How PoolTogether is Building a Sustainable Lottery at the Protocol Level

Once a premier example of the potential of decentralized finance, PoolTogether has since fallen into the background as increasing gas prices and a hunt for yield has made the protocol less enticing for speculators.

Still, PoolTogether already established its case as a powerful application and continues to gain users even though DeFi yield farmers have, quite amazingly, found a more degenerate way to gamble their money than via the lottery. As the new version of PoolTogether draws near, it’s worth visiting the current state of the popular no-loss lottery smart contract before it transitions into a fully fledged no-loss protocol.

PoolTogether: The Path Towards a Sustainable Lottery

PoolTogether is a unique application that enables a “no-loss” lottery. Anyone can purchase a ticket for 1 Dai and at the end of the week, a winner is selected. However, instead of receiving the funds from the lottery tickets – like your neighborhood gas station/traditional lottery – PoolTogether takes the money from ticket sales and allocates those funds into a lending protocol like Compound that earns interest on the deposits. Each week, the winner of the lottery receives the combined interest of all the funds and participants retain their initial contributions.

So, the only loss that lottery players experience is from the opportunity cost of not being able to farm riskier protocols or place capital into other revenue-generating assets. Here’s a quick video about how it works, in case you’re more of a visual learner.

To date, PoolTogether has garnered over 12,000 unique lottery players which makes it one of the most utilized protocols in DeFi, not including decentralized exchanges.