PoolTogether V5 protocol allows participation in the lottery by holding ETH without loss.
The decentralized lottery protocol PoolTogether recently launched its V5 version, allowing users to participate in the lottery and claim prizes more conveniently. PoolTogether V5 automates most operations and removes protocol backdoors, aiming to become the underlying protocol in the alternative investment space.
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What is PoolTogether
Founded in 2019, PoolTogether is a no-loss lottery protocol that allows users to participate in a lottery while keeping their principal intact. Even if users do not win, they can always redeem their principal. There have been instances where users deposited $74 and won a $40,000 prize using this protocol.
PoolTogether has gone through four versions, but the basic principle remains the same. It offers users lottery opportunities and prizes, where the more funds they deposit, the higher their chances of winning. It attracts users to deposit funds, then invests the funds in low-risk DeFi protocols to earn returns, such as Aave or Compound, and distributes the prizes randomly to participants based on their deposit amounts.
- Deposit funds
- Wait for the draw
- Claim winnings or withdraw principal at any time
There are no additional protocol fees involved in the process, and there have been no incidents of fund breaches. PoolTogether has attracted many users as an alternative long-term investment method.
Key Features of PoolTogether V5
The team stated that PoolTogether V5 will first be built on the Optimism network and will fundamentally update the protocol to enhance decentralization and automation mechanisms.
Permissionless Pool Creation
PoolTogether V5 protocol allows any user to create their own prize pool, supporting most ERC-4626 compatible yield vaults, such as Aave lending pools, in a completely permissionless manner. Unlike PoolTogether V4, which only had a single prize source from the Aave lending pool and a single asset type, USDC.
Depending on the user interface settings or different sources, users may see different prize pools. For example, Cabana's default list includes USDC, WETH, and DAI pools, using the Aave V3 lending pool on the Optimism network as the income source. Users can deposit these three assets to participate in the draw or choose to deposit in pools opened by other users.
Additional note: ERC-4626 is a standard for encrypted asset vaults that significantly reduces the difficulty of integrating vaults across protocols and strengthens security. By separating asset management from the logic of each vault, it reduces integration issues caused by each vault having its own logic and details.
Holding Prize Tokens Equals Participation in the Draw
In the previous V4 design, users needed to deposit assets into the protocol to get a chance to win the lottery, and winners had to claim their prizes before they expired in 60 days.
With PoolTogether V5, users can participate in the draw by directly depositing or by exchanging prize tokens anywhere. Holding prize tokens means participating in the draw. If a user wins, the prize will be sent directly to their wallet using prize tokens for tracking, eliminating the need for manual withdrawal.
This means users do not necessarily need to access the PoolTogether website or protocol to participate in the lottery, significantly increasing the protocol's composability and flexibility.
Immutable Protocol
PoolTogether V5 has removed the governance mechanism, meaning there is no need for multisignature control of the protocol and "manual" governance. There are no protocol backdoors that can be used, and once the protocol is deployed, the code cannot be changed.
Previously, parameters that required governance adjustments, such as prize distribution ratios, are now automatically adjusted by the contract based on market participation.
The entire protocol has been open-sourced, and the team has decentralized the brand resources, allowing anyone to use brand identity materials with proper attribution.
Protocol Security
The team stated that in the past four years of protocol development, there have been no user losses. Besides not charging protocol fees, the team is very strict in guarding against protocol vulnerabilities.
Therefore, PoolTogether V5's smart contracts have been audited three times by two auditing firms, and two audit competitions have been held, with over 120 participants assisting in analyzing contract security.
PoolTogether V5 Offers Diverse Profit-Making Methods
Users can benefit from the protocol in various ways, including:
- Participating in the lottery
- Creating prize pools for other assets or income sources: Choose to redirect some of the income flow
- Triggering protocol operations to maintain automated earnings: Including liquidating yield, distributing prizes, completing draw auctions
How to Participate in PoolTogether V5
Direct Deposit
With the release of V5, there are currently two user interfaces to choose from, with more expected in the future:
- Cabana.fi managed by Generation Software
- Pooltime.app managed by Pooltime
Users can also find all team-verified frontend interfaces on the PoolTogether official website.
Exchange Prize Tokens
Users can also directly purchase prize tokens on any exchange that provides liquidity, holding them to participate in the draw. The Cabana project has already organized exchanges where users can exchange prize tokens.
PoolTogether Aims to Become Infrastructure
Due to significant changes in PoolTogether V5 compared to previous versions, the team currently maintains the operation of PoolTogether V4.
Whether the consensus of participants is sufficient to make PoolTogether a foundational protocol still relies on the community's trust and support for the protocol, which will require time to prove. This article does not constitute investment advice.