PoolTogether is a deceptively simple DeFi app that encourages users to deposit money with the opportunity to earn rewards. So what exactly is PoolTogether and how does it work?
There are two types of prize pools on PoolTogether: those created by the PoolTogether project and community prize pools that anyone can create.
What is PoolTogether?
PoolTogether is an Ethereum-based lottery platform that allows users to deposit cryptocurrencies into pools to buy tickets. Each pool has a weekly draw that awards a prize pool to up to five winners, but your tickets do not expire after the draw. Instead, tickets move to the next draw, the next draw, and so on until you win or withdraw money from the pool.
In this sense, it’s a lossless lottery: You may not win, but you cannot lose. PoolTogether also describes this as a “reward saving” approach, as you can be rewarded for holding your crypto instead of spending it elsewhere.
How Does PoolTogether Work?
Many cryptocurrencies offer a staking feature that allows users to lock their funds in the network to provide liquidity, and for doing so they are rewarded with an interest-like staking reward. PoolTogether takes this premise and implements it as a lottery on a large scale. When users deposit into pools, they are staked on the DeFi platform Compound and the interest generated is used for lottery prizes.
Staking rewards vary by token, but due to so many users playing and keeping their funds in a long-term pool, they add up to jackpot amounts. Automated smart contracts select winners and allow everyone else to sign up for the latest weekly drawings, with no manual action required.
What Makes PoolTogether Special?
Just as DeFi has revolutionized other traditional financial services, PoolTogether breathes new life into the traditional lottery. But the worst part about playing the lottery is that the ever-increasing sum of money spent on disposable tickets is taken out of the equation.
You pay a transaction fee to enter and exit the pools, but your money stays with you and you will constantly enter weekly draws as long as your money stays in the pool.
How to Use PoolTogether
You don’t need an account to play: just go to the PoolTogether website and connect a cryptocurrency wallet. It supports a number of popular options, including PoolTogether, MetaMask, Coinbase Wallet, Trezor, Ledger, and Trust Wallet.
Go to the list of pools and click the Deposit button to add the specified coins. As of this writing, PoolTogether offers a variety of pools, including USD Coin (USDC), DAI, SushiSwap (SUSHI), Compound (COMP), and Uniswap (UNI), each with its own weekly prize winners.
After entering how much of the selected cryptocurrency you wish to deposit, you will need to confirm the transaction with your wallet and pay the transaction fee in ETH. PoolTogether requires users to keep their funds locked in a pool for at least 10 days, otherwise there is a fee for early withdrawal.
What are the disadvantages?
As of this writing, there is no apparent risk: your money is safe, PoolTogether has been working successfully for a long time and it is not a scam. However, there are a few disadvantages to keep in mind. Transaction fees can be costly due to demand on the Ethereum network, and if you’re putting just a few dollars’ worth of crypto into a pool, it may cost you more to pay the transaction fee.
There is also an opportunity cost of locking your cryptocurrency in a pool and leaving it there. You can risk these funds or provide liquidity through a decentralized exchange and earn a small amount of returns, but instead you pool them in hopes of winning a big jackpot. Finally, the more tickets you buy, the greater your chances of winning, thus potentially helping the rich get even richer. Still, anyone who plays can potentially win.
What is POOL Token?
Launched in February 2021, POOL is a management token that allows holders to vote on proposals that will help shape the future of PoolTogether. Users can vote to change how rewards are awarded, what pools the site runs, and future distribution of POOL to users. The site airdropped POOL tokens to first users at launch, and POOL has also been continuously distributed to PoolTogether users.
Where to Buy POOL Token?
Besides earning POOL using PoolTogether, you can also buy POOL from several exchanges. It is not widely available, but you can trade Ethereum-based tokens on popular decentralized exchange Uniswap and buy them on exchanges like Gate.io and 1inch.
The Future of POOL
With the launch of POOL, PoolTogether opened up the future management of the site to the community, enabling token holders to vote on the site’s development and evolution. PoolTogether commissioned partners like the popular DEX SushiSwap and blockchain platform The Graph to create new integrations and pools, and organized an audit content to help verify that its code is secure.
Rising Ethereum transaction fees are a potential concern right now as they can vary wildly and can be very significant. Over a few hours while writing this article, we observed fees ranging from $5 to $35 per transaction, and this was for an intended transaction that only added $5 worth of DAI to a pool.
The upcoming London network upgrade for Ethereum should help stabilize fees, and the eventual Ethereum 2.0 upgrade could significantly lower fees as the network scales to support more activity.
PoolTogether also launched a pool for Ethereum sidechain Polygon (MATIC) in April 2021 with fees much cheaper than Ethereum mainnet pools, and this could be a sign of further changes to be made for the platform.
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