no loss lotteries, behind-the-scenes proposal process & pooltogether with @blakeburrito

Welcome to the Armada Podcast, where we are focusing in on DAO governance. Let's hop into the show. If you could start with who you are and what you're working on.

Yeah, hey everyone, my name is Blake Burrito. I am the now committee lead for the PoolTogether Grants Committee. I was involved in the authorship and then bringing that through governance as well. I'm just a community user with PoolTogether. I'm not involved with the protocol itself, but as a leading community member, I was instrumental in bringing it to fruition. And we're really excited to be finally funded, proposal gone through governance and all that good stuff. So we're excited.

Yeah. It's an interesting idea that we'll get into in just a minute, but what is your fictional character of choice that you'd love to have dinner with?

Okay, so I give it a little bit of thought prior to, to be fair. Um, had to go Star Wars character, but you start thinking about that and who would be interesting to actually have a dinner with. I gotta go Darth Vader. I gotta go dark side, right?

Oh man, I like that. That's a, that's a, that says a lot about you and I want to know more. So why Darth?

Dude, you know they're eating good on the Death Star, right? They got tons of slaves, tons of clones. You know, they throw a few of those in the kitchen, probably make some good stuff. They got tons of money. You know, they're living well.

These rebels, right?

Yeah. Rebels are based out of caves, you know, just scrounging by. Yeah, they got the moral high ground, but you know who's eating better?

That is a fascinating one. I mean, I think the only downside that I'm going to critique you on a touch is that like Darth could kill you. And the— whereas with the Rebels, like, you know you're gonna be safe and it's gonna be all cool, but like, you might say a stupid joke or whatever and your life is an actual, like, threat, which is an unusual predicament to be in during a dinner specifically of your choice.

Fair point, fair point. Worth the— worth the risk.

Yeah, that— I mean, he's— yeah, what a— what an interesting one. We had the episode before, uh, which I'm assuming will be released before this one, but, uh, they picked Data from Star Trek, and it was— so we have a Star Wars and Star Trek battle going on between Nice. The last few guests.

So,

so can we talk a little bit about no-loss lotteries and why they're interesting?

Uh, no-loss lotteries, um, it's what PoolTogether is completely built on. Uh, it gives users with crypto, with common crypto tokens, um, we're talking stablecoins, so DAI, USDC, USDT, Uni, Badger, and several others, the chance to stake those tokens in these lottery pools with no chance of loss on that initial investment. So you put 100 DAI in the lottery pool, that 100 DAI isn't going anywhere. But since you're staking your tokens in a lottery pool rather than just holding them in your wallet, You are entered into the lottery that is drawn weekly. Our stablecoin pools have drawn close to $100,000, certainly $80,000 the past couple of weeks in lottery prizes. Plus, with our new pool token that released in February and was airdropped to past users of the protocol, we also pay out upwards of 20%, even 35% on certain pools, uh, in yearly APY, which is paid in that pool rewards token. So, uh, there are several ways for the community to build their own pools, uh, get creative with them, but they are what PoolTogether is built on and founded on.

So the, the APY thing that you were talking about, um, so you're saying like it's like the protocol token holders of this broader system are just sort of, as an investment vehicle, getting great returns just simply as, as that. And then there's the actual, like, the participant side of, of being a lottery participant.

As a lottery participant, you have 2, 2 potential streams of income on your, on your investment, right? Which is that yearly APY on any deposits, plus those deposits acting as tickets for the lottery pool.

I see.

Right. Does that make sense?

Yes. Yes. And is there like a real-life equivalent? Is this a practice? I mean, obviously, aside from like straight-up lottery, but like, is this a— like, is this no-loss lottery a thing that is happening in the Web2 or, you know, just World 1 world?

Yeah, it is unique. The only thing that I could maybe compare it to is just a general pooling together of funds to try to win at a raffle or whatever, which is different levels of lottery, right? But it's essentially what it is, a lottery. But that $1 you paid for your ticket or those 20 tickets you bought with $20, you get that $20 back.

Right.

Right. So there really is no No direct real-world correlation that I can make, except to say it's lottery with no risk.

Right. And so the minuscule risk that you are, I suppose, theoretically taking on is some sort of issue with the stablecoin or some catastrophic hacking situation or Some known, like, but like very, very low, small, small sort of, um, existential risk profile that is not sort of like a profile in the actual idea of a no-loss lottery.

Correct. It's the same risks that are baked into any other DeFi project, right? The, uh, potential hacks and, and all the rest that we have to deal with in our, in our chosen field.

But right.

