerDao-backed platform promises a lottery where you never lose your money, even if you never win the lottery. Sounds interesting? Tag along as we tell you how it works.
What is PoolTogether?
PoolTogether is a crypto-powered lottery platform that gives users a chance to win a significant weekly prize. It allows users to buy lottery tickets in exchange for depositing their crypto into a prize pool. However, it differs from the traditional lottery because your lottery tickets do not expire.
The lottery pool awards prizes to up to five winners every week. However, even if you do not win, your tickets will not expire. Instead, they will be rolled over to the next draw, and the process will continue until you either win or withdraw your crypto. In this way, while the chances of winning the lottery remain the same — very slim — you do not lose any money either.
Also Read: What are Stablecoins, how they work, how to buy them, and other questions answered
Then how are the prizes funded? PoolTogether uses the interest they earn on the lottery pool to finance the awards. PoolTogether describes it as a prize-savings approach where you get rewarded for holding your cryptos rather than spending them.
How do no-loss lotteries on PoolTogether work?
PoolTogether combines the traditional lottery system and crypto staking. Crypto staking is a way of earning passive income on your crypto holdings by putting the tokens to work. It is equivalent to putting your money into a high-yield savings account. Crypto lotteries have taken this premise and converged it with the traditional lottery system.
Here is a step-by-step breakdown of the entire process:
1. In the case of PoolTogether, the players deposit their stablecoins or other cryptos into a pooling account. This pool currently accepts these four major types of tokens — DAI, UNI, USDC, and COMP.
2. The pooled funds are staked via a DeFi lending platform, Compound Finance. It stores the funds for a week. Staking rewards vary according to the coins staked. However, the variations are easily offset with so many players.
3. Every week, PoolTogether chooses the winners at random. The interest earned on the pooled funds (for a week) makes up the lottery prize. So, the winners get a large share of the entire interest earned on the lottery pool along with their ticket amount. The non-winners only get their ticket amounts back. Smart contracts ensure everything is automated, so you don’t have to buy tickets again.
Also Read: Everything you need to know about Zero-Knowledge (ZK) Proofs and how they work
A smart contract is a self-executing piece of code containing certain instructions and conditions. Once the conditions are met, it executes the instructions coded into the contract.
4. The game begins again.
PoolTogether combines blockchain with smart contracts and decentralised applications to create a game that gives you a huge upside while minimising the downsides. The downsides include the transaction fee and the opportunity cost (the benefit you forgo for choosing the crypto lottery over some other investment vehicle).
