PoolTogether: Save Money, With a Chance to Win - Ep.108

Transcript

Hi, everyone. Welcome to Unconfirmed, the podcast that reveals how the marquee names in crypto are reacting to the week's top headlines and gets the inside scoop on what they see on the horizon. I'm your host, Laura Shin. Crypto.com, the crypto super app that lets you buy, earn and spend crypto in one place. Download the crypto.com app today. Email them at info at

kelman.law. Today's guest is Leighton Cusack, CEO and co-founder of Pool Together. Welcome, Leighton. Hey, thanks for having me. What is Pool Together? Pool Together is an app built on Ethereum that has the goal of making saving money as fun as a game. So the way it works, it's built on the concept of a prize link savings account, otherwise known as a no loss lottery. And the idea is, it's really simple. You buy a ticket for a chance to win a prize. And if you don't win, you get all your money back. And that sounds too good to be true. But the way that's possible is because the prize is funded by the interest that accrues

on all the tickets that have been purchased. So it's essentially a way to use the incentive mechanism of a chance to win a prize, which has been proven to be really psychologically popular, to actually apply it to the action of saving money, which is economically healthy. And why do it this way as opposed to the way a regular lottery works? Yeah, well, I think so, you know, regular lotteries, the way we think about them or the way I think about them is that they take human psychology really seriously, right? They're very fun to play and they are they're addicting and they're one of the most popular financial tools in the entire world, lotteries. But the issue with them is that they're wealth destroying. They're negative some. And so the reason

to do it this way is that you can take what's kind of best about a lottery, which is this idea of taking human psychology seriously and making a financial tool that's fun to use, but take away what's worst about it, which is the fact that it's negative sum and the fact that you lose your money. So that's kind of the core concept is try to take what's best about a lottery, but apply it to actually what's a healthy, positive sum economic action. And one other piece of this is that the way you're doing this is using blockchain technology. So what are the benefits of doing it using that technology? Yeah, yeah. So this is really interesting because, yeah, for clarity, you know, no loss lotteries and prize-linking savings accounts, it's not something that we've invented. If you just Google it, you'll find articles about how

this has been done in the past. And it's a fairly recent thing, last 20 years, but it's not something we invented. But it is something that works way better on a blockchain, which is really cool because sometimes you put things on blockchains and they don't work as well. But the four big reasons that we believe this works a lot better on a blockchain, the first is that it's global. So you have way bigger economies of scale. It's open to people everywhere. The second is the, you know, auditable open source nature of the project so that it can be trusted without needing kind of a government third party to back it. The third is that the economies of scale are much higher because it's run on smart contracts. And so if you're, building a game that uses interest, then it's obviously important to have really efficient

economies of scale because every little cent is going to matter. So running on smart contracts makes it much more efficient. And then the fourth, which I actually think is probably the most important one is that it makes it, um, programmable. And so in the Ethereum ecosystem, people talk a lot about money Legos and composability, being able to kind of plug and play different apps together. And what Pool Together is doing is, and by putting a pricing savings account on the blockchain, it makes it into something that can be programmed and plugged into by other applications. How did you come up with the idea for Pool Together? Yeah, well, I wish I could take the credit, but I can't. Just in terms of, you know, it wasn't a new idea. I guess that would be what I'm trying to get at there. I came up with

it really, I started basically just researching... the history of the major economic tools we have in our society. So, you know, what's the history of the bond market? What's the history of the stock market? And my goal in researching those things was to find what tools have been created that have really helped people be more financially healthy and have a better economic mobility. And in my research, that's where I came across this idea of PrizeLink Savings Accounts No-Loss Lotteries. And it was a recent idea and it was an idea that just struck me as like, wow, this is a really brilliant idea. It's something that seems almost too good to be true. So that was where I originally came across it. And also in thinking about putting on the blockchain, it just seemed obvious to me that it would be an idea that would work

a lot better on the blockchain. And so that's, yeah, it was really through reading economic history that I kind of found the idea. And what was your background before you started Pool Together? Yeah. I would say I've always been in entrepreneurship, software entrepreneurship. So I was the co-founder and CEO of another fintech company, not blockchain, called Kindred. And I did that for seven years. And that, yeah, that's my primary professional background. And how did you end up getting into crypto and Ethereum? So, yeah, so my I first got into Bitcoin and my impetus was Trump's election in 2016. So I was just like, man, this is this is not good. We're going to have a lot of global instability, a lot of trade wars, and I should I should buy

