[Review] [GF: Phase 1] PoolTogether

Project name: PoolTogether

Author name and contact info: Leighton Cusack // PoolTogether Inc (@lay2000lbs on Telegram)

I understand that I will be required to provide additional KYC information to the Optimism Foundation to receive this grant: Yes

L2 recipient address: 0xfB0dADb835fAdE151aBf6780BeAfB12FC5BA0e1F

Which Voting Cycle are you applying for?: Cycle 8

Grant category: Governance Fund Phase 1

Is this proposal applicable to a specific committee? DeFi Committee Group A or C

Project description (please explain how your project works):

PoolTogether is a global savings account with super powers. It’s a DeFi protocol enabling anyone to deposit and save funds while having the chance to win thousands of dollars in prizes every day. Even if they don’t win, they keep all their money and can withdraw at any time.

This is possible because prizes are made up of the interest that accrues on all deposited funds. Users deposit into the network, yield accrues on all deposits, and that yield is randomly awarded as prizes.

The protocol was built by PoolTogether Inc and is now controlled by the community of POOL token holders.

Project links:

Additional team member info (please link):

The protocol was originally developed by PoolTogether Inc. The co-founders of that company are listed below:

As of today, there are many other contributors to the protocol too numerous to list. Importantly, since the protocol is non-custodial and decentralized, no company or contributors (or even POOL token holders) have any control over user deposits.

Please link to any previous projects the team has meaningfully contributed to:

Primary contributions of the team listed above have been to the The PoolTogether protocol. The protocol is one of the first and most widely used DeFi applications since 2019.

Relevant usage metrics (TVL, transactions, volume, unique addresses, etc. Optimism metrics preferred; please link to public sources such as Dune Analytics, etc.):

Optimism Metrics

Relevant Dashboards:

Competitors, peers, or similar projects (please link):

PoolTogether has no direct competitor or similar projects. You could consider Aave to be a similar project but using Aave directly does not offer the return variance of PoolTogether.

Is/will this project be open sourced?

Yes, PoolTogether is open source. You can find all code on Github.

Optimism native?

No, the PoolTogether protocol is Ethereum native. However, 77% of all deposits and the majority of all depositors are on Optimism.

Additionally, all major marketing efforts are centered around growing PoolTogether on, and onboarding users to, the Optimism network. The PoolTogether community is fully value-aligned and dedicated to Optimism’s cause.

Date of deployment/expected deployment on Optimism:

July 8th, 2022

Ecosystem Value Proposition:

What is the problem statement this proposal hopes to solve for the Optimism ecosystem?

The Optimism ecosystem needs a simple, secure, and compelling on-ramp. That on-ramp is PoolTogether. PoolTogether is a proven protocol that is fun and financially healthy to use. It’s been recognized by leaders in the Ethereum community. Decentralized Finance can be complicated and inaccessible; PoolTogether opens the doors.

After learning through PoolTogether, users can more confidently experience other DeFi protocols in the Optimism ecosystem.

How does your proposal offer a value proposition solving the above problem?

PoolTogether is the best way to onramp users into the Optimism ecosystem. The protocol applies to beginners as well as to experienced users and provides a secure and accessible entry point to Decentralized Finance.

It is one of the few protocols live on the Optimism network that allows for returns without the risk of impermanent loss, the use of derivatives, or pooling funds exposed to bridge risk.

As a prize savings protocol, PoolTogether is ultimately designed to be a public good. It’s a global savings account run by its users. It’s a financial instrument that’s proven to direct money away from wealth-destroying mechanisms and help people become financially healthy.

Why will this solution be a source of growth for the Optimism ecosystem?

PoolTogether has already proven to be one of the most popular apps on Optimism. Currently there are over 18,000 unique depositors and the protocol is #7 for total TVL on Optimism. Since PoolTogether is built on external yield sources, PoolTogether’s growth directly contributes to AAVE’s TVL on Optimism as well as improved liquidity for borrowers.

The protocol is aligned with Optimism’s public goods vision and is uniquely positioned to grow the ecosystem in a sustainable way.

Prize Savings is a global industry with >$100 billion deposited in TradFi products. Prize Savings is also a concept that works a lot better on the blockchain than it does in the fiat world. PoolTogether will be the first breakout consumer DeFi application.

Has your project previously applied for an OP grant?

PoolTogether Inc has previously requested and received 450,000 $OP tokens through the Foundation Partner Fund to be distributed as user incentives for using the PoolTogether protocol. These OP tokens were effectively used to grow PoolTogether to $35 million in deposits and 18,000 unique active depositors. This makes PoolTogether one of the most popular apps on Optimism. Additionally, Optimism has become the main network PoolTogether is used on, with over 70% of all network deposits being on Optimism.

The initial 450,000 $OP distribution happened in three phases, while the third phase is still ongoing until November 15th. You can find a detailed grant update here.

Notably, PoolTogether has exceeded the success benchmarks of Foundation grant which was $25 million in deposits and 10,000+ unique depositors.

Number of OP tokens requested:

550,000 $OP

Did the project apply for or receive OP tokens through the Foundation Partner Fund?:

The initial allocation outlined above of 450,000 $OP was received via the foundation partner fund.

If OP tokens were requested from the Foundation Partner Fund, what was the amount?:

450,000 $OP

How much will your project match in co-incentives? (not required but recommended, when applicable):

The PoolTogether protocol continues to provide co-incentives in the form of additional USDC that is being distributed as prizes above the yield that is generated. In other words, assuming $1,000 in USDC yield is generated on deposits, $1,500 will be distributed as prizes, with the additional USDC coming from the PoolTogether protocol treasury.

The amount of subsidy is variable depending on POOL governance but historically has amounted to $500 - $2,000 per day in additional subsidy.

In addition, the PoolTogether Grants Team is actively looking to fund grants from team and community members who are expanding PoolTogether on Optimism

Proposal for token distribution:

How will the OP tokens be distributed?

  • 70% will be distributed directly to PoolTogether depositors on Optimism over 19 weeks
  • 20% will be reserved for teams/projects that build new PoolTogether UIs that leverage core features of the protocol on Optimism
  • 10% will be distributed to projects that directly integrate PoolTogether on Optimism

Over what period of time will the tokens be distributed for each initiative?

380,000 of the user rewards will be distributed over a period of 19 weeks at the rate of 20,000 tokens per week to all Optimism depositors. This represents a 28% reduction in the current $OP distribution rate. The goal of this step is to keep incentivizing the growth momentum on Optimism while tapering off special incentives. 19 additional weeks will reach until March 28th 2023 when distribution can be re-evaluated.

The remaining 170,000 $OP tokens will be used for building on Optimism in two primary ways. The first is to encourage builders to create Optimism specific on-boarding tools and websites to the protocol. The second is to fund yield source integrations with other Optimism yield sources.

All of these things ensure Optimism will continue to grow and be the primary interaction point of the PoolTogether protocol.

Please list the milestones/KPIs you expect to achieve for each initiative, considering how each relates to incentivizing sustainable usage and liquidity on Optimism. Please keep in mind that progress towards these milestones/KPIs should be trackable.

All KPIs outlined in our first grant have been exceeded. We aim to again exceed these and drive more growth to Optimism.

The grant will be a success if

  • PoolTogether on Optimism grows current TVL from $35 million to $40 million while reducing $OP incentives by ~30%
  • Total unique depositors grow to ≥ 30,000
  • Optimism remains PoolTogether’s prize pool with the highest TVL
  • At least 1 alternative user interface is in production
  • At least 1 yield source integrates with the protocol

Why will incentivized users and liquidity on Optimism remain after incentives dry up?

PoolTogether remains the front door to DeFi on Optimism. Thus far, PoolTogether usage on Optimism has shown to be broad based and sticky. Even without the $OP incentives, Optimism depositors will still be enjoying the prizes!

As PoolTogether grows, it gets better. When PoolTogether reaches $200 million in TVL the weekly prizes will be over $100K.

The more deposited into PoolTogether, the more attractive PoolTogether becomes. The protocol is designed to create a reinforcing growth loop.

9 Likes

PoolTogether is the best DeFi protocol to onboard new users.

6 Likes

Hi Leighton, nice written proposal.

I think the proposal would be stronger taking out the second part of the ask:

Having said that, I would like to see a bigger focus on the integration of new revenue sources which would drive organic usage and less focus on distribution to depositors.
Maybe go for 50/50 on this part. Currently you could have integrated AAVE only, correct?

3 Likes

Hey @Leighton good to see PoolTogether back here and show the performance of the latest grants. In Latin America PoolTogether is a very popular protocol and used by users:

In our communities they are very popular.

I have a question, could you please detail how you are going to manage these funds, will they be linked to PoolTogether governance or will they be selected by the team?

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Hey Netrim! Thanks for the input!

You are correct that currently the only yield source integrated is Aave. So a big goal here would be to get at least one more additional Optimism yield source integrated.

I do think it makes sense to weight a bit heavy towards that and less heavy on the UIs. The idea around the UI though is to try and create something that is geared towards people totally new to crypto. Think something that combines Optimism Gateway with the ability to deposit, check prizes, etc.

Does that make sense and answer your questions?

1 Like

In Latin America PoolTogether is a very popular protocol and used by users:

That is really encouraging to hear! Please reach out to me if you have any ideas on how we can continue to grow protocol usage in Latin America!

I have a question, could you please detail how you are going to manage these funds, will they be linked to PoolTogether governance or will they be selected by the team?

Good question! This grant request is ultimately for PoolTogether Inc, the company. So at the end of the day we (meaning the company) will be in charge of managing their distribution.

However, I do anticipate that process will have a lot of input from the broader PoolTogether community.

Let me know if you have any other thoughts or questions!

Looks good to be. I have good user experience with PoolTogether

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Hey @Leighton;

This would accompany the $OP rewards; Or is it an action that they normally perform even if the grant is not received?

Would you help me to clearly understand where these coincentivities come from and what their distribution policy is like?

1 Like

Hey, not Leighton but a PT Community member :slight_smile:
The USDC incentives come from the PT treasury (https://info.pooltogether.com/), the network APR currently is 3.42%, that means a 1000$ depositor wins on average 34$ and that is better than what he would get on Aave directly!
The current prize distribution on Optimism is:
1 x 1000$
32 x 20$
and 512 x 5$, per day!
We especially want to reward small depositors, that‘s why there are so many small prizes and there is a prize cap of 1 prize per wallet.

Hey @Lonser; thanks for answering

But my doubts are not clear to me;
What is your treasury fund distribution policy?
I understood that these funds are sent today, right? that is, regardless of the $OP grant

1 Like

I am one of the Synthetix Ambassadors, & a member of the Defi Shadow Committee.

I am an Optimism delegate [Delegate Commitments - #65 by mastermojo ] with sufficient voting power, and I believe this proposal is ready to move to a vote.

2 Likes

Hey, great question!

The $OP factors in and without the $OP prizes would be reduced significantly. The finance team that sets the prize distribution has committed to keeping the average USDC yield rate at least 50% higher than Aave USDC yield assuming the $OP incentives stay. This has been based on the assumption of the last couple of months of having $OP incentives.

I can’t speak to exactly how that would change if the $OP incentives did not stay but it would certainly be less.

I can say overall, the whole PoolTogether community sees the $OP incentives as a super important and limited window to maximize growth.

I’m a delegate with enough voting power Delegate Commitments - #136 by jackanorak and i think this is ready for a vote

1 Like

Thanks for the concise proposal.

It’s good to see your alignment with Optimism, initial growth on Optimism & reaching set goals.

We believe that easy-to-use products with product market fit such as Pooltogether can onboard a significant amount of real users & liquidity - even though yield hunters may dominate currently.

Consequently, it’s also reasonable to phase out OP rewards over time after a kickstarting period to ultimately achieve sustainable growth on Optimism :+1:

The core KPIs are also very clear and make sense - not 100% sure about the necessity of new frontends / builder incentives in the near-term for a project that can, in our opinion, contribute most to the success of Optimism with user/liquidity onboarding in the near-term.

That said, we also see potential in future collaborations on specific co-marketing campaigns, user onboarding funnels, better UX etc.

3 Likes

Thanks for your feedback! Let me know if you have any additional questions!

As we get closer to the voting period, I’d like to highlight the OP Rewards part of this Dune Dashboard.
As a background: The current rewards on PoolTogether accrue in real time and are claimable every Tuesday for the previous week, based on a users TWAB.

So far, more than 5,400 unique wallets have claimed the OP rewards on PoolTogether, while we can still see several hundred new claimers every week.

At the time of writing, 347,500 OP tokens are available for claiming. Out of these, almost 300,000 were claimed already.

The increase in claims in week five and ten suggest that some users wait for the end of a distribution period to claim the full amount at once. The third distribution period will end on November 15th. I expect a similar increase in claims the week after that.

Overall this verifies the thesis that $OP distributed via PoolTogether goes to a wide set of users and not just to a few whales. The marketing around the incentives continues to be effective, attracting new users and creating awareness.

While these rewards go out to many new Optimism users, we make sure to keep educating them about their rights in token house governance. The claim process in the PoolTogether app includes a prompt to delegate your $OP:

Happy to discuss any left uncertainties or doubts before the voting period starts. :slight_smile:

3 Likes

@Leighton
Very clear proposal; the statistics are specific, and I am enthusiastic about the results achieved; PT is a great project for Optimism, its track record and simplicity is impeccable

As some members have already commented, I don’t agree with the grant to projects, much less to user interfaces; would you be willing to change this?

@Netrim advice, to diversify the source of income (new alliances) seems key to the joint and organic growth of the ecosystem

I would like to echo this as well. PT has clear use case, last distribution plan and its impact is clearly visible, both from TVL and user activity side.
Not that I am against better UI but in given the market condition, shouldn’t we focus more towards user incentives.

Netrim warned me that they should no longer change the proposal, it was approved as such, I did not notice this; With which my advice is useless in this instance, would you be willing to change this for the next cycle? @Leighton

Thanks for the feedback!

We’ve carefully timed this proposal to avoid an ending of the deposit incentives. Right now, if this current vote fails then $OP rewards for PoolTogether will end on November 15th (two weeks from today).

Obviously we could re-start them but I think ending and then re-starting would lead to a big loss in momentum and diminish the overall effectiveness that we see.

We are happy to continue to work collaboratively on how to best leverage 170k OP allocated for yield source integrations and alternative interfaces. Yield source integrations will be very important as it will improve the overall Optimism ecosystem. As an example of alternative interfaces, here is one thing that Pool Grants recently funded. This wouldn’t something funded using this grant but we do believe that ideas like this could help cement a larger community on Optimism and attract more people to try it out.