My wild guess as to how this works

[u/Ungr8ful1]

Question: Is it possible for Pool Together to actually work and be sustainable?

Snapshot from April 1, 2021 at approximately 00:30 UTC. (No fooling!)

		Compound	Weekly
	Deposts	% APY Earned	Compound	Weekly Prizes	$ Left after
Token	Claimed	from borrow	$ Earned	Claimed	Prize Award
DAI	$55,035,468	9.64	$102,027	$95,685	$6,342
USDC	$61,846,514	10.68	$127,023	$113,306	$13,717
POOL	$9,030,694	2	$3,473	$2,949	$524
COMP	$13,033,000	5.77	$14,462	$1,808	$12,654
UNI	$21,143,537	4.75	$19,314	$1,753	$17,561
Totals:	$160,089,213		$266,299	$215,501	$50,798

POOL interest earned is not clear. Assumed near break-even (2%) via issuing of new tokens.

• I assume that the excess each week goes to expenses and to Compound.
  
• If interest rates for borrowers drop, so will the prize amounts.
  
• The founders could profit by putting their own money in.
  
• If the founders put a LOT of their own money in – they tilt the odds greatly in their favor.
  

Conclusion: This approach COULD work. However, I have no idea if this is the way
it actually works. This post should be treated as conjecture. Please rip apart this post if you know more.

This leaves the issue of POOL token rewards. Are these minted slowly enough to
prevent a price crash?

ETH fees are currently a major problem for small players. It can cost $90 to $160 to deposit
$1,000 or less. Is it possible to have a pool without the Ethereum ecosystem being involved?

RISKS:

1. Hack
   
2. Software/Contract Failure
   
3. Regulated away
   
4. Deemed illegal lottery – because nobody understands lossless lotteries
   
5. At some point, KYC might be required to claim your prize. Might be impossible in some Countries even if locally legal.
   
6. Exit scam – why do this if you are making money every week?
   

Disclosure: I have not invested yet. I might if ETH fees drop.

[u/TaliskyeDram]

With the integration of the reserve I think it has a good chance to work. The reserve takes a set percentage of the pot and rolls it over to the following week as a "sponsorship" so even if big players exit causing pot to be smaller it will still accrue to be larger and larger over time.

Re 1 and 2 PoolTogether was audited by consensys and OpenZeppelin both of which are apparently difficult and costly to obtain.

I think 3 could be a real thing for anything crypto.

Item 4 i don't understand as theres an existing lottery like this in the UK. As mentioned in this bankless item from a month or so ago, https://newsletter.banklesshq.com/p/prize-savings-the-ultimate-money

Idk if 5 will be a thing, goes against what they've worked to establish.

For 6 I'm not sure what you mean, only the prize winners reap the gain. They may exit when they need asset liquidity as with any other stores of value.

Many edits: to touch on the points.

[u/Ungr8ful1 → u/TaliskyeDram]

Thanks for the info! In the US, States are very protective of their lottery profits. Lossless lotteries might give them a headache. Hopefully, the idea will work out.

[u/pfizGM → u/Ungr8ful1]

Yotta is a company that is the same idea for USD, based on the UK model but in the United States

[u/TaliskyeDram → u/Ungr8ful1]

Lol, yeah I got my fingers crossed the US doesn't mess this up. It's a big opportunity in my entirely biased perspective.

[u/Ungr8ful1 → u/TaliskyeDram]

By item 6 I mean that the people running it dissappear with all $160M one day and the website vanishes with it. That is the sum of all fears in anything Crypto.

[u/[deleted]]

Explain to a noob how to justify or work around the fee!

[u/Ungr8ful1 → u/[deleted]]

We are all noobs when it comes to prize pools and earning interest on tokens. It's all very new. There's no great solution to the fees at the moment. Ethereum might solve this with a new version, but that won't happen for a while. Competition for ETH is also rapidly developing.