Um,

uh, so aside from the fact that it's a lottery and human beings love lotteries, uh, Do you see something interesting here broadly of taking this concept and applying it to other things? How do you think about no-loss lotteries broadly outside of the gambling component of it?

Glad you asked. That's what our grants proposal's all about. I mentioned that Pool token came out in February and that it was airdropped to past users of the protocol, right? That was really the impetus for this community to really coalesce, realize that there was a real opportunity here, because PoolTogether has been around for at least since 2019. I think it was June in '19. That's a long time for a dApp and a protocol to last and be successful. So the next step that was missing was to draw that talent to answer your very question. What's more that we can build on top of this? How else can we apply this technology that we've proved out with our no-loss lottery pools already to a good extent, right? And that's the answer that we're trying— or that's the question that we're trying to answer with Pool Grants. Obviously, it is the Pool Together Grants Committee. We shortened to a cute little name of Pool Grants. We're trying to answer that very question that she asked, right? What else can we do with these lottery pools? The community coalesced and realized that we needed to attract this talent. We brought it through with examples. I should mention, we basically— I like to say forked Aave's proposal and copied it for more or less We used Compound's though and Uniswap's grants proposals as ideas and helped us on our roadmap too, but brought it through governance. We are now live and ready to attract that talent, but it's a real gap in the protocol is taking that next step, right? Because whoever's brought the protocol up to this point, which has been several people, Brandon and Leighton are the 2 main guys behind it. They've done a great job, and we should incentivize the community now who already has a ton of good ideas about where we can take this to actually implement those ideas. Right. Because it's a big gap from idea to fruition, and that's that spasm that we're trying to clear.

Yeah. I mean, it strikes me that you have a group of people with a process to pool their money together. They're pooling their money together, and then obviously there's this interest-bearing investment that's occurring, and then you have these time horizons, sounds like a week. And so it just strikes me that there's a bunch of interesting variables to play with of, well, what's the duration? Who's involved in it? What is the intention of the reward, for lack of a better word? Mm-hmm. Could that go to a charity of choice? And you have these different factions similar to how people fundraise, right? It's a competition between these 3 entities and, you know, whatever entity wins, you know, wins the, the donation and the matching. So there feels like a bunch of, um, charity kind of baked in there. Um, are there other buckets of like ideas that people have that are getting some traction within kind of the governance of this to explore?

Sure. So we've actually, uh, launched just recently on PoolTogether community pools. So what you're talking about with, uh, manipulating the factors within our own API and our own pools You can already do that today. So any community can go on there, set up their own pools, set up their own prizes and how those work, because every pool obviously generates their prize that they pay out weekly in a different way, right? Whether it's different interest-bearing, strategies on the deposits or whatever it may be. Right. But there's also the ability for DAOs to go and sponsor certain pools. So if they want to attract those deposits,

I see

they can put up that money and disperse it however they deem fit. Right.

Interesting.

So we're allowing the community to play with the tools themselves within our protocol. Right.

Right.

We're also coming out soon with pods within PoolTogether. So the depositors, the depositing users within the different pools can pool together their deposits within the pool, making a subpool within one of the lottery pools to give themselves a higher chance of winning the lottery. So

Reminds me of those classic stories of like those work groups, right? And then the one guy's sick and then they win $400 million and they're like, well, you weren't there that day. They're like, but we had like a pack that like, you know, we always buy it together and like, well, you're sick that day. So sorry, you don't get your $100 million.

We didn't get your $1 that week, bud. We didn't get your wallet signature on that week.

So yeah, yeah. Right, right. So I'd like to talk a little bit about kind of going behind the scenes of a grant proposal. And, you know, so Obviously, the PoolTogether product is not particularly very governance-focused, but I think you guys have kind of brought in elements of governance and you're exploring it. And so I would just kind of love to hear the— how would you describe this to an old friend who doesn't understand Web3, of sort of the process that you guys have gone through of making this grant proposal? And you alluded to a little bit with some of the forking and being inspired by some of those other proposals, but like, Take me through what started the impetus and almost explain it to us like we're 5th graders kind of deal.