Bitcoin. And that also happened to be a very fortuitous time to get into Bitcoin. The end of 2016 was right before the 2017 bull market. So Bitcoin was my entry point into crypto. And then shortly after, I found Ethereum. And honestly, it was just because Coinbase had Ethereum and Bitcoin. Those are the two assets they had at that time. And I thought, hey, this is interesting. What's this one? And so initially just got into it by buying it. And but, you know, as we all say, kind of went down the rabbit rabbit hole from there. Oh my God, I love that you got into this because of Trump's election. That's so funny because I feel like I read that people theorize that that would happen, but I don't know if I've ever actually had somebody say to me that that was the reason they got

into this. Anyway, okay, so let's dive into the details on how pull together works. And actually, when you do that, can you just give an example of like how much money somebody would put in and then how much they could potentially win? Yeah, that's a great question. So, you know, the most common amount of money people put into pool together is $20, 20 DAI. DAI is the cryptocurrency we use, but $20 equivalent. If you look at kind of the distribution of the total, so for high level context, right now, there's about About $250,000 that has been deposited by about 1,500 unique Ethereum addresses. So that's kind of like the high level context. Is that just for the current pool or is that over since you

launched? That is for the current pool. So the way it works is it's essentially, you know, once you deposit, your money just stays in there until you take it out and you're eligible to win the prize every week. So it just automatically rolls over. Oh, got it. Got it. Okay. Do people tend to, how long do they tend to keep it in the pool? Yeah. We're obviously still pretty early on, and we've had a bit of a transition with the side to die. But for the first nine weeks, if you looked at the people who were in the very first pool when we first launched, the unique Ethereum addresses that were in there. And then if you did nine weeks later, if you looked at the Ethereum addresses that were

still in the pool, it was basically 75% of the addresses were still in the pool nine weeks later. So that's a 75% nine-week retention rate. We haven't been around long enough to get annualized and things like that, but that's kind of a ballpark figure. Okay. But they're only putting $20 in because then it doesn't feel like a great savings tool. Yeah, well, so $20 is the most common amount of money that's put in. But yeah, the distribution is quite – everything from people have put in over $100,000 at times to a lot of people who put in $1. Our ultimate goal, like the behavior we're trying to drive, is highly engaged recurring. So again, going back to the ultimate goal of helping people save money, we

want them to be putting in $20 every time they get a paycheck over a long period of time. And so we're kind of okay if $20 is the norm as long as people are doing it again. And I think going back to the analogy of lotteries, And lotteries are a very recurring thing. Most people don't just buy one ticket. You know, there's some people who do that, but most people are doing it every week. And so what we're trying to do is displace that habit and turn it into savings. Oh, interesting. I like that. As somebody who used to cover personal finance, I think that's really smart. So in a moment, we're going to dive more into the details on how this works. But first, a quick word for the sponsors who make this show possible. Crypto.Law is run by crypto OGs in New York

who understand crypto and fintech. They were already operating in the space back in 2013 and they accept crypto as payment. One One of the partners, Zachary Kelman, is known for drafting a bill submitted to the U.S. Congress in 2014 aimed at exempting on-chain Bitcoin transactions from U.S. regulations. The other founding partner, his brother Daniel Kelman, became well-known in the crypto law space for his work in the Mt. Gox civil rehabilitation. So if you operate a fintech business or have a dispute with some person or business involving crypto, or you just need legal advice related to crypto, info at kelman.law. That's K-E-L-M-A-N dot law, or just go to their website at www.crypto.law. When you think crypto, think Kelman. Are you interested in getting into the cryptocurrency markets but don't know where to start building your portfolio? eToro has the answer for you. It's called CopyTrader by

eToro. With CopyTrader, you can automatically copy every trade of eToro's top crypto traders at the exact price in real time. No need to study up on markets or develop your own strategies. Simply sign up and copy the trader of your choice. Any profits they make, you do too, proportional to your investment. With eToro, you get access to the world's most popular cryptocurrencies with transparent trading fees, all in one easy-to-use app. Copy the smart money with eToro. Join now at eToro.com. That's e-t-o-r-o dot com. Back to my conversation with Leighton Cusack of Pull Together. So basically people are putting in tickets, you know, kind of on the same regularity that they would enter a lottery. And

