Bobby Ong:   0:02
Welcome to the CoinGecko podcast. I'm your host Bobby Ong. Each week we will be interviewing someone from the blockchain industry to learn more about this fast moving crypto currency economy. If this is your first time listening, then thanks for coming. The CoinGecko podcast is produced each week to help you stay ahead of the curve. Show notes can be found at podcast.coingecko.com. I highly encourage you to join our newsletter where we send out top news in the crypto industry every Monday to Friday. Come back often and feel free to add the podcast to your favorite RSS feed or iTunes. You can also follow us on Twitter and Telegram at CoinGecko. 

Bobby Ong:   1:11
Welcome to the CoinGecko Podcast. For today’s episode, we have the honour of welcoming Leighton Cusack, CEO of PoolTogether. PoolTogether is a no-loss lottery where users get to keep their initial deposit amount after the lottery prize is drawn. Instead of funding the prize money using the lottery tickets purchased, the prize money is funded using the interest earned on Compound by the pooled user deposits. At the end of each round, all the user deposits will be sent to Compound to earn an interest and one lucky winner will be selected at each interval to win the entire interest prize money. Very happy to have Leighton to join us on the call. very happy to be here

Leighton Cusack:   1:13
Hey, thank you. I'm very happy to be here. 

Bobby Ong:   0:00
So for the first question Leighton, can you explain to us what exactly PoolTogether does and how it works?

Leighton Cusack:   1:19
Yea, I thought you did a very good explanation but PoolTogether is based on this concept of no loss lotteries, otherwise known as prize savings accounts. And the main idea is that you have a chance to win a prize, but even if you don't win, you get all your money back. And that sounds too good to be true, but the reason it's possible is because the prize is funded by the interest that accrues on all of the money from all the tickets that have been purchased. So in kind of like a broad overview, right now there's about 3,500 people who are in the PoolTogether app playing PoolTogether and collectively they've saved about $800,000 and that generates a weekly prize of about $1,300. So each week one of those people has a chance to win $1,300.

Bobby Ong:   2:08
Cool. So what inspired you to start PoolTogether?

Leighton Cusack:   2:13
Yeah, that's a good question. So I really was doing a lot of research on economic history and researching what have been tools that had been used in the past that helped people achieve economic mobility and economic health. So that's really what I'm interested in. I'm interested in building financial tools that help people to become more financially healthy. And in that research is when I came across the idea for prize savings accounts and that's when I read the idea and I thought it was a really brilliant idea. Yeah, I thought it would work even better on the blockchain. And so that's, that's really where the idea came from.

Bobby Ong:   2:51
How big is PoolTogether team? Is it just you and your partner or you guys got a team and was it your idea you're co-founders partner?

Leighton Cusack:   2:58
Yeah, it was my idea. There's three co-founders though, so myself and two other people and that's the total team right now it's just the three of us. So I had the idea that when I brought it to them, the two gentlemen who are now my co-founders. And initially I actually contracted them because they were running in Ethereum development agency, so I hired them to start building that product. So initially we contracted them and we built the first prototype. But long story short, we ended up working together full time and co-founded the company together.

Bobby Ong:   3:27
Sweet. And you guys just raised a million US dollars in fundraising recently, so congratulations on that.

Leighton Cusack:   3:32
Yeah, thank you. Yeah, it's good to have that done.

Bobby Ong:   3:34
Can you share some stats on PoolTogether? For example, how many lotteries that have been conducted using DAI and USDC? How many winners that have been selected so far? What was the largest price and who was the luckiest winner?

Leighton Cusack:   3:46
Those are great questions. So the DAI pool has been running for about 10 weeks since December 20th and the largest prize so far is, has been $1,700, just under $1,700. And it's actually interesting because the luckiest winner, was also the person who won the largest prize. So the person who won that prize only had 10 DAI deposited in PoolTogether. So again, the way the system works is for each DAI, each dollar essentially you deposit into PoolTogether, you have a chance to win. So the more money you deposit, the higher your chance to win it. So the luckiest winner was that person who only deposited 10 DAI and they won 1700. That was pretty cool to see. We did also just start a daily prize pool as well, and that uses USDC. So that has a much smaller prize. It's like $50 to $60 a day because it's not that earning interest for as long. Yeah, those are some of the kind of the general stats.

Bobby Ong:   4:41
It's very interesting that one lucky winner only put in $10 won $1,700 in return. What was his odds of winning like, I guess one in 60,000 or something like that?

Leighton Cusack:   4:50
Yeah, it was like one in like 68,000. It was very, very improbable.

