DeFi has also impacted the lottery sector by transforming it into a decentralized game where there are no losers. One such application is PoolTogether.
PoolTogether is a decentralized no-loss lottery or decentralized prize savings application where users get to keep their initial deposit amount after the lottery prize is drawn. In a conventional/centralized system the prize money is funded from the lottery tickets purchased, however in PoolTogether the prize money is funded using the interest earned on Compound by pooled users’ deposits. Compound is a leading lending/borrowing platform in the DeFi space.
For each round of PoolTogether, all user deposits are sent to Compound to earn interest and one lucky winner will be selected at random at the end of each interval to win the entire interest prize money.
How It Works
Taking part in PoolTogether is fairly straightforward- a user purchases their PoolTogether ticket(s) using either DAI or USDC in their MetaMask wallet, where each ticket purchased represents 1 entry and the chance of winning increases proportionately with the number of tickets purchased. PoolTogether currently supports 2 different lotteries:
• A weekly DAI pool
• A daily USDC pool
A portion of the money currently earning interest in PoolTogether is sponsored and this increases the interest earned on Compound each week to make the prize pool larger. The sponsored tickets are not eligible to be a winner on PoolTogether.
The PoolTogether concept is not new and is similar to Prize-Linked Savings Account (PLSA) where it incentivizes people to save more in their bank’s savings account by providing sweepstakes for lucky winners. However with the use of smart contracts it has now enabled a new way for anyone around the World to take part in a decentralized lottery system without losing any funds.
One of the attractions of decentralized lotteries in the context of PoolTogether is that funds do not go through middlemen or brokers, but are instead held in smart contracts that have been audited. There is also no lock-up period on funds, meaning that they can be withdrawn at any moment. Being decentralized also breaks down any geographical barriers allowing anyone to participate.
No 3rd Parties
No Lock-Up Period
To get started you will need a Metamask Wallet, which can be downloaded directly from the Metamask Website. Metamask is basically a cryptocurrency wallet that allows you to interact with the Ethereum network. It works through a web browser extension on Chrome, Brave and Firefox.
For help installing the application please visit their website for detailed instructions – Getting Started. And please ensure to never lose your secret backup phrase or disclose it to anyone, as this may result in funds being lost and be at risk of theft. The same applies to the password you create. Once you have installed the application and have stored your secret backup phrase safely the next step is to deposit some $DAI cryptocurrency.
As Metamask is an Ethereum compatible wallet it can only store Ether and ERC-20 tokens, as these digital assets are native to the Ethereum blockchain. Ether can be bought from various exchanges such as Uphold, Coinbase and Crypto.com. I recommend Uphold as I am an avid user. Once you have signed up and purchased some Ether this can then be sent to the address of your Metamask wallet. This can be found by clicking on the Metamask extension icon and then clicking on Deposit. You will then see your address for receiving funds, this address is also known as your public key which can be given to anyone wishing to send funds to you. For a more detailed guide please visit – How to Send/Deposit tokens to your Metamask wallet.
KyberSwap and Dai
In order to purchase lottery tickets on PoolTogether you will need to use either DAI or USDC. Either can be obtained by exchanging your newly deposited Ether via an exchange, I recommend KyberSwap. Once on the KyberSwap website enter the amount of DAI you would like to purchase, remembering that 1 DAI = 1 Lottery Entry.
After entering the amount click on Swap Now where you will be prompted to connect to your wallet, in this case choose Metamask. Enter your password and then click Connect where you will be taken back to the KyberSwap website. You can then enter the amount of DAI you would like to obtain according to the amount of Ether you have in your Metamask wallet. You will then be prompted to confirm this transaction via your Metamask wallet. Once you have confirmed the transaction, it will be then be broadcasted on the Ethereum network to be mined and once completed you will then receive the equivalent DAI in your Metamask wallet.
There is a fee known as Gas that will be added to your total amount, this is a standard fee that is used to pay miners for validating and executing transactions on the Ethereum blockchain.
For more information on using KyberSwap- Getting Started
Participating in PoolTogether
As PoolTogether is a Decentralized Application (Dapp) that runs on the Ethereum network you an use your Metamask wallet directly for purchasing lottery entries. Once on the website click on Connect Wallet and choose Metamask, once connected you can then Buy tickets. Enter the amount of tickets you would like to purchase depending on the amount of DAI in your account and click Buy tickets. And that’s it! You have now participated in the first decentralized lottery of its kind. You just need to wait for the draw to see if you have won. And remember that your funds can be withdrawn at anytime by accessing your account using your Metamask Wallet.