Cryptocurrencies are often considered to be risky investments. While that is certainly a factor, there are a lot of other aspects that make this industry more than worthwhile.
The DeFi ecosystem, for example, has given rise to some unique projects. PoolTogether, for example, is a lottery system that ensures no one ever loses their money.
The Concept of PoolTogether
In theory, a lottery is designed to take people’s money and distribute it among those who win. All of the remaining money is then pooled for future lotteries. To partake in future lotteries, consumers need to spend money again. This business model has been around for decades and remains incredibly popular even in 2020.
PoolTogether shows how things can be done very differently. It too is a lottery, but its core mechanic is very different. By focusing on a no-loss, audited savings game running on the blockchain, different use cases can be created. In fact, a system that ensures no one ever loses money is rather brilliant.
Just because no one loses money with this lottery doesn’t mean there are no winnings. This Ethereum-based application allows users to buy “savings tickets”. Every ticket gives users a chance to win a prize. That prize comes in the form of all interest generated by the total funds in the pool. All tickets are purchased through either Dai or USDC.
The money associated with these prizes comes from the money used to buy tickets. That money generates interest through Compound.Finance.
It is also interesting to note how users only need to enter the lottery once. As long as their funds remain in the pool, the owner will be eligible for prizes. This adds another layer of convenience to this no-risk DeFi application.
Explaining Sponsored Amounts
Some people may wonder what the “sponsored amount” in PoolTogether means. It sounds like something that doesn’t belong in a no-loss lottery. It is far less innocent than one may think at first. Sponsored amounts are added to the pool to generate interest for the prize.
However, those who contribute sponsored amounts cannot win the prize itself. It is simply a way for individuals and organizations to help grow the DeFi ecosystem.
Despite the sponsored amounts, PoolTogether does not make any money at this time. A plan is in the works to change that narrative over time. If and when that will be introduced exactly, remains to be determined.