then every week there's a payout, right? How much has the payout been typically? Yeah. Yeah, so it's fluctuated a bit, but I would say I think the lowest it's been is right around $100. And this week's prize is going to be the largest it's been, which is $400 and I think $420. So that's, yeah, that's the current kind of range. Okay, well, not too bad if you put in $20 and get $400 back. So how do you earn the interest? Right now, all the interest is earned through compound finance. So as soon as someone puts money into pool together and they get their tickets, that money directly goes into compound finance and is earning interest there. And the system, as you mentioned, uses DAI. And I wondered, other than the fact that you guys received a grant from the Maker Foundation, is there a reason,

like, does Pool Together need to use decentralized stablecoins like DAI? Or could you use, you know, like a centralized one like USDC or Tether? Yeah, so we definitely could, I would say. And we will be adding some in the near future. Specifically, we do have some plans to add USDC here in the near future. I would say we are a bit partial to DAI, obviously, just because it is more decentralized than the other ones. And we do think that's better for the ecosystem and for, you know, from a long term perspective for people's financial health. You know, Tether is not on compound finance right now. When they add it, that would be a decision we'd have to make. And it would be a little bit of a tricky decision, just kind of balancing the risk of the collateral type against the popularity of the collateral

type. But yeah, we're certainly partial to DAI. We love DAI. But we also understand that you need to support more than just one kind of stable coin. And earlier when we spoke about compound, could you use some other DeFi way of earning interest for the pool? Yeah, for sure. Again, we definitely could. I would also say we're, you know, on the one hand, we really like Compound. But the other thing, even if we didn't like it, is it does have, it's kind of been around for a long time. It has a lot of liquidity. It has a lot of usage.

And so we really take security and stability super seriously. And so we're kind of willing to say either Even if Compound maybe has a average interest rate that's 100 basis points lower than other options, we would probably still say let's stick with Compound because it's more battle tested. It's better audited. It's all those things. So we're really trying to maximize for safety of people's funds. And how many, well, you may not know this, but how many people have participated so far? Yeah. So if you looked at total participants, I would say, I don't know exactly, but it'd be probably around like 3,000 if you were looking at unique Ethereum addresses. And then current would be between 1,500 and 2,000. So yeah. And a lot of those have been,

you know, in the past, even in the past couple of weeks has been a lot of growth. And who is participating? Are they typically people who are already steeped in the crypto world? Yeah. Yeah, so I love this question. I would say for sure we get a lot of people who are steeped in the crypto world, but we also get a lot who aren't. And that's kind of super exciting to us. So we try to be really proactive on customer support and we get a lot of customer support tickets from people who clearly have no idea what they're doing. And we see that as a really good thing. I also think one interesting thing to note on this is geographically, it's very distributed. So when we most recently ran our analytics, this was in mid-December, less than half of our traffic was from

English-speaking countries. And so more than half was from non-English speaking countries, specifically a lot from China, Indonesia, and India. So what we've seen, and we're really focused on not being a US or Western centric platform. And we've kind of already seen that play out in the analytics, which we're encouraged by and actually pretty surprised by how quickly that's happened. That's really interesting. Although it makes sense. Because a $400 payout isn't probably going to motivate a lot of Americans. But yes, like I used to live in Indonesia. I've been well, I actually I've also been to India and China. Forgot about China because I was only there for four days, but and I was sick the whole time. Like ate something bad or I don't know. I was like so ill

the whole time. But anyway, so yeah, I, you know, obviously, I'm aware of those economies. But yeah. Like your materials are all in English. So even with even despite that hurdle, well, I mean, I guess in India, that's not a hurdle. But in Indonesia and China, you're still getting a lot of participants. Yeah, well, we're, I will. So, um, our, our website, actually the, the app itself, it has been translated already into, uh, into five languages. So it's in Japanese, Mandarin, Spanish, um, Italian, uh, and English. And if you, if you go to the, if you go to the site and your computer is set to that language, it will just redirect you automatically. Um, otherwise at the bottom of the app page, you can toggle your language, um, So we are trying to be like really serious about getting that done really early on

and not making translation an afterthought. And we also are hiring... Well, I guess we would say it's more like an intern, like a stipend intern situation with community representatives, basically. And our goal is to have them in every country. Right now, we have one in South Korea, one in Argentina, one in Croatia, one in Italy. And so we want to keep expanding that. So we're trying to really actively cultivate that international community. And are you going to translate it into Bahasa Indonesia? Yeah. Well, yes, we would love to. I actually just got in touch with the DeFi Indonesia. I'm assuming those are the languages in Indonesia. To be honest, I don't know. Bahasa is like the national language. It's like an imposed language kind of because everybody has their own.

