PoolTogether, which runs on ethereum, now holds $969,502 DAI with circa $250,000 of it being “donated” in as far as they are ineligible to win, so donating any interest accrued from lending it on dapps.
Some $100,000 are new tickets, meaning they’re not eligible to win this week, while around $600,000 is playing for a prize pool of $1,400 that is given to one winning ticket every week.
It costs just a dollar for a ticket, in dai, and currently the chances of winning are one in 700,000.
So we have no chance, but the process is smooth-ish. They conveniently have something you can click to convert eth to dai, so that was nice and quick. Now:
We obviously entered 1 in the input box for a ticket and clicked the blue box to get ticket, so now we have this.
A nice cheap fee of just 5 cent makes our ticket cost $1.05, or so we initially thought because this is just giving permission to their contract to interact with our plain ethereum address and more particularly with the smart contract of the dai token.
As you might know ownership of smart contract based assets is determined and validated by the world computer’s nodes, and not by a private key.
This is a bit confusing unless you remember DAI is just open source code that behaves under the rules known to all nodes.
So what we’re doing with this transaction above is we’re adding new rules to our dai whereby we agree it can now be governed by the rules of the PoolTogether smart contract.
So if PoolTogether was malicious and we had 1,000 DAI instead of just 1 and some pennies in this test account, they could have stolen all our dai after we clicked confirm.
So bear that in mind because by clicking confirm you’re giving considerable power away, something that does not apply for eth because eth is a protocol level crypto.
To move eth you have to sign with the private key, you have to give permission for each interaction. While for a token the PoolTogether smart contract can now do whatever it wants – without any input from us -with our $1000 dai if we had it.
Obviously in this case PoolTogether is legit, but we got confused by this first transaction and presumably everyone else did too because we thought we actually bought the ticket when we just gave them access to our gold pennies.
So as this is all new, the little text in the above image could do a far better job starting with the headline of Warning: Ownership Rules of Your Token Will Be Changed, or whatever marketing people come up with to both inform while not alarming.
You also now know why everyone goes on about this scalability nonsense. A mere 2 cent we paid for the eth to dai conversion transaction, but to buy the ticket it cost some 50 cent because it’s a smart contract interaction that needs to go through all these rules within it.
So we put it all together and we have $1.57 for a ticket, for the chance of winning – let’s say $1,570. Math being our forte, the initial suggestion is we paid 0.1% of the prize pool, but as we get $1 back, it makes it 0.03%.
Our chance of winning is 0.0000014%. That’s too many zeros for our brain, so, we paid 1,000x more than our chance of winning.
Meaning this isn’t really no loss if it is a ticket of 1. In that case we’ve actually lost 57% cus our fifty cent goes just as the rapper’s bitcoins went.
The 50 cent fee however applies whether it’s $1 or $1 trillion, but on the other hand the lottery usually costs $1, not $1 trillion.
We also forgot to mention this prize pool comes from this $1 million being locked on the Compound dapp where others borrow it to do their own arbitraging and whatever other wiz stuff they do. So we could have sent this to Oasis instead and gotten about 8 cent in a year after the 50 cent fee because what’s more fun than playing with pennies.
So let’s make it $1,000. Now we don’t have to worry about pennies, we just have to figure out whether $80 in a year is better than 1 in a 721 chance of winning per week $400 in this case, so making it 5x more than that $80.
Per week, so 53 weeks divided by 721, we have a chance of 1 in 13 of making $400 over a year, or 40%, over a – let’s assume – guaranteed 8%.
Quite magically, 40 divided by 8 happens to be 5. Showing clearly bots got there way before our napkin maths. So raising the question of bot oppression when?
Ignoring all this fancy maths, on an emotional level it feels cool to know for $1 you could win $1400.
That’s not nothing to anyone, but if you actually need it then you do get that dream factor to some extent.
That dollar, moreover, can be forgotten. Just like after you scratch a ticket you no longer think about it, at a human level this one dollar sent to this lotto is now lost if you don’t win.
Except the dollar continues trying, week after week, and maybe even decade after decade, raising an important point about ded accounts becoming rish.
So practically you’d probably need some return limit after 5 years or whatever or that could be used as “donated” in a Nakamoto style.
Scaling this however doesn’t appear to be easy because if we get to $10 million, it’s still “just” $14,000, but if we get to $100 million it can be interesting.
At that point, $140,000 is nothing to scoff at, but if you double it and make it monthly, you now have the wow factor of a prize pool of a million dollars at a negligible cost presuming you’re playing with $21 which was the initial prize ticket and therefore is probably the magic number.
Making it quite an interesting thing especially as it is all in the open and fully transparent, so the managers can’t shave off some dollars for their own pockets.
Making it interesting also because it’s an easy arb opportunity that can be utilized by hard working bots that are now probably the primary residents of this world computer.