Episode 7: Leighton Cusack, McColl and Gio | Pool Together - Building DeFi Primitives
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Status
Crypto_Sapiens_Pooltogether7e96z
Timestamps
00:03:36
Layton Cusack
Intro to No loss Lotteries
00:07:15
Layton Cusack
Explains the two main parts of pool together
00:10:49
Gio
Explains No Loss Lotteries
00:11:55
McCall
Explains Tickets and Rate
00:15:58
McCall
Explains On-Ramps
00:19:50
Layton Cusak
Details timeline of pool together
Intro
Welcome to crypto sapiens, a show that hosts lively discussions with innovative web3 builders to help you learn about decentralized money systems, including Etherum, Bitcoin and DeFI. The podcast is for educational and entertainment purposes only. It is not financial advice. Crypto sapiens is presented in partnership with Bankless DAO, a movement for pioneers seeking freedom from the limitations of the traditional financial system. BanklessDAO will help the world go bankless. I create user-friendly on-ramps for people to discover decentralized financial technologies through education, media, and culture.
[00:00:46]
Humpty Caldron
Hi everyone. I'm your host, Humpty Caldron. Today I'm talking to Layton Cusak. Co-founder at pool together and community advocates McKoll and Gio. We discussed the crypto powered savings protocol and the value of creating accessible on-ramps to DeFi for new users. Well, let's get started, first off.
[00:01:06]
Layton Cusak
Thanks for, thanks for having us super excited to be here. I love BanklessDAO for what you guys are doing, I have been a fan for a long time. So about myself, I got into crypto in late 2016, and at the time I originally got to Bitcoin. And if you guys remember, when Coinbase had two assets, they had Bitcoin and Etherum. Etherum was only $9.
Bitcoin was like $900, so I should buy ETH. So that's how I found out about Etherum. Then, throughout 2017 and 2018 started just getting more and more involved and ultimately went to the Ethereum hackathon in Denver in February of 2019. I had the idea for starting pool together at that time, a protocol for no loss, lotteries. I Pitched the idea there, got a grant from Maker. I'm obviously skipping over a lot of stuff, but that's, that's pretty much how pool together started. So Pool Together is actually one of the first DeFi, protocols it's launched in may of, or sorry, June of 2019.
So at that time, there was SNX, Maker, Uniswap, Compound and Pool Together.
[00:02:58]
It seems like a lot of activity happens there and a lot of great projects that we're familiar with, they have had their start there also. In terms of pool together and the fact that it's one of the earliest DeFi protocols, all of it just really makes sense.
In fact, I was recently listening to a discussion where you participate. I believe it was with David Hoffman, a lot has happened since the very beginning of DeFi and pool together to has continued to grow and evolve.
So, why don't you talk a little bit about that aha moment, the inspiration to pool together and why you chose to take on this concept of taking these no loss lotteries.
[00:03:36]
Layton Cusak
So no loss, lotteries are actually something that exists in the sort of traditional financial system and they're not super popular in the United States.
So a lot of people don't necessarily. For me, when I was getting into DeFi, I was really interested in working on protocols that would help people become more financially healthy. Like actually help people achieve financial mobility and achieve financial health. Basically in my research, I came across this idea for no loss lotteries and thought, wow, this is like a brilliant idea.
[00:04:06] And there's a ton of research showing that this actually helps people save money. It actually decreases spending on normal lotteries. So it's sort of empirically proven and three that this is an idea that would just work way better as a decentralized protocol. That was really so really the motivation was like, okay, how do we build something that's going to actually help people achieve financial wealth?
[00:04:29] The kind of the edge was a proven idea that's super popular. It helps people. And also it's going to be way better on a blockchain.
[00:04:41]
Humpty Caldron
So let, let me go back a little bit there, because I think there's something here that I'm really interested in, and that is the concept of no loss, lotteries, and how these are being used in other countries outside the US. From your research, what's the function? How are these being used in other countries? And from your research, did you see these working? Because it was kind of like, and I hate to use this overused term, but banking the bank list, giving people an opportunity to, be able to save in a way that's not accessible through normal.
[00:05:20]
Layton Cusak
Currently the biggest, no loss lottery in the world is in the UK and it's called premium bonds. So for some general stats, they have a hundred billion dollars deposited into premium bonds and that generates about like $1.2 billion a year in prizes.
[00:05:41] From a scale perspective. These are really large, like I said, one of the most popular consumer financial instruments that exists, they are really popular. They're really popular actually kind of across the demographic spectrum, but there is a lot of research that shows specifically unbanked people will essentially use these. It will attract people who are not traditionally banked.