Yeah. And I love being able to do this kind of thing with PoolTogether because we think of the biggest projects in DeFi, Badger, Uniswap, Aave, Cream, explain those. And that takes a little bit more handholding and defining of different things. But with PoolTogether, I mean, anyone can get that, right? You take a dollar, you put it in a pool, and you get to win said prize. By the way, you get your money back and you get interest. Yeah, yeah, yeah. But that's the basic premise. Anyone can get it, right? So I see PoolTogether as an essential linchpin in the onboarding of new users to DeFi, making that, uh, those, those barriers to entry a little bit softer or a little bit, um, easier for new people. PoolTogether is an easy, an easy bridge, right? Um, because—

Can I interject one thing? I love that strategy because I, I think that there are some interesting projects out there, and Rabbit Hole comes to mind of one of the ones that's like, hey, how do we make this super accessible to people? Lotteries is a super interesting one, casino gaming, I hate to say it, pornography. But any of these things that are sort of this world, they joke, pornography led the internet and VHS tapes and all these things. There's this wave of this raw, very core human psychology thing. Interesting approach to kind of use that as a catalyst to get regular everyday people that are not even in the kind of Silicon Valley space, right? Like Web2 space. They're just in life. You're just going about their regular life to get them with a foundation. Because I suppose you walk away with a wallet, now you have an account. Now, if you want to go set up into something much more Web3 DeFi world, that's a really fascinating strategy.

Yeah. At least you now have the tools. If not the advanced knowledge, you have the tools, right? And we were that bridge. So Yeah, it is. It's something that maybe we don't leverage enough because most users are DeFi inclined already, but it's certainly a huge opportunity.

Right.

And it's one that we're carrying over to our pool grants initiative because really, now that we are a Stack committee with a budget, with a mission, we're kind of acting Certainly independent, uh, and I guess in conjunction with PoolTogether, right? Uh, but it's still its own separate DAO with a multisig and, uh, and, uh, signers of that. So, uh, where that bridge is of accessibility and PoolTogether and PoolGrants though is we want our grants to be similar to PoolTogether in the sense that they're accessible To people without that technical ability and development experience with a microgrant. So it's our initial approach. Be fair, everyone, we're just getting started and our application is live. It's been about 2 days, but unlike other existing ones that we've used as a roadmap to build ours, we've noticed that the barriers to people with how do I say, more everyday ideas, smaller, um, smaller investments, certainly, uh, less turnaround time. And, uh, to give you some examples I'm talking about, uh, we would love to be able to recognize community members for running weekly community calls or creating a POAP, uh, that's claimable by people who attended a certain meeting, right? Just everyday run-of-the-mill contributions that we all make in the different communities that we're part of, right? There are certainly some projects that are trying to do that now that we're trying to coordinate with, but the real challenge is how do we identify contributions? How do we enumerate the value of said contribution? And how do we make sure that people are recognized from top to bottom of the skill set within the user base. So that's what we're going into this with, the same focus as PoolTogether and being accessible by all skill sets. And that's what we think will make us maybe a little bit different. That, and not to mention that we are completely community-built, community-led, and going to be community-managed. That seems to be a unique factor. Among other committees.

So one of the questions I wanted to ask is this, you know, so you guys are working on this grant proposal and, you know, one of the things I learned, I think from Jack DeRose, you talked about soft consensus and hard consensus.

Okay.

And how sort of this process of sort of like greasing the skids, so to speak, right? You're like, hey, I'm going to ask this one person who's maybe very influential or maybe they're a big shareholder and kind of get their input in it. Like, I guess what I'm trying to ask is like, how much when you guys were doing this grant proposal, like how much of that is sort of like going on versus a group of, you know, 5 or 6 people being like, oh, this is like exactly what we're gonna do. We're gonna propose it. And like, no one's really expecting it. Right. And we just sort of drop it out there versus how much behind the scenes kind of conversations is there kind of laddering up to validating that this is the right thing to propose and then like putting it out there. Does that question make sense?

Absolutely. It makes perfect sense. I'm glad you asked it too, because I'm more than happy to share our process. Obviously, I can only speak for, for how we came to fruition, but from the beginning, the impetus was certainly within Discord and the weekly calls that we started to have, I believe in March, run by a leading community member, was we needed a way to easily identify people and uh, recuperate people for, uh, their contributions, whatever those may be, right? Obviously, a grants proposal is what came out of that. But to your question, um, there was certainly a lot of dipping a toe in what does the community think, certainly reaching out to leading delegates because that, uh, product— excuse me, PoolTogether is completely governance-run. Their treasury— our treasury and governance process is completely community-driven. So there was, there was a little bit of everything there. Everything was transparent, certainly from beginning to end, including up till now. All postings, all drafts of the proposal that we went through are available. And I'm not sure if there's one approach that will work for every single community out there. I think there needs to be a mix of that, reaching out to delegates, potentially playing politics, but more importantly, getting the proposal out in front of the community and just asking them what they think. Right now, certainly, there needs to be a point where— and we did in fact reach a point where the community, rather than continue to debate internally, the community kind of, I guess, decided together on a call that we needed to set the committee leads, which are myself and Torgan is my fellow lead in the committee to take the thing across the goal line. Right. It takes a lot of lifting to get it from forum post to proper proposal to now on-chain voting, which our on-chain voting is done on-chain through our own dApp and through Snapshot as well. So we have both of those avenues.

Yeah.

So yeah, it's certainly a challenge, and I think it's a challenge that isn't unique to us in the sense that there are no shortage of people with good intentions and good ideas, but who in the community is going to and take the initiative to make those ideas into reality. Right. I'm glad to say we got there, but to answer your question, I'm interested in the hard consensus, soft consensus thing. Certainly, in any way, we looked for hard consensus and mainly got it. I think we got one no vote on our snapshot, but We only got to that point by several forum posts, reiterations, and input from the community back and forth.

I think you're certainly right. I mean, I think there's an alternative universe where I named this podcast Governance 2.0 because I just think that word encapsulates this idea of sort of the truths of trying to do governance from a singular structure of saying, hey, here's all the token holders, and we're going to do everything sort of in a binary way, as opposed to mapping how humans actually get things done. And I just love this Governance 2.0 phrasing that's come out of Yearn and Andrew Beale and lots of other people thinking about this kind of mapping how we actually get it done. And so starting to write code to do that. And so I appreciate you guys kind of taking us through the behind the scenes of the grant proposal. Broadly on this journey, have you noticed any friction points or opportunities in this sort of Governance 2.0 space?

You know what? Yes and no. Certainly as we're just now recently officially up and live We are— our list of stuff that we didn't know going into it is certainly growing. Yes. And one of those columns is challenges. One thing that I certainly need to shed more light with my committee members about and make them, if nothing else other than aware, of any potential legal repercussions that can come out of having this authority and managing said budget and being responsible for it. As a US-based user, that's even more challenging, right? Right. And especially in a country as litigious as the US, I think that's a unique challenge within the DAO structure. But more than anything, I'm excited about all of the potential that the DAO structure and governance on-chain gives us, right? I mean, the limits are endless. The possibilities are endless, I mean to say. And any challenges I'm sure that come across, I mean, if any community can face them, Whether in a legit way or a more degen way, which is my official title. I'm a proud degen myself. We'll cross them, right? But yeah.

Yeah, I appreciate that. It's certainly something that, especially as an optimist and someone who's worked in the space for over 10 years, I certainly have the attitude of like, well, we'll figure out it's the future. Let's just keep moving. And so

Yeah.

Um, but it is, it is a real, uh, consideration and a real, uh, challenge that does need to be figured out. And, um, you know, I'm thankful that, you know, uh, is it Brian Armstrong from Coinbase? You know, that like they're putting together a big, uh, consortium of, of people to try to get regulation passed, which is probably the requirement that we unfortunately need, at least in this temporary phase, um, as we kind of navigate this Web3 world. But, um, yeah, I like that.

I think we should all at least put on the same public face as Facebook is, and yes, we welcome it. Oh yes, we want it. You know, with them, I'm not sure that it's so much valid, but with us, I mean, really, we need protections, especially in spaces where we're dealing with finances, and those finances are a lot of times getting wrecked.

Right. Which is sometimes a— it's like, yeah, the byproduct of the kind of average consumer in America's understanding of the risk profile of each one of these things is most often incorrect. And then couple in this idea that they feel like they're buying, speaking of lottery tickets, like a lottery ticket and buying Bitcoin, right? Like the amount of people that I went to high school and college with that are like, oh yeah, like I bought some Bitcoin. They think about it as a lottery ticket. Which is fine, like that's the way it is, but like understanding like the risk profile, then now add in actual no-loss lotteries, add in, you know, it's a complexity on a complexity, which is, yeah, that's going to make dicey for ambiguous regulation.

Well, not to mention getting people from the mindset of it's a currency to, oh, it's a technology.

Yes. Yeah. Yeah. Yeah. Well, I appreciate you joining the show and kind of taking us through what you guys are working on and how you're thinking about it. If you could remind people maybe where to check you out.

Absolutely. Check out poolgrants.org. As I mentioned, our application is live, guys. So any ideas, big to small, like I mentioned, under $1,000, we have a quarterly budget of $500,000 to spend on our community's ideas. So Please feel free to reach out. Once again, poolgrants.org. We are @poolgrants on Twitter and @poolgrants everywhere else. Man, thank you so much for the time. I appreciate it.

Yeah, thank you. Thanks once again. Thank you for listening to the Armada Podcast. We would greatly appreciate a review in your favorite podcast player. And if you want to stay in the loop even further, head to armada.fm Where we have a repo. You can check out what we're doing and what we're learning along the way. Love to see you there. Thank you.