We’re building a lottery that has positive expected value and provably fair outcomes.
- How does this compare to existing lotteries?
- Why building a better lottery is important
- Lottery components
- How everyone benefits
- Comparison to PoolTogether
- Comparison to other gambling apps
- Analogy to Uniswap, Blur, and LooksRare
- How do we compete
- Inspired by LooksRare Raffle and Games
- Thoughts
How does this compare to existing lotteries?
Why are existing lotteries inefficient? Because all of the following is taken from the prize pool
- Real world expenses like scratch cards or payments to brick and mortar locations
- Demand generation by running advertisements since many lottery competitors
- Business running the lottery needs a way to profit
Our lottery system - let’s call it lottery.tech for now - will be efficient by nature of blockchain:
- Lottery has no cost to run as it is a decentralized blockchain protocol
- No user acquisition cost and competitors. Rewards are provided for users who refer lottery entrants. Protocol is structured such that competitors will want to build on top of protocol, rather than compete.
- Team profits from monetization features on the frontend that are independent of the lottery
Why building a better lottery is important
People will always want to gamble and speculate. However, crypto is full of scams, casinos take a large margin, and lotteries/scratchers take even larger margins. Let’s return that margin to the user and make it provably fair.
Lottery components
Onchain lottery contract
- When the lottery reaches a predetermined amount, say $100, a lottery commences and users get proportional entries based on how much they contribute. If a user puts in $1, they have a 1/100 chance; similarly someone who puts in $30 has a 30% chance of winning that $100.
- Provably fair, audited, etc.
- Every transaction has a referrer field
- On a non-lottery.tech website, that website can set its own wallet as referrer
- On lottery.tech website, users can generate a referral code which then sets the referrer to their wallet
Contract has a fee switch
- Fee switch takes a maximum of 0.1% of the lottery amount, and it is sent to the treasury. Eg. A $100 lottery pool now pays $99.90, $0.10 goes to treasury
- Fee switch can only able to be enabled when 10k wallets have participated in lotteries.
- After fee switch occurs, a snapshot is taken at every lottery conclusion and the proportional fee is claimable by token holders
Points
- Users gain points for participating in lotteries. Only X points are given out per day. Depending on how much they wager, they get Y points. Thus, it pays to be an early lottery player.
- Users also gain points for referring users to participate in lotteries. Build a leaderboard like Blur and Blast.
- Users lastly gain points for using onramp or swap, since that generates revenue
- Points are not tradeable
Airdrop season
- Every so often, points get converted into tokens
- Tokens get revenue share from the platform
Frontend allows anyone to enter a lottery, whether they are in crypto or not
- Easy crypto way to deposit with native wallet. Anything that’s not USDC will be swapped into it. If you have a crypto wallet, the lottery $ is sent there
- Fiat onramp to deposit. A wallet is created based on your social via Privy. Frontend will charge the user at cost for what we pay for Privy.
How everyone benefits
Frontend makes money independently outside of lottery:
- Onramp referral fees
- Swap fee if trying to enter with a non-stablecoin
- 50% goes to treasury so there’s some value even without fee switch, 50% goes to team
Users get positive EV
- EV is always 1.0 (though after fee switch, it becomes 0.999)
- They get points for participating in lotteries. Only X points are given out per day. Depending on how much they wager, they get Y points. Thus, it pays to be an early lottery player.
- They also get points for referring users to participate in lotteries. Build a leaderboard like Blur and Blast.
- Points influences the initial airdrop.
Comparison to PoolTogether
PoolTogether is a prize-linked savings account, whereas lottery.tech is a real lottery.
Lottery.tech | PoolTogether | |
Moat → Impact | Lottery pool liquidity → Faster lotteries, larger prizes | Lottery pool liquidity → Larger prizes, but |
How team makes money | - Trusted frontend monetization (onramp, swap fee)
- Initial token allocation | - Token allocation |
Incentives for users | - Governance over fee switch, etc.
- Built in Revenue share | Governance to choose pools |
Comparison to other gambling apps
Need to research how these work. I know there are a ton out there.
Analogy to Uniswap, Blur, and LooksRare
Uniswap | Lottery.tech | Blur | LooksRare | |
Moat → Impact | Liquidity Pool liquidity → Better prices | Lottery pool liquidity → Faster lotteries, larger prizes | NFT listing, bids, and lending liquidity → More selection, better prices | Raffle pool liquidity → More games to play, larger prizes |
How team makes money | - Trusted frontend monetization (onramp, swap fee)
- Initial token allocation | - Trusted frontend monetization (onramp, swap fee)
- Initial token allocation | Initial token allocation only | 5-15% of prize pool |
Incentives for users | None now | Points system to gamify and incentivize users to use the product and refer users | Points system to gamify and incentivize users to use the product and refer users | Points (”Gems”) |
Incentives for token holders | - Governance over fee switch, etc.
- Theoretically treasury can be deployed for users | - Governance over fee switch, etc.
- Built in Revenue share | - Governance over fee switch, etc.
- Theoretically treasury can be deployed for users | Revenue share |
Audience | - Crypto-native only use case (tokens)
- Mainstream users can onramp | Lottery is understandable by everyone, crypto native AND non-crypto users | Crypto-native only | Crypto-native only |
How do we compete
We have a moat, incentivize others to build on top, and profitability is independent of lottery.
- Our moat is liquidity. Lotteries will finish very quickly since everyone sends their lottery entries to our contract. Others who fork our lottery will not have the same demand, so their lotteries will take longer, and users will have their money stuck waiting.
- Referral rewards incentivize others to build on top of us. If you build a frontend and use our protocol, you can set a referrer field to your wallet and reap the benefits.
- Profitability is from a trusted frontend, and actions that users take (eg. onramp). Thus, for a crypto native, we offer best prices, while for non-crypto natives, we offer peace of mind.
Inspired by LooksRare Raffle and Games
LooksRare has games that are provably fair, and take 5% for simple games (Raffle, Poke the bear, YOLO) and 15% for complex games (Infiltration). These are a hit with people. I think we can simplify it, remove the fee, and make it accessible to non-crypto users.
Thoughts
Likely will need to put this on Solana and/or Base to keep fees low
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