DAI interest rates plummet, can PoolTogether still be played? We found a chance for free entry.

During the mid-March black swan event, the "deleveraging" effect spread throughout the market, leading to a dead calm in the financing market, even decentralized finance (DeFi) was not spared.

Take the decentralized lending platform Compound as an example, on March 12, the lending rate for DAI once soared to 20.85%, but has since dropped to 0.45%, a decrease of 97%.

The reasons behind the significant drop in DAI interest rates are quite complex. One of the main reasons is the liquidity risk that occurred with DAI during the sharp decline, where circulating DAI decreased due to repayments, causing a significant premium on the market price of DAI. The issuing platform Maker, in order to lower the market price of DAI to stabilize it at $1, significantly reduced the stability fee, stimulating market investors' willingness to borrow DAI, thereby increasing the circulation of DAI in the market. Although not entirely the same, the cause-and-effect relationship mentioned above can be understood using the concept of the Federal Reserve lowering the federal funds rate (interest rate cut): the Federal Reserve (Maker) lowers the federal funds rate (stability fee), resulting in a significant decrease in the deposit interest rate for investors in banks (Compound).

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For more details, please refer to the report: "Market Plunge Tests DeFi's Resilience, MakerDAO Encounters Bad Debt, Platforms Conducting High-value Liquidation."

PoolTogether Prize Pool Affected by Decrease in Rates

The significant decrease in DeFi lending rates has not only led to a decrease in the platform's own usage rates, but has also affected many decentralized applications (Dapps) designed based on DeFi principles. PoolTogether is a no-loss lottery platform that raises funds through smart contracts, selecting a lucky winner to receive the interest generated from the loans.

Since PoolTogether's lending is executed through Compound, a decrease in Compound's lending rates directly reduces PoolTogether's total prize pool. The chart below shows the historical prize pool records of the decentralized lottery platform PoolTogether.

It can be observed that since after March 14th, the prize pool has seen a significant decline, with the current prize pool amounting to only $77. This poses a significant challenge for PoolTogether, as the reduced prize pool greatly diminishes the expected value for participants in the lottery. Gradually, participants may choose to withdraw their funds due to the decreased prize pool, further lowering the total prize pool. Unless Compound's lending rates increase, PoolTogether is likely to fall into a vicious cycle.

Fortunately, MakerDAO has taken measures to address such unforeseen events by generating governance token MKR and selling it to offset bad debt. Ultimately, the majority of the auction was won by cryptocurrency venture capital firm Paradigm at market price, and DAI returned to a fully overcollateralized state.

The DeFi ecosystem is gradually returning to its original state, and PoolTogether is expected to break free from the vicious cycle. For readers who are interested in trying out PoolTogether at this stage, there is a simple and no-cost way to participate.

Earn Lottery Tickets by Participating in Blocto Promotion

A well-known Taiwanese tech company dedicated to developing Dapp browsers and smart contract wallets, Portto, listed PoolTogether on its smart contract wallet product, Blocto, on the 14th and launched a promotion offering free lottery tickets worth a total of NT$75,000 (approximately 2,500 tickets).

Emphasizing user experience, Blocto ensures that even users with no experience in blockchain applications can have a wallet as soon as they open the app. Through simple and clear guidance, users can receive a free decentralized stablecoin DAI (equivalent to one US dollar) without any threshold, with Blocto covering gas fees, allowing them to purchase a lottery ticket on PoolTogether.

In order to allow users to experience Blocto's various Dapp services, including lending platforms, purchasing coins, games, etc., Blocto also offers user-friendly guidance articles that allow users to easily convert lottery tickets into DAI or invest in more tickets through the built-in coin purchase feature to try their luck.

However, suspicions have arisen regarding this wallet that requires no mnemonic or registration. Does it use a centralized management method for private keys to enhance efficiency?

According to Yan Wei-Zuo, co-founder of Portto, Blocto aims to strike a balance between security and convenience through technology. He explains that Blocto utilizes a private key security custody service based on Google Cloud KMS, allowing users to quickly create and use a wallet within a minute. In Blocto's definition, this is an experiential start, where users can further bind their email to log into the wallet on various devices once they understand the blockchain world. If advanced users have the need, they can generate private keys themselves and manage them, while the private keys held by Blocto immediately become invalid.

We believe that the current high barrier to entry for blockchain applications can be mitigated by entrusting private keys through reputable custody services, providing the general public with a more convenient way to access blockchain applications, which can be an effective solution. This product may be the most straightforward tool for insiders to explain blockchain to their friends and also offers a free opportunity to win a prize!