Tens of billions are spent every year on lottery in the United States alone, with almost no one winning.
Some call it a stealth regressive tax on the poor. Others call it an outright scam. Yet everyone has bought a ticket in some rare occasion just in case it happens, who knows.
Mathematicians do and they say the chances of you winning are virtually zero. Hence most consider this as not just gambling, but an ensured loss of money.
Yet the dream is alluring of striking out of poverty by the grace of god to be a millionaire overnight. Making it a battle of mind over emotion where the latter usually wins if one had to, in any given day, engage far too much in such battles.
As the poor generally have little, so their temptations grow greater and more numerous. Religion tilts that balance towards self-control and discipline, towards the mind, in such matters like gambling. Intellect can do too in a far more convenient way by making it not gambling at all.
The Lottery Where You Can Only Win
Instead of taking away “entertainment” or the will to dream, a new start-up plans to have the cake and eat it too.
Arrakis Labs says they’re building economic software for human thriving. “We’re betting the next 10 years is a pivotal time to build economic software because we’re living through the transition from the industrial age to the information age,” they say.
One such economic software is PoolTogether, which is just a few lines of code in an ethereum smart contract.
That code implements a simple idea. You connect to it on their site through the MetaMask browser plugin, you buy a ticket at the cost of $20 DAI, and then at some point the lottery locks.
They’ve set it to lock for only 15 days during which period all the funds sent to the contract are lent out on Compound to earn interest, with that lending out done automatically by the smart contract according to Leighton Cusack (pictured above), the project’s founder.
One address is then randomly selected to receive all the interest, minus 10% kept by the project, with everyone else receiving back $20 x however many tickets they bought, minus the blockchain transaction fees.
At the time of the above screenshot, 1,680 tickets were bought, translating to $34,000.
Our chance of winning here is 5 times out of 100, so unlikely but not in any way surprising if we did win this lottery.
That $34,000 is estimated to “buy” $150. If we do it by proportion, we’re basically removing two zeros. So at $70 billion, which is how much was spent in lotteries last year in US, there might be a prize pool of $700 million.
Meaning this can potentially have the dream element too with a lot of things easily imaginable here, which would make it a lot more exciting. Say, if we’re at scale, instead of just lending it out you can have some DAO to invest in start-ups with the winner then the beneficiary.
So even at scale, logically one thinks there would be sufficient interest returns to make it a jackpot of dreams. That’s while no one loses the capital, which is the most fascinating aspect.
Gambling With Pooled Winnings
Depending on just how many tickets are bought, there is a loss in that you could yourself lend that money at Compound or some other similar service.
The $150 pot that is to be won by someone, for example, is a collective loss of $150 to the gain of the winner, although Cusack mentioned they’re thinking of having a long tail of distribution so everyone receives something with the winner receiving the most.
If on the other hand you yourself lend out this $20, you’d hardly get much at all in interest. So you probably wouldn’t lend it.
While if you have the chance to get $150 for your $20 at no risk of losing your $20, then it gets a bit more interesting.
At scale and with some imagination it can get extremely interesting because the winnings are basically a product of primarily added value creation.
This can become a lot more complex from less “silly” lotto entertainment to a way of organizing the pooling of small funds with the aim of having sufficient capital to create value at scale, and thus so distribute that value back to the savers.
That’s a company, you might say, but a lot more global, a lot more accessible and a lot more automated with a lot more of the initial savings and any added value coming from it.
In a way it is a cooperative, a horizontal machine based organization of equals where through unity they gain strength.
Building the Blocks
PoolTogether has just launched, so as a new project, bugs are perhaps to be expected in this space.
They also have unanswered questions regarding how they’ve achieved randomness with the project not responding in time for publishing.
But it is interesting how they have integrated themselves with Compound and with AragonDAO , making PoolTogether itself another building block of open digital finance accessible to all throughout the globe with their code to be open sourced.
In such incremental steps where everyone is free to innovate and incorporate previous innovation, from simplicity you would think would rise more sophistication.
Thus just what is savings and what one does with them is beginning to change, and with savings being at the root of finance, it is the entire financial industry itself that is changing.
Some call it a stealth regressive tax on the poor. Others […]