Megapot: World’s Largest Raffle

Summary: Megapot will become the world’s largest raffle because users get the best odds to win massive jackpots and developers get to build on an immutable platform with an open prize pool. Today, traditional lotteries are negative expected value (EV) because fees are taken from the prize pool to fund expenses. Megapot is positive EV by taking no fees from the prize pool, since it runs freely on a blockchain, and even rewards users with staking yield generated on the money in the prize pool. Since users only want to play when jackpots are big, liquidity providers (LPs) initially fund every prize pool. In return, the majority of staking yield from users’ ticket entries is given to LPs, who now earn yield on everyone’s assets, instead of just their own. As a permission-less protocol, rivals cannot be de-platformed, so they will build upon, and contribute to, the shared prize pool instead of competing.

Megapot takes no fees, is provably fair, and has mega jackpots

Why I’m excited to build this

People will always want to gamble

Crypto is full of scams, casinos take a large margin, and scratchers take even larger margins. You don’t have to condone gambling to want to improve it. It’s a noble goal to reduce consumer prices.

This is uniquely possible with crypto

• Only a protocol can guarantee that no one will ever be blocked from using it. Such a stable foundation incentivizes others to contribute rather than compete.
• Traditional business models need to take fees and compete on fees. 5% fees is 10x cheaper than 50% fees. However, a crypto business model can take no fees, and instead pay users to play, which is infinitely better, or pass the “10x better” bar to get users to switch
• Crypto users can buy tickets with negligible fees. Solana transactions cost $0.00025, and Ethereum L2s cost $0.04. Meanwhile, a traditional $2 lottery ticket pays $0.36 in credit card fees.

This is hugely valuable

Global market size of lotteries is $378 billion, casinos is $130 billion, and online lotteries is $21 billion.

Every lottery in the world has its own prize pool, whether it’s due to geographic regulations (eg. US state-sanctioned lotteries) or tailored to a specific audience (eg. on one casino or website). The underlying goal for all of them is building a big jackpot to attract users to enter. Let’s build a jackpot that everyone can contribute to, and that the whole world can play for.

Monetizing by taking a cut of yield is valuable - Lido has earned $1.2 billion in fees.

Lottery Components

Onchain lottery contract

• Each ticket has equal chance to win entire prize pool
• Winning ticket is drawn every 24h

Points program

• Users get points for buying lottery tickets, referring other users, and other GTM activities
• Points are worth real money. These are exchanged later for the staking yield generated from money in the prize pool.

Trusted frontend

• Open-source the product with public founders (like Uniswap). Contrast against shady competitors with anonymous teams
• For legal and compliance reasons, block US users.
• Encourage others to build frontends. For example, empower others to take on the compliance/risk to serve US users or any other country, tailor it to different audiences (eg. themed games), or build different form factors (eg. Telegram bot)

Liquidity Providing program

It’s important to build a large jackpot and maintain large jackpots to get users excited. To do this, liquidity providers (LPs) initially fund every jackpot to make it exciting. By purchasing tickets for a neutral EV lottery, they take on variance. In return, the vast majority of yield from users’ ticket entries is given to LPs.

LPs like that they can earn multiples of what they would normally earn from standard staking.

Overview flow chart

Detailed flow chart

This chart covers how the jackpot is grown and does not cover yield.

Building on Blast L2

We’re building on Blast’s Ethereum L2 because:

• Deposits into a smart contract earn yield automatically with no developer work.
• Gas fees are returned to the protocol’s developers (us). This is a revenue source even if another frontend drives majority of traffic.
• They offer a sizeable developer airdrop. Passing this on to users incentivizes product usage, and if we cannot get users with this added incentive, we’ll definitely fail without it.

With Blast, LPs’ earnings is significantly higher than just native yield:

Monetization

The team takes 10% of yield only after LPs earn 2x the standard staking yield. This way, we profit only when others in the ecosystem profit.

Additional monetization can come from onramp and swap fees (Uniswap Labs did this to earn $4M in past quarter) or platform incentives like Blast’s developer airdrop and gas rebate.

Hypotheses

• Users play Megapot because if they’re going to gamble, it’s the highest ROI way to do it. Need to understand if users actually care about EV or ROI.
• Positive EV is a strong selling point for users, and the phrase “Get paid to play” is catchy. Thus, it’s important to keep it positive, even if a small magnitude (+0.01%).
• LPs’ risk-free returns rate is native staking yield. With our smart contract risk and added variance, we cannot take a cut of yield until after we significantly increase their yield. Need to understand: Is the native yield we’re offering enough incentive for LPs?
• Points let us share more yield to early adopters who provide liquidity, buy lottery tickets, and refer friends. If yield was purely based on deposits, there isn’t enough incentive to cold start the network. Thus, our GTM will include significant points multipliers for the first month.
• In the short term, launching on Blast lets us test the concept and iterate on user experience.
• In the medium term, once we’ve found initial traction, we’ll make it the best platform for builders by making the protocol audited, composable, and non-upgradeable.