Bobby Ong:   4:55
And how many tickets have been purchased for PoolTogether? What's the highest amount that you had so far? Was it, did you hit $1 million mark so far recently?

Leighton Cusack:   5:06
Yeah. So right now we have over a million, a little over a million between both the DAI and the USDC. I think it peaked the highest it's been is about like 1.5 million. We had a couple of whales that joined and left, so it's come down a little bit in the last couple of weeks, but it's still over over a million tickets between the two pools.

Bobby Ong:   5:25
I remember looking at the stats on PoolTogether and it seems like three or four whales are basically each buying about 20 to 25% of all eligible tickets for PoolTogether. Are you, am I correct to say so and you think these guys are basically trying to win? They have better odds by having a large percentage of tickets on PoolTogether.

Leighton Cusack:   5:47
Yeah, so that has been true at times. That's not true right now. But there has been times when that's been true. Right now I think the largest whale has like 50,000 tickets. And so that's, you only, still only like a, you know, one in 15% chance to win. So that has been true. I think one thing that is important to know is that the pools in addition to the money from tickets, the pools also have what we call sponsored DAI and sponsored USDC in them, which basically means that that's money that's in the pool that's not eligible to win but contributes interest to the prize. And so the reason that's important is that it basically just makes prize bigger and makes your odds of winning better. And so that's, that's why some of these whales join in cause they're basically gonna be earning more money than they would than they're just in compound finance.

Bobby Ong:   6:38
Do you think like people will start forming PoolTogether pools to put together funds and then basically to have a higher chance of winning, sort of like a mining pool where instead of just solo mining Bitcoin or Ethereum, we join a mining pool to have a higher chance of winning the mining block reward.

Leighton Cusack:   6:55
Yes. We actually want people to do that. And so actually something that we're announcing this week is ticket tokenization which basically the tickets are now going to be tokens that can be transferred and that is going to enable exactly what you're talking about. And we actually, we're calling that functionality Pods and we're building that. We're finishing it this week, the audit starts next week and we're hoping to deploy that in a couple of weeks. So that's our way of hopefully giving, you know, smaller players a chance to win.

Bobby Ong:   7:23
I'm looking on the PoolTogether site now and there states, where it says there's open tickets, eligible tickets and sponsored amount. What does open ticket mean over here?

Leighton Cusack:   7:36
Yeah, so open tickets means tickets that are in the pool but are not yet eligible to win. And the reason that those exist is because to keep the system fair, when you deposit money into PoolTogether, you're not eligible for that prize. You're eligible for the next prize and all future prizes. And that's because you haven't contributed interest for the full time for that prize. So that prevents someone from cheating the system by, you know, just putting a bunch of money into the pool right before a prize is awarded. And so the open tickets are ones that have been deposited since the last prize. And when the next prize is awarded, those open tickets will convert to fully eligible tickets.

Bobby Ong:   8:16
And what is the minimum number of days that you have to put into the pool before you become an eligible ticket holder?

Leighton Cusack:   8:23
Well, it basically, you just have to put into the pool before the next prize is awarded. So whenever a prize is awarded, that's when all of the tickets. So for example, if you put in the pool right now, then your tickets would be open until Friday when the prize is awarded, which I think is like 48 hours from now or something like that.

Bobby Ong:   8:42
Okay. So if I put in today, it will not be eligible and only be eligible from the following prize draw right?

Leighton Cusack:   0:00
Correct. 

Bobby Ong:   0:00
And who are the people sponsoring money on the PoolTogether pool? Like, why would they do such a thing? Why would they not take the money and put it on compound and earn an interest themselves?

Leighton Cusack:   9:01
Yeah, that's a good question. So right now it's mostly PoolTogether. It's mostly us. We took, we took our investors money and put it in there, but we also um, are in talks with a few different other crypto projects that want to sponsor it basically just to get publicity. So like they'll put money in and then um, we'll include them in like our weekly email and things like that so that they get some visibility.

Bobby Ong:   9:24
Yeah, it was great to hear that because I was going to ask them next, like do you guys have any plans to allow the crypto companies to sponsor some of the amount to make it more exciting for the users?

Leighton Cusack:   9:34
Yeah, yeah. That's exactly what we want to do. And we have that functionality built right now, but we're just making sure we work with the right companies that want to do that. And obviously it have enough capital to do that.

Bobby Ong:   9:44
Super interesting. Yeah. I love PoolTogether in a sense because I feel that is really one of this DeFi native decentralized application that can only be done in crypto. Like without compound without crypto like this prize savings link account can't be done, can't be conducted at all. Because no way can you do a no loss lottery. Only in crypto can you do such a thing. So I think it's super awesome what you guys have done.

Leighton Cusack:   10:08
Yeah, yeah, I agree. It's definitely a very, very good use case for crypto specifically. And yeah we're really excited about it too and we really want it to be a global product that people use everywhere.

Bobby Ong:   10:19
Yeah, and I think such a product has very strong mainstream market appeal like it's very easy to explain to like your mother, your grandmother, why you should be involve. And I think its something that will be very important as we pushed crypto towards more mainstream adoption, especially in developing countries. So something like PoolTogether is kind of a perfect use case that we need to see more growing in the crypto and DeFi space. My next question actually is about the way you select winners. So I have read and the way you select winners is basically random winners selected from each cycle. But that being said, it is relatively hard problem to get a truly random number on smart contract. So how exactly is this randomness determined and how is the random winner generated?

Leighton Cusack:   11:08
Yeah, that's a good question. So you're right. Well and one thing I'll say first is we do have a long blog post we published I think like last week or two weeks ago on this topic. So if people are interested in diving deep they can read that. But yeah, randomness is really hard to generate on-chain. And so right now it's a centralized or there are centralization in the process, meaning basically to get the entropy, what's happened is there's a admin committed secret that's committed at the time the prize is initiated, not when the prize projects awarded. The price is initiated and then when the prize is awarded, that secret is revealed. So the admin doesn't know ahead of time what it is. And the secret is then combined with what's called a salt, which is basically another number to improve entropy. And then those two numbers are, the hash of those two numbers, generate the entropy to get a random number and then that random number, all of the entries into PoolTogether are sorted essentially on a data structure that basically gives, if you think of it from zero to 100, if you own 10 tickets and you would own numbers zero to 10. And so then all the entries are on that data structure and the number picks entry from that data structure. So that's the brief how it works. We definitely want to improve this and make it completely decentralized and we're going to do that.It's just a matter of getting the right technology that makes that possible to do on-chain. Um, we think we can do it with the TBTC, the keep protocol. And so that's our plan and that's supposed to release in March. So hopefully very soon we'll have that change.

Bobby Ong:   12:41
Cool, that's good to hear. Actually our team at CoinGecko actually went through your smart contract and try to find out like how do you end up doing the random number formula and what we found was that it was a black box. And it was basically couldn't figure it out like seems like a centralized solution which is why I wanted to ask this question to you.

Leighton Cusack:   12:58
Yeah, yeah. Well, and you should have them check out the recent blog post we wrote. Within the blog post there's actually you can download a simulator to simulate the results. Oh, it should be fun.

Bobby Ong:   13:01
Okay, cool. That sounds interesting. So PoolTogether received $25,000 grant from the MakerDAO team and I believe that was how you guys got this whole project kick started. Can you share a little bit about how it was like receiving the grant and how was it like working with the Maker team?

Leighton Cusack:   13:23
Yeah. Well it was great to receive the grant. We definitely would not be around without having received that grant. So basically what happened was we had built a Rinkrby test net version of PoolTogether and you know, we didn't want to deploy to main net without an official third party security audit. And so obviously those are very expensive. We really didn't have money for one, but I posted the prototype on to the MakerDao Reddit. And actually that's how it was pretty popular on there and that's how I got connected to Rich on MakerDAO who leads the grant program. And so they gave us a small grant to get us to main net that from that. That's how we got connected and it was really great. And you know PoolTogether definitely would not exist without Maker's help.

Bobby Ong:   14:08
Yeah actually it's very interesting that you used to run money to pay for audit. Also it's actually one of my later question but I wanna ask it now. DeFi applications have a lot of risk. We've seen it recently with bZx's Twin hacks where over $1 million was stolen. Does PoolTogether has any kill switch in case something bad were to happen to your smart contract. And also, I hope this will not happen. I mean you guys have got an audit but what if an exploit is found on the smart contract? What's going to happen or what if there's exploit is found on compound's smart contract and all the funds are drained? Not only does, so all of those participants in PoolTogether will lose their money.

Leighton Cusack:   14:48
Yeah, I mean there's definitely different risks for sure. You know, we've done a lot to mitigate the risks, but those risks still exist. So there's no kill switch for the contracts. The contracts though are upgradable at this point. So that would essentially be kind of equivalent to a kill switch because if something needed to be changed that could be changed. The contracts have been audited by a couple of different professional auditors. And additionally, we also have a bug bounty program with the top award of $25,000 to award anyone who finds bugs in the code. And so that's some of the things that we've done to mitigate the risk. But for sure with all of the DeFi, there's still definitely a lot of risk and we want to keep continuing to do everything we can to minimize that risk. So outside of what we've already done with the audits and the bug bounty, we're also looking into insurance products that we can get. That's the main kind of next thing we're looking at.

Bobby Ong:   15:42
Yeah. So I guess like one of the things that can be done to make it more secure is to mitigate the risk of something happening on compound, which I say if you have $1 million placed on compound each week, you can probably get some Nexus Mutual insurance to mitigate the risk of compound going down completely and drain all the funds right?

Leighton Cusack:   16:02
Yes. Yes exactly. We could do that and that's what we're looking at right now. Nexus Mutual doesn't have enough money to cover the contracts that we have because we have so much money in that. But that's the type of stuff we want to do.

Bobby Ong:   16:13
What do you say has been the largest challenge in building PoolTogether so far?

Leighton Cusack:   16:17
Oh man. Um, the largest challenge is onboarding. You know, it's just so, it's still so hard. It is getting better and it's getting better fast, but it's still, it's so hard with just, everyone has a different wallet. People need Ethereum. That's really annoying. They can't just buy DAI, have to also get Ethereum. I would say. Yeah. Those are the largest challenges I really say around that and well, and also I would, I guess I'll say too, security does make it really hard to be iterative. You can't just release something and when it's done you have to take it to audit and then release it and that, that's it. That just adds a lot of time.

Bobby Ong:   16:50
You mentioned a lot of things about user friction. For example, a different wallets, users need Ethereum. Do you think this is a protocol problem with Ethereum by itself? What do you think that should be done to make it better for user onboarding?

Leighton Cusack:   17:04
I think we're getting there. I think what should be done is apps should be using smart contract wallets, um, where they kind of spin one up for each app they're using and they can be still be inter-operable between the apps. But that's just a much better experience. So I think like what you see Argent is doing, um, what you see FortMatic doing what you see Dharma has done with their, with their new app. Like those are much better experiences. And that's what I think we want.

Bobby Ong:   17:30
What do you think would be some of the major challenges of growing PoolTogether in the future? For example, price link savings account basically have some sort of regulatory issues from some States. Do you see such regulatory issues like lottery regulations coming being a challenge for PoolTogether to grow?

Leighton Cusack:   17:48
Yeah, I would definitely say regulation probably the number one kind of unknown thing that I spend the most amount of time thinking about and working on. And we also spend, you know, security and regulation are the two things we spend the most amount of money on. So it's definitely a big unknown. There's a lot a product, like PoolTogether touches a lot of different areas of regulation. So that's for sure a big one. I think the other is just ensuring that we can keep things, move to decentralized, a fully decentralized infrastructure as quickly as possible, but not too quickly, if that makes sense. You know, if you do it too fast, you can kind of maybe get locked into a design that's not ideal. Um, so we want to make sure we move as fast as possible but not too fast.

Bobby Ong:   18:31
And what would be your business model? I read that used to take 10% of price pool for the company, but since you're fundraising you have waived a 10% business model. So how do you see PoolTogether making money?

Leighton Cusack:   18:44
Yeah, so I think there's still potential to, you know, take like a 10% fee at the protocol level. If we did that though, we would want to do it in a decentralized way where anyone could participate in that and not do it in a way, not just do it for PoolTogether the company. So PoolTogether as a company will not monetize on the protocol. I do also think there is an option to monetize on the front end where you know, you can imagine we could either offer different products that have a higher margin to it, like different trading products. So things like that. So I think those are options too. But overall it's still really early for us and we really just want to, you know, create as much value as we possibly can and then figure out a business model that makes more sense with that.

Bobby Ong:   19:27
You mentioned some stuff just now like creating something with higher margin like trading product on the front end. What, what is actually do you mean by that? I'm just a bit confused there.

Leighton Cusack:   19:36
Well all I mean is um, so you're thinking about, you know, monetization. If you have an app that has a lot of users using a product, then that is a very natural opportunity to introduce them to another product that may be, you know, I don't know if it will be a trading product, but just a different product. It has a higher margin to it that does have a fee attached to it. So you have like a free product then you have a different product and so that's, I was just kind of trying to make the point that that would be an option.

Bobby Ong:   20:03
All right, cool. Cool. It's very interesting that how you see earlier that you want to kind of allow the users to also make a profit on PoolTogether. It sort of reminds me a little bit about, in crypto where there's all these casinos where you can actually bet on, try to be casino and profits on all the bets that the user have put on the casinos. Probably somewhere around the same line of thinking, right?