Basically doing research on how much, how many people who didn't have bank accounts, created bank accounts for the first time specifically to do, no loss lotteries and obviously, with pool together, you know, that just makes it so much easier, right?
Because you don't have to create a bank account to join pool together. You just have to have it in an Etherum wallet or your wallet on polygon.
[00:06:42]
Humpty Caldron
So I'm trying to wrap my head around this in terms of, you know, how this works and all that, but I guess one of the things that's that I'm curious as to when you were doing your research and you were adapting this for the digital world, what lent itself to doing this on chain and, you know, kind of what was the vision for it, or really, how were you taking that original idea and then evolving it for, for the blockchain?
[00:07:15]
Layton Cusak
Yeah. Well, so I think there's two, parts that, right. So the first part is, is maybe a little bit more of the boring part. And that's just sort of from a functionality perspective, why it's better? So if you're doing this on the blockchain, it means it's globally accessible, right? It's not limited to one specific country.
[00:07:23] So it means you can have like way more deposits, way, bigger prizes, etc. If you're doing this on the blockchain, it means it's auditable. It's open source. So typically a big problem with no loss lotteries is like, how do you know that the person who actually was. Is not just the guy's friend, who's running it. So, being open-source project on the, on the Ethereum blockchain it's auditable, anyone can verify that it's truly fair, um, is also far more scalable, right? You don't have, you have no incremental costs. So for a new person to deposit it to the protocol, there's no cost associated. I mean, that person is paying a transaction fee, but there's no cost to the protocol to do that.
[00:08:01] So those are sort of operational reasons that I thought this was a lot better, but I think the most important reason. It's the one we have is the decentralization and user ownership. So having, instead of, instead of a financial intermediary, like a bank running this program and monopolizing, the profits that come from it, you have a decentralized network that's owned by the pool token holders who, who received the token for using the protocol and can run the, it can run the protocol. I think data is the other, the other big piece. That's really exciting.
[00:08:41]
Humpty Caldron
Well, I think that just goes back to, you know, the topic of discussion and that's DeFi primitives, right? So I think to some degree, if not, you know, not just to some degree, but really pull together is one of those DeFi primitives and it sounds pretty original in terms of what we may be familiar with in terms of DeFi, because there's mechanisms there that are unique to it.
[00:09:04]
Layton Cusak
Yeah, well, for sure. I mean, I think a lot of DeFi primitives are pretty hardcore financial things, right? Like we have a lot of like options and like, um, hedging and like all these things, which are great. I started thinking, pull the others like a DeFi primitive for, for normal people. Like it's something that like your grandma probably isn't going to trade like options, but I think she might want to deposit to pull together.
[00:09:26]
Humpty Caldron
Yes, it's familiar, I guess, a better word for it. Especially for those where, you know, these, these systems are available to them, they recognize them and it isn't as scary, you know, based on its complexity, it's pretty straightforward.
[00:09:45]
Layton Cusak
Yeah, exactly. And it's, and it's like, I mean, the only thing that we struggle with is it's almost too good to be true.
People have to be convinced to sign a scam because they're like, wait a lottery that I can't lose?
[00:09:56]
Humpty Caldron
Why don’t we speak to that? When we talk about the no, no loss part of the lottery, what does that mean?
[00:10:03]
Layton Cusak
I want to get the other, our other community advocates involved here. They can speak to this even better than I can, so I'll give a quick answer and let them. No loss basically just means in relationship to what you deposit, you will always end up with the same or more money. If you deposit a hundred dollars, you can take your a hundred dollars back whenever you want to. Your worst case scenario is, is you will have a hundred dollars plus in pool tokens. Your best case scenario is you'll have a hundred dollars plus thousands, more dollars. Um, so like the luckiest winter so far with pulled together, they deposited $78 and they won $43,000. It's basically like, you always are going to win, but you see, but sometimes you'll win even more.
[00:10:46]
Humpty Caldron
Gio, did you want to add anything to that?
[00:10:49]
Gio, Community Advocate
Yeah. So the way, the way I look at the no loss part as that traditional lotteries, there are plenty of gambles. So you put your money and you may win, but chances are you will loose, and your money's gone. Pool Together different because its like your traditional bank account, but with supercharged extra features. Because you're getting on some of the tools you're getting a pretty healthy APR., but you're also getting that fun aspect where you have a chance to win a prize. So, like Layton says, you're never losing that initial principle and deposit. You can continue that and you can increase your tickets. So it's totally upended than the traditional idea of a lottery, where you're losing your deposit, you know?
[00:11:48]
Humpty Caldron
Can you, can you talk a little bit about those tickets? I actually don't, recall that through my research.How do those tickets function?