I mean, it's a huge, huge country. So just whatever region you go to, they have their own dialect in that area. But then the country, they all learn in school this language called Bahasa. Yeah. Okay. Yeah. Yeah. So we just got in touch with the kind of DeFi, local DeFi meetup leader in Indonesia and have been talking to them about helping us with the translation. So hopefully we'll have that soon. I love it. So how do you think the non-crypto people are finding out about it? Yeah, so that's a good question. I think that it's a very memeable concept. So the idea of like, it's very easy. It's very viral. It's very easy to share.

It seems too good to be true. I think people really like to talk about it. And so I think that the primary way we talk about these non-crypto people as crypto adjacent. So the primary way is it's, you know, the mom of the guy who works at Coinbase or the dad of the woman who is, you know, or, you know, maybe someone in your family. It's people, we're getting people who have a connection to someone who's in the crypto space, but aren't in the crypto space themselves. Right. Because what we're finding is that it's a really kind of easy, fun way for someone to get onboarded. So if I'm excited about crypto, I'm not going to tell my friend to invest $1,000 in Bitcoin. Well, I mean, maybe I'll tell

them, but they won't. Or buy $1,000 of ETH. But they will say, oh, this no loss lottery, this prize link savings, I'll try that. Huh, definitely not somebody in my family. They all think I'm a weirdo. But anyway, where was I? Oh, I know what I was gonna ask. Are they also? Do you know, like when you were saying crypto OGs, and you were saying like the mom or the dad, like, so it's not even people who tend to be younger and are a little bit more digitally savvy? Yeah. Yeah, so I mean, it's hard to, you know, being a DeFi product, it's, we don't have any accounts, you know, people are just coming. So it's so we can only say based on, you know, the user interviews we do, it's fairly small sample set. But what I can say based on that sample set,

based on the people who respond to our user interviews, the people who send in support requests, it's surprisingly diverse. And we certainly have a lot of people who are not into crypto. We have we get we get people who are really into lotteries, we get people who are really into sports betting, we get people who, you know, are maybe really into like prizes and promotional products. So it kind of it kind of crosses crosses the spectrum. And so other than the translations, what are your other plans for expanding this out to, you know, beyond the, the crypto set? Yeah, so I think, I think, you know, part of it is we're waiting for other pieces of the infrastructure of the ecosystem to improve. And I think we're like super close, right? So we need to, you know, make it a little bit easier with like

smart contract wallets, integrated fiat on ramps, like those types of things to like really go all out. You know, we want to get every person in the world on board. So I think that we're in a little bit of like a, we're trying to like stay up with those recent improvements and implement those into the product. But once those are done, what we see is that an interesting dimension to the product is the social element of it. And actually, if you look at lotteries, those have a really strong social element to it to begin with, right? Like people in the office will all pool their money together to buy lottery tickets. And so we think we can do a lot to grow this by empowering people to share their tickets, link their tickets together. And then if any of them win, they all split the

money split the prize. Nice. And do you imagine at a certain point that instead of just having one big pull with one huge payout that you'll just have multiple pulls? Yeah, yeah, for sure. We're going to experiment with that. Actually, with the new collateral type that we're adding, USDC, that's going to be a separate pool with its own prize. And we're actually going to experiment with that one. It's going to be a daily prize instead of a weekly prize. So for sure, there's room for experimentation in this area to see what is the most kind of engaging way to present this and do this. Yeah. Interesting. Well, I look forward to seeing how this continues to play out. As I mentioned earlier, since I used to cover personal finance, I

am well aware that people do not have great savings habits. And it's a little bit worrying. Yeah, yeah, for sure. Well, anyway, so, well, it's been great having you on the phone. It's been great having you on the show. Thanks for coming on Unconfirmed. Yeah, absolutely. Thanks for having me. Don't forget, next up is the news recap. Stick around for This Week in Crypto after this short break. Crypto.com. Have you seen the MZO Visa card? A metal card loaded with perks, up to 5% back and unlimited airport lounge access. They pay for your Spotify and Netflix too. What's not to love? Crypto.com has recently launched its exchange and crypto fundraising platform, The Syndicate. There was a 50% off Adam listing event on February 12th, 2020. Sign up on the crypto.com

exchange now. Hi everyone, thanks for tuning in to this week's news recap. First up, the state of the top 12 cryptos. Larry Cermak of The Block has 19 great charts summarizing the state of the top 12 blockchains by market cap as of the end of 2019. Some of the trends he pulled out were mentioned by Nate Madry in last week's Unconfirmed, such as that Bitcoin is becoming uncorrelated to other cryptocurrencies. It also has a low but statistically significant positive correlation with Bitcoin. Meanwhile, Larry points out, Ethereum tends to correlate with most of the other cryptocurrencies. He also notes that cryptocurrency trading volume on the spot markets hit a nine-month low in December, and web traffic on cryptocurrency exchanges had dropped by half since June. But the monthly volume of BitMEX's

Bitcoin perpetual swap reached an all-time high in 2019, and there are signs the institutional market is picking up. Next headline. Crypto Dad Forms Group with Accenture to Push for Digital Dollar Former CFTC Chairman Christopher Giancarlo, former Lab CFTC Director Daniel Gorfine, and investor Charles Giancarlo are forming the Digital Dollar Foundation in conjunction with Accenture to push for a digital dollar. Quote, said Christopher Giancarlo in a statement.

Next headline. Gemini creates insurance for up to $200 million in coverage. Customers of Gemini custody can sleep a bit easier now. Gemini has created its own insurance company to protect against a loss of coins from the Gemini cold storage, with what Coindesk calls a possibly record-breaking $200 million coverage limit. And guess what they named the new insurance company? Nakamoto. Next headline, progressive decentralization. It's hard. Jesse Walden of the A16 Crypto Startup School wrote an interesting post on progressive decentralization. In the post, he walks through the steps from launch, which he says needs to be centralized, all the way to full decentralization. Reading it, my main

takeaway is that it's a hard, uncertain road. He talks about how early on, finding product market fit requires centralization. He talks about how early on, finding product market fit requires centralization. And that once the product gains traction, then the founders need to invest in helping the product be a true open source project, such as investing in good documentation and offering incentives for other developers. Then it gets into trickier territory, like how to offer incentives and distribute tokens. Although then, of course, you run the risk of attracting speculators and also run into thorny questions of how to distribute, which also may attract regulatory scrutiny. Speaking of regulatory scrutiny, surprise, surprise, IEOs are ICOs by another name, says the SEC. The SEC issued a warning about IEOs, calling

them similar to ICOs and warning investors that they may be conducted in violation of federal securities laws. The notice says, quote, be cautious if considering an investment in an IEO. Claims of new technologies and financial products, such as those associated with digital asset offerings, and claims that IEOs are vetted by trading platforms, can be used improperly to entice investors with the false promise of high returns in a new investment space. Next headline, profiting from DeFi liquidations. Tom Schmidt of Dragonfly Capital had an interesting post analyzing how money is being made from being a liquidator in DeFi for protocols such as Maker, Compound, and DYDX. Over the

lifetime of these protocols, liquidators have earned almost $5 million in profits, with some liquidators earning $100,000 in a single liquidation. However, he says, profits are decreasing due to more competition and borrowers wising up. Fun bits! I've got two stories and fun bits this week. First, donate one die, plant 10 trees. If you were interested in how Pull Together is using interest in DeFi, you might also like rTrees, an Ethereum-based DeFi contract for donating to plant trees. If you put some die in rTrees, it will redirect the interest earned on your die to trees for the future, which will plant real trees. They say for every single die of interest donated, 10

trees are planted. You can see how many trees you've planted so far on your Grove page, which R-Trees calls a DeFi-powered arboreal Tamagotchi. Just FYI that R-Trees keeps 2% of the donated interest to support its own development. Lastly, Blockchain Cream, on sale for €126.40. Wistful for the days when Long Island iced tea changed its name to Long Blockchain? Don't worry! Cosmetique Bio Naturelle Suisse has you covered with blockchain cream

and its blockchain serum. The cream is on sale for 126 euros and 40 cents down from 160 euros. And the serum goes for 140. I dare one of you to buy these products, slather them on your face and send me the reviews. Thanks for tuning in, everyone. To learn more about Leighton and Pull Together, be sure to check out the links in the show notes of your podcast player. If you enjoy these news recaps, then why not sign up for The Real Deal, the weekly newsletter I put out every Friday morning. Some of you have asked me for the links to the stories I mentioned on the show, and now you can get them delivered right to your inbox. Go to unchainedpodcast.com right now to sign up. Unconfirmed is produced by me, Laura Shin, with help from Factual

Recording, Anthony Yoon, Daniel Ness, Josh Durham, and the team at CLK Transcription. Thanks for listening.