Leighton Cusack:   20:29
Yes. Yeah. It's very much, you know, that makes a lot more sense for a web 3 product. You know, we don't really want to apply a Web 2 business model to a Web 3 products.

Bobby Ong:   20:37
Yeah. That is very visionary. I would say it takes a lot of guts to putting players a web trade business model. Because a lot of business models seem very much untested and it's experimental in nature very well. Where else web 2 model very well, the route is clear, we know that the profit, the dollars are made, where the profits have to be made. Do you guys plan to launch pools besides DAI and USDC. And so you have any timeline of confirmed coins that would be launched tokens?

Leighton Cusack:   21:10
Um, we ultimately want to support all stable coins. So, you know, Tether would be the biggest one that we don't support right now. In terms of timeline, we're kind of waiting until compound supports it, compounds adding Tether. It's supposed to be added. Well they haven't given a date, but should, it should be added sometime relatively soon. And so that would be when we'd probably support that one. Um, but ultimately we don't want to support non-stable coin assets but just all stable coins.

Bobby Ong:   21:36
Why do you not want to support non-stable coins assets?

Leighton Cusack:   21:41
Well, because for us, uh, you know, we're trying to help people save money, you know, and if the underlying asset is going up and down in value, then it's hard to kinda save money. I mean, I guess, I guess I should head to that a little bit. You know, I could see us potentially offering something. The other issue was stable coin assets have the highest yield, you know, they have the highest supply APR and so supplying Ethereum to compound doesn't make any sense because there's very, very little yield. But I think we're primarily interested in stable coins because that it takes out the volatility risk of the asset.

Bobby Ong:   22:13
At this point in time you're using compound as the only way to get deal on assets. Do you foresee integrating with other DeFi landing platform that offer higher yield for example?

Leighton Cusack:   22:25
Yeah, yeah, we do. We see that too. I think that we're very cautious around that just because we want to make sure the security is really, really, really good. There's a great example right now with BZX, right? A lot of people told us, Hey, why don't you integrate with Fulcrum? You could be making a higher return on your money. And we said, no, we don't think Fulcrum. We don't want to take that risk. And now there's been attack. And so we are very cautious around that. But over time, yes, I do think that'll happen.

Bobby Ong:   22:52
What are some of PoolTogether's plans for 2020 and beyond?

Leighton Cusack:   22:56
Uh, well it's hard to say beyond 2020 but I could definitely talk to 2020. I think so, right now we're working on, you know what I mentioned to you, the ticket transferability into the pods, letting people link their tickets together. After that we're going to be focusing on onboarding and making that um, a lot smoother. And then the big focus is going to be the decentralization of the protocol, the decentralization of the randomness generation and just the, um, getting to a point where we were completely locked out of the protocol. That's our goal.

Bobby Ong:   23:25
Cool. I think it'd be really interesting if you guys do integration with all the wallets as well. For example, on Argent I can just do one tap and then like, and there will be really simple way to join the PoolTogether and get users for your app as well.

Leighton Cusack:   23:41
Yeah, we definitely want to do that with as many wallets as we can and yeah, we really like Argent. We're working really closely with them. Um, yeah. So we definitely want to do that kind of stuff. I'm glad you glad you gave us that feedback.

Bobby Ong:   23:52
Okay. So lastly, before we close off, how can people find out more info and follow PoolTogether?

Leighton Cusack:   23:59
Yeah, that's a great question. Um, so I mentioned our Medium blog, so if you just Google PoolTogether Medium that's where you can see, you know, those blog posts on randomness generation and some, some more details on different new things that are launching. Um, we're also very active on Twitter and Discord. Um, and so you can join us there. You can find the links to those on PoolTogether.com and um, uh, and obviously on PoolTogether.com itself is a great resource. So I would say those are the top places to get in touch with us. We do have a Telegram as well.

Bobby Ong:   24:29
All right. Thank you very much Leighton for joining us on the PoolTogether podcast. Great pleasure to have you on the show. We learned a lot about PoolTogether, ask some good questions on how PoolTogether work, so thank you very much for spending the time with us.

Leighton Cusack:   24:42
Yeah. Thank you. This is great to be on.

Bobby Ong:   24:44
All right, that wraps up the show. Thank you for listening to the CoinGecko podcast with Bobby. If you like our show and want to know more, check out podcasts.coingecko.com or please leave us a review on iTunes. Do you have any feedback? Do drop us an email at hello@coingecko.com. Join us for more next week. See ya. 

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