[00:11:55]
McCall, Community Advocate
So a ticket is just represents a chance to win and the pool rate. If you use a stable coin pool, as an example, you could DAI And USDC. When you deposit one DAI or 1 USDC, you get one ticket, one chance to win. The protocol uses that ticket to inform the users chance. If you deposit a hundred DAI, that would be a hundred tickets. That would be up against all the other tickets from all the other users in the pool. The protocol is set to select, and it depends on the pro the pool actually, because some of them are, you know, five prices per week or one price per day, you know, that that's, adjustable, but, the protocol uses that ticket to inform.
[00:12:41]
Humpty Caldron
So is it, one ticket per deposit or one ticket per token that you deposit?
[00:12:47]
McCall, Community Advocate
One ticket per token. So one user can have many tokens.
[00:12:53]
Humpty Caldron
So you could increase your chances per se, based on the amount of tokens that you deposit.
[00:12:58]
McCall, Community Advocate
Absolutely, and that's what makes it savings, because you can use it as just a traditional bank account but it has got that extra, aspect to it, but where you've got the chance to win, you can continue to add to it and you can continue to increase your chance. And the protocol will both tell you. The interface will tell you what your actual chance to win is, which is different from traditional lotteries, like Layton said, you don't know what your chance says, and you don't know if the, the winner was sealed on the blockchain and see how the, protocol came first, the session with dislikes, what, whoever user or whatever ticket holder.
[00:13:37]
Humpty Caldron
That's thanks to that transparency of the blockchain. So you're able to see that real time. Um, and it also sounds like there's some programmability, as you were saying, you know, it depends, on pool if you will. So, can an individual or could an organization, change or program different odds. How does that work?
[00:14:05]
Layton Cusak
Yeah. So technically, yes, that's possible. That hasn't happened. So that would be like something governance controls, right? So governance controls the prize pools. And so someone could propose an alteration to the prize strategy contract. They could say, hey, let's make it so the odds are not based on the amount of money you deposit, but just based on something else. So that's, technically possible, but it hasn’t been done.
[00:14:30]
Humpty Caldron
Okay. So it's programmed at the, protocol level and the changes to that can only be done through consensus, through the protocol governance, which in this case it's the pool token, correct?
[00:14:45]
McCall, Community Advocate
Exactly. That's I mean, the parameters, the primary is off the pools are all adjustable by governance.
[00:14:53]
Humpty Caldron
Gio, did you want to add anything to this or shall we continue?
[00:15:00]
Gio, Community Advocate
I think Layton introduced it beautifully. I think, you know, one thing I would add just about the no loss elements who had, I think pool together in general is just a really good protocol for people who maybe might be like newer to the space. Its just such a simple way even for family or friends who are in crypto. We're not just to explain to them what's actually happening where they actually understand these like five primitives of, I deposit this dollar and everyone knows what a lottery is, and this thing gets lent out at these other protocols. Then that interest is what is used to reward the winners. And then the savings element of it and earning yield. It's such a beautiful, simple protocol that is easy for folks like DeFi super users and new people.
[00:15:58]
Humpty Caldron
Talking about those on-ramps, which again is on topic, on yesterday's call when we were, preparing for this event. McCall, I think you mentioned that this was your introduction to DeFi.
[00:15:58]
McCall, Community Advocate
Yeah. So my first foray into crypto and Etherum , especially it was way back in early 2019’s, you know, I had my first Coinbase account and bought my first Etherum. And then I was looking at like, what can I, what can I use this for this Etherum is supposed to be a smart contract platform, right? So where's all this smart contract. And it was, and summer around summer where I heard that they pulled together and I decided to try and use that and figure out how it works and try and make a deposit. And when I did that, and that was like an epiphany moment for me, that made me really understand, okay, we've got something here. This has world potentially. What are we changing technology. The fact that me as just some random user can take full custody of my funds and do whatever I want with them. I can put them in this contract. I can have a chance to win in the price savings game and it's totally up to me to do that.
[00:17:12] So yeah, pool together as an excellent teachable moment, I think, for anybody to really understand smart contracts and what they are capable of. It's actually the one example I use when I show people I'm the crypto guy So I show them, pool together to try and get them to understand what the value is here and there's a lot of value.
Certainly. I think that there, there are needs for creating tools that are simple to understand. Especially for new users, new crypto users, the goal is to increase the adoption to everyone, to make DeFi appealing and useful for everyone.
[00:18:00]
Humpty Caldron
So I think that what pulled together is doing is fantastic because it's certainly meeting that need and hearing your story, Layton to me, was inspiring. It there's something about someone who discovered or started their own journey through a protocol to be fine. I think that to me is the ultimate advocacy, right, is individuals who come forward and say, I was curious, I was interested, I got into this. It meant something to me. I learned it. And now I am a part of its growth. I think that's super powerful. That's why, I spent quite a bit of time just, you know, following pool together, DAO discords and discussions, and that's just through, my own passion and belief in the power of the project and potentially go and where it can lead to.
[00:18:52]
Layton Cusak
That's why I'm here and doing this because I truly believe in the value that the protocol can actually offer it to anybody that wants to use it. Yeah. I mean, for anybody who's been around crypto, or DeFi for any amount of time, they know that really for any project to succeed, it's the power of the community.
[00:19:13]
Humpty Caldron
So it's great to see that pool together is empowering and giving, community members, a platform to continue developing that protocol, together. Really no pun intended. I know that there are in terms of deposits, there's growth in terms of the number of prizes, there's been growth, and then there's also certain goals that have been set by the community. Leighton, did you want to speak about this quick high-level context.
[00:19:50]
Layton Cusak
So I mean, high level, you know, a year ago at this time, we were, there was probably about a thousand dollars of prizes a week. Now there's about a hundred thousand dollars surprises a week. In the last, like five months, there's been over $4 million. It's been awarded by the protocol as well as over a million dollars that's been retained by the protocol and the protocol and the protocol reserves. It's growth has been good. Our big goal is to get to a million dollarr weekly prize. That's sort of from a future looking perspective, that's what we're working towards. We have a lot of stuff we're working on that we think is going to make that possible and make that happen in the near future. But, that's sort of how, where we're at right now.
[00:20:33]
Humpty Caldron
Okay. Well, that's great to hear. So before, before we close that, I think that there's a few things about the project that are interesting, and that I personally want to learn a little bit more ofis the two different ways to use the protocol. One of those is pools and the other one of those as pods. Can you help us understand what each of them does?
[00:21:19]
Layton Cusak
That's where you deposit your funds. I'm yet another pool and you have your chances to win. And pods are kind of built on top of the pools. So our pod, as a way, for many, we, we think of it in terms of many small fish can combine their funds and all their tickets to become a better. You know, they're, putting their millions dollars up against, you know, the little fish with a few dollars, and the pool and the, the little fish don't really have great chances of an on the run, but a pod does, as a separate contract that you can join. They will combine all the tickets for all the individual individual users that join that. The pool, the tool contracts treat the port contract as a single user, so that single use those tickets can all potentially when the price and the potable distribute that price fairly, amongst all those participants. So it's kind of like a pool with an appeal, like you think about like that that's about, just to add on top of that. The interesting parts about pods is they were originally made to decrease the costs associated with trying to deposit into a pool. If the user tries to deposit whatever amount of money, the gas fees are reduced by about 70%. One of the side effects of this type of mechanism is that this pod, is almost great for a community like bankless and some other ones I've used it like a Reddit community called lead finance. They already have a pod setup and like they have maybe hundreds of users at this point that are all deposited into pool together, into the DAI pool, through this pod. And when this pod wins, everyone wins at the same time. So it's like a celebration in a way when that pod wins for that community. So it's, like a fun. Not only to your gas costs, but also to, um, you know, celebrate with what the other people that you spend your time with. I think that's a good point to touch on because through my research, I found that there is something in terms of gas efficiency that pods enable that pools through.
[00:24:31]
Humpty Caldron
That makes sense, thanks for explaining that. So in terms of ROI, I know that one of the things that said is that there's better ROI in the long run with pool together. And one of the reasons for that is the reserve. Can we talk about the reserve and how that works?
[00:24:52]
Layton Cusak
So the reserve is actually set by governance. Governance has control of the reserve rate on each of the bills. And it can be anywhere from zero to a hundred percent. Obviously you don't want a hundred percent because you want a price, a pendulum to come at the end of the price period. But what happens with the reserves as each? It is part of the bills that programs to have a reserve, a portion of the price. So, the reserve is not eligible to obviously get distributed to user. So we think of it as a perpetual growth mechanism where every, every week or every day, depending on when the pool is drawn and the reserve is constantly growing and constantly feeding and more value and to the pool and the praise that the tool can eventually.
I think our biggest reserve right now is currently the USDC reserve. I think that has over half a million, uh, use to see what the value in it. And that's just purely through, every week, taking some of the prize away and putting it back in, serve to feed the protocol and feed the pool protocols growth.
So it compounds, and it's not eligible to win as well. So it really just has one purpose. It's just contributing to increasing the price. That's actually very interesting, at least not something that is common in DeFi in terms of holding back a piece of that reward for, I guess really to kind of support the mechanism of rewarding people.
[00:26:41]
McCall, Community Advocate
Let's say for some reason everybody removes all their deposits from the pool. Well, there's going to be a floor to that, right? Because the reserve is always still going to be there and the reserve is still an interest. So there will always still be a price, or some capital to generate, first in generally in price because the reserve exists. That's what enables the sustainability of the protocol. There will always still be users and the pool because there is always a prizes generated and the users will be incentivized to join the pool and collect that price.Well, it's cool too, because it really just through that, through that reserve, you're also increasing the yield. That's getting rewarded, whatever the distribution rate is, you know. Well, yeah, you could look at it like that because the price is part of the yield of the pool. It's going to be increased by some percentage dependent on your chance to win the pool.
[00:27:38]
Humpty Calderon
So where does the pool token fit in all of this? Uh, we talked about it being the governance token, but how do, uh, participants in the protocol get their hands on the pool? It was initially distributed, early this year to, users of the protocol.
[00:28:01]
Gio, Community Advocate
So, like McCall, myself included, I've used it over the past couple of years and I was airdropped pool, to be part of governance and people who even participated in like snapshot both even prior to being distributed. But these days, it's just publicly accessible on any decks, through swaps and whatnot. It hasn't been mentioned if you are an LP. I mean, I don't think many people know about it because the yield is pretty high. LP yields, that's another use of the token, that I guess isn't being used enough. There's actually an ether pool LP on possession on, Uniswap V2. I can start a pool to be one of the more high quality tokens in the space, because as a protocol that is generally in reserves, it's called sustainability.
[00:29:12]
McCall, Community Advocate
There will always be a price floor to that. And, and that's not the only way you can earn tokens. And most of the, the flagship pools on the main site, to have a concept of a project and that's what pervades your APR. So the percent equals the highest, have some of the highest APRs because the governance has decided that we want to promote those pools as much as possible. The USDC pool is the one of the ones that you want to try and push to reach that $1 million price and the future. So governance has set aside some of its treasury funds and every, every day or every block, even some of that goal has to the posers and the bills. That's one of the ways that we can end at some value back from the protocol that is not just the price of. You've also got the savings and with savings games, you expect some sort of APR or some sort of return, right. And that's fair.
[00:30:22]
Humpty Caldron
So it sounds like there are several things at play here. One of them obviously is just put your, you know, put your money, on this protocol and you're saving money. The other is there's an opportunity to, win a prize. Maybe we can talk a little bit about how that distribution or how, how you know, how that works, but also there is pool for your participation. You're in a little bit of pool every every time there's a prize district. Yeah. So as said, incentivizing people to use the protocol and potentially become part of the governance process as well. If you're a user of the protocol, hopefully you're incentivized to, you know, make sure the protocol is operating as efficiently as possible and participate in the discussions.
[00:31:05]
Layton Cusak
I think that's the main vehicle for community engagement. And so enabling the users of the platform who are the ones that, uh, would like to see us succeed based on their participation, enabling them a way to gain access to that governance governance, like you said, dripping this pool token, on a regular basis.
[00:31:35]
Humpty Caldron
So I guess one last thing is in terms of pool together being multi chain, can you talk a little bit about that in terms of what blockchains is currently on, that works in terms of pooling together these deposits and distributed rewards across blockchains.
[00:31:58]
Layton Cusak
So, right now primarily on etherum and polygon. There is also a deployment of Binance smart chain. That hasn't really been officially announced, but it is done. So primarily just the etherum and polygon. You bring up an interesting point because right now, basically the way it works is like each prize pool on each chain is sort of its own entity.
So we have a USDT prize pool on polygon that has like a thousand dollar daily prize. And then we have a USDC prize pool on a theory of that has like a $50,000 weekly prize. So they're all day. What's been being worked on and what will be a big part of the pool together before, which is coming soon is, essentially, bridging all those together. So what that means is there will be one prize pool that simultaneously exists on multiple chains. So you can join on polygon. You can join an Ethereum, you can join on optimistic or Arbitrum. You'll have the same chance to win one massive prize.
[00:33:04]
Humpty Caldron
That's distributed across all the chains. That's a little sneak peek in the future, and we're really excited about, about that. I hope you enjoyed this conversation. If you'd like to learn more about pulling together, please go to pool together.com and on Twitter @pooltogether.
[00:33:22]
Humpty Caldron
Thanks for listening to crypto sapiens. Please give us a follow link and a five-star review wherever you enjoy your podcasts and stay tuned for our next discussion.
August 17, 2021: DeFi primitives and onboarding new users. (Ep. 7)