Audio and transcript from the December 2nd, 2021 installment of “Conversations with the Coop” with Leighton Cusack from PoolTogether!
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Crypto Texan: Hello. Welcome to conversations with the Coop. This is where we source questions from the Index Coop community to gain insights from today's leaders in crypto and DeFi. I'm your host Crypto Texan. And today we have Leighton Cusack from PoolTogether with us here today. Leighton, thank you for being here with us today.
Leighton: Yeah. Thanks for having me. I'm a long time Index Coop holder. So it's good to be on the call.
Crypto Texan: Always good to have Index Coop holders on these conversations. So let's get into your background. What is your background and how did you get into crypto and DeFi?
Leighton: All right. Yeah. I could probably talk about that for a while, so I'll try to keep it short. So my background is kind of generally just in software entrepreneurship. So when I graduated undergrad in 2010, I started a company right after undergrad, that was building software to facilitate donations actually, cause I was really passionate about trying to help people give more money by making it easier to give money. That was not a blockchain thing though. So that's my background. I started getting into crypto in terms of just buying it in late 2016. And then in late 2018, that's when I got introduced to DeFi.
And so my first DeFi experience was you know, locking Eth on Maker, minting Dai, and then taking it over to Compound and depositing it. And that was in December, I think, or November of 2018. And that for me was like the huge, just sort of aha moment of like, this is incredible. And from that point on, I knew for sure I wanted to do something in DeFi. DeFi the term didn't even exist at that time. So I didn't know I wanted to do something to DeFi, but I knew I wanted to work in the crypto blockchain space. So that's how I got into DeFi. And then specifically how I started contributing to PoolTogether was when at this time, early 2019, I was particularly interested in what are the applications for blockchain technology that help people become more financially healthy.
In the course of my research on that, I came across this concept of prize savings accounts, which are really popular all over the world. They very obviously would work a lot better if they were administered via decentralized smart contracts, as opposed to with centralized intermediaries. And so that's how I specifically started contributing to PoolTogether.
Crypto Texan: And do you have a developer background or what, I guess, what is your role at PoolTogether and how do you use talents from your previous life in what you're doing now?
Leighton: Yeah. Well, that's a good question. First to clarify, there's PoolTogether, Inc, which is the company that I'm employed by, and then there's the PoolTogether protocol. And as of February of this year, the control and governance of the protocol was fully decentralized with the issuance of the POOL token.
And so I still work for the company, that's my role. But obviously the company is still working to build on top of and around. It's kind of the typical open-source software model where you create an open-source piece of software and then you can provide services around it.
So that's just to clarify sort of like what my involvement is in the protocol. So I'm no longer in control of the protocol. Now I'm a part of the company that initially contributed to it. And I would still consider myself like a contributor to the protocol in a more informal sense, but not so much professionally.
So that's kind of a long-winded answer, but just to describe that portion of it. I think more directly to your question. I'm not an engineer, so I definitely can't write code. But I do have a pretty good technical understanding of how the systems work. I like to dive deep. So I'm not technical, but I do have a pretty good technical understanding. And I think what's probably been most applicable to me from my experience it's just community building, you know, with the last company that I started it was a lot different because it wasn't decentralized. So it was a lot different in that sense, but there were some elements of the community side in terms of customer support and in terms of building community around a product that I think are applicable to DeFi as well.
Crypto Texan: So are you a founder of PoolTogether or was it already around and then you just hopped in and started contributing?
Leighton: I was the founder of the company, PoolTogether, Inc. So to go back again early 2019, I went to the Ethereum Denver conference and at the time I had this idea of like, “Hey, I really want to work on creating a protocol to facilitate price savings.” And I actually pitched it at the conference and this is a little shout out for people listening. I went to that conference and at the time I knew no one in crypto. I did not. I went to the conference by myself. I almost didn't go because I didn't really want to go by myself. It's kind of intimidating to go by yourself, obviously. And I knew no one in crypto and I went to that conference all by myself.
I actually ended up meeting my two co-founders at that conference. I pitched the idea for PoolTogether. People really liked it. I tried to work on it that week. We didn't actually win any prizes or anything in the hackathon, but that was sort of how it got started.
Crypto Texan: Okay. Yeah. And I feel like PoolTogether has been around almost as early as Maker, Synthetix, Uniswap, Compound. And personally, I'm a huge fan of the protocol, but I feel that PoolTogether when you compare it to those other protocols that I just named haven't really obtained the same type of popularity as the others. Why do you think that?
Leighton: I think it's because.. I'm trying to say, I don't want to say that we're ahead of our time, but a little bit, I think PoolTogether is a protocol that, so if you look at like Maker or Synthetix or Compound, those are sort of like very base layer protocols, right? Maker is literally a stable coin. That's like the most base layer you can get. Compound is borrowing and lending that's for a financial product, that's sort of like the most base layer that you can get. PoolTogether prize savings, that doesn't so much appeal as much to whales. I mean, it does appeal to some whales, but it appeals more to people. It's more like a consumer protocol. And so I think that in the early stages, just naturally at the earliest stage is when there's less protocols out there. There's less people out there. The things that will get more prominence are going to be the things that are more base layer. Whereas prize savings is something that is built on top of Compound and Aave, it's built on top of that base layer. It requires a little bit easier like on-ramps to use it and things like that.
And so I think we're seeing this change right now. It's getting easier and easier, right? To get into crypto. It's getting easier and easier to use these things. Gas fees are getting lower on Polygon, et cetera. And so I really feel like for PoolTogether, our sort of moment in the spotlight is still coming because I think it requires the on-ramps into DeFi to be a bit more developed than it did for things like SNX and Compound and Maker.
Crypto Texan: Yeah, that's interesting. I haven't really thought of it like that, so you're not necessarily DeFi 1.0 or DeFi 2.0. You are, I mean, you might even be DeFi 3.0, which might be just completely retail facing. That makes a lot of sense because this prize savings accounts feels a lot more retail focused. And why don't you go into what a prize savings account is and what a no loss lottery is for our listeners.
Leighton: Yeah, for sure. Prize savings accounts and no loss lotteries, those terms are kind of used interchangeably. I prefer prize savings accounts, just because if you say the word lottery, people get confused and start thinking it is actually a lottery when it's not. But the basic concept is, regardless of what term is kind of used to describe it, the basic concept is it's a savings account, on the blockchain of course, so not like a bank savings account. But it's a savings account like you would have at a bank where you can deposit & withdraw whenever you want to.
There's no fees to deposit and withdraw. But the difference is with PoolTogether, with prize savings, the difference is, instead of getting like a fixed APR, you typically get either like a lower APR or potentially no APR but the interest that's earned on everyone's money is combined and given out as prizes. And your chances to win those prizes are based on how much you deposit. So that's sort of the mechanics of it. If you think about it from a more behavioral perspective, it's essentially a way to gamify savings. It's essentially a way to make savings more fun, and also to make them more economically beneficial, because at a really core level, what price savings do is they give people an opportunity to get asymmetric returns without risking their principle.
So like, for example, the luckiest person who's ever deposited into PoolTogether, they put $75 in won like $43,000. So there's no other way, if you're someone who has $75, you don't have any way to get an
asymmetrical return on that money without risking your principal, right? Like you could potentially get it by investing in doge coin, but you're taking on the principal risk. And so economically what PoolTogether does and what prize savings do is they give people, and this is particularly helpful for people who have smaller amounts of money let's say like $10,000 or less, they give people a way that they can still have their savings. They can still withdraw it whenever they want to. They don't have to worry about that, but, well, they have it deposited. They have exposure to asymmetric returns. So that's sort of like a mechanical definition of how it works. Also a psychological definition and also sort of an economic definition.
Crypto Texan: Yeah, absolutely. And why did you feel like this prize savings account idea was perfect for the blockchain because there are real world examples of prize savings accounts. So why is doing this on the blockchain better?
Leighton: So, yeah, so a few things. So one is its auditable in public, right? So a big issue with price savings is like, how do you know that the person who won the prize actually was randomly chosen, right? And when it's on the blockchain, you actually can know that and you can verify it and you can see that for yourself. So having that public auditability is really, really important. The other thing is that typically prize savings are very costly to administer because, you know, if people are depositing like a hundred dollars and you have to handle the administration for each person that the unit economics are very unfavorable. Basically, it would be the way to say it. And so with being built on a protocol, there's no incremental costs, right? So more people can deposit. There's no costs that accrue to anyone when people are depositing more. So your growth is really uncapped, which makes it possible to have much larger amounts of money that are deposited and then therefore much larger prizes. So that's like the second reason. So the first is the transparency, auditability. Second reason is really the scalability. And the third reason is you can get higher returns, right?
So capital is more efficient in decentralized finance. So therefore you can get higher returns. And then the final thing, which is sort of the overarching reason is that it can actually be a decentralized user owned protocol. Right. So instead of building this as a centralized service, where everything is controlled by a small group of individuals or a company, it can actually be a decentralized protocol that's owned by the people who actually use it. And to me that's the most important thing, but I think there's also, those product improvements are important too.
Crypto Texan: I mean, it sounds like you're just hitting all of the major buzzwords and for the right reasons, you know, transparency, low overhead scalability, more efficient capital use, which yields higher returns. Are there examples of these price savings accounts like that you can think of in the real world? Because I don't know, I’m in the US and I think you're in the U S too. I don't know of any in the US.
Leighton: Yeah. So there's a couple, there's a few in the US right now. One's called Prize Pool and one’s called Yotta Savings. There's also like Walmart in the past, they had a program that did this, so there are a few in the US. The biggest program globally is in the UK. So in the UK, they have a program it's called premium bonds, but it functions the exact same way, but they just call it premium bonds.
And that program has like a hundred billion or over a hundred billion US dollars deposited into it. so, you know, if you have a hundred billion dollars that they only, it only yields like 1.2%. But you're still going to be distributing like a billion dollars a year in prizes, If you have a hundred billion dollars deposited in 1% APR.
So that's the biggest one globally, but they are available in the US but I would say they're less popular culturally than they are in other countries.
Crypto Texan: Yeah. And I think that, I mean, as far as I can think, at least you're one of the most successful early examples of a protocol that is actually building on top or utilizing smart contracts that call other smart contracts. Cause you're built on top of Aave and Compound, I think. Do you want to talk about that a little bit, and is there any possibility of expanding beyond just Aave and Compound for when you're using those smart contracts.
Leighton: Yeah. Yeah, for sure. So yeah, you know, I think the word some people in the audience may have heard before is composability. So that's this big concept in decentralized finance and DeFi of being able to easily build new things by composing different things together. And so you could think of PoolTogether, at least like when it first launched, it was a composition of Maker with the Dai stable coin in Compound with a yield source.
And it was sort of built on top of those two things. And, um, yeah, I think PoolTogether has been one of the earliest and it's one of the best examples of that. To your question on like the yield sources long term. I mean, I would definitely hope that the protocol would be integrated with a bunch of yield sources.
Now with the decentralization, the inclusion of yield sources is up to governance to vote on. So it's not something we have control over anymore, but I definitely would like to see that happen. But you know, obviously with something like PoolTogether we want to be a lot more Conservative on yield generation, right?
Like there's all sorts of ways you can try to get like, you know, a 50 or a hundred or whatever percent APR, but a lot of times those come with increased risk. And so one thing I'm most proud of is the fact that the PoolTogether protocol has never lost anyone money. It's never been hacked in any way. And that's actually really rare right in this space. And that's a record that I really hope protocol keeps.
Crypto Texan: Yeah, that makes sense. Like the security of what you're using to build on top of is really important because if you were to use something like Cream and they had that huge exploit a month or two ago, or even Badger today that would be a loss of funds for your users and that would kind of defeat the whole purpose of a no loss lottery. So users put their money into this pool, that money is then lent out and the interest is then paid to one or a few different, users in the pool. All of that interest that's generated, does all that go to the users at the end of the week or is some of that retained by the pool or by the PoolTogether Treasury. How does all that work? How does that distribution end up playing out?
Leighton: Yeah. That's a great question. So, and it's a little tricky to answer because there's some nuance and because the protocol has sort of been transitioned. The short answer would be The POOL token holders control how the interest is distributed. And so basically, and actually, so this is something that just happened today. The POOL token holders did their vote a few days ago to create a new prize distribution. Right? So, there's all sorts of ways you can distribute the interest that accrued.
Let's say there's a hundred thousand dollars that's accrued in a week. You could have one winner, you could have five winners, you could have 5,000 winners. Right. So that's up to the POOL token governance to determine how those prizes are distributed. The other parameter that governance manages that's pretty interesting is the reserve.
And basically what the reserve does is it's a mechanism to make sure that the prizes are always bigger than just the amount of money that's deposited into the protocol. So basically the way it works is like there's a reserve rate. So say it's 10%. What that means is like 10% of the interest generated, stays in the prize pool, and then sits there and contributes interest to all future prizes. So it sort of builds this like a perpetual growth machine. That's what we've called it before. Which I think long-term is a super powerful concept for the protocol to just have like hundreds of millions of dollars in this reserve, that's then contributing to making these prizes larger and larger and larger.
So those are sort of the ways it works out mechanically. But like I said, at the end of the day, it's the decision on what those parameters are up to the POOL token holders.
Crypto Texan: Okay, so that interest reserve, and in your example you said 10%, that is no longer eligible to be won, but it is contributed so that interest compounds over time is what you're saying.
Leighton: Exactly. Yeah, yeah. So it's not eligible to win. So what that means is. Well, I'll give you a concrete example. For USDC I think there's like, $20 million deposited, but then there's also like $5 million of reserves. And so that means there's the interest as if it's $25 million, but that $5 million isn't eligible to win. So that's just contributing interest to the prize.
Crypto Texan: Okay. And is there a limit on how long someone has to be in that pool to be eligible to win? Because what's to stop a user from coming in, depositing a hundred thousand dollars on the day of the drawing, and then withdrawing it the next day.
Leighton: Yeah. So there's not a limit. No. But basically your chances to win are weighted by your average deposit over the prize period. So let's say there's a prize every 24 hours and you deposit one minute before the prize. Your chance would be very, very small because your average balance over that 24 hours would be tiny. So it basically automatically weighs your chances based on how long you've been deposited.
Crypto Texan: Interesting. And so if I've had a deposit in the pool for a year, does that make me more likely to win as opposed to someone who's been in there for two months? Or is there a limit on that?
Leighton: So, no, it's only within that prize period. Assuming you're deposited for the whole prize period, whatever that prize period is your chances to win are the same, it doesn't matter if you're in like multiples in a row. It's just a mechanism the protocol has to protect against what you were just talking about, which is like someone coming in right before a prize, like a big whale coming in and depositing and then withdrawing right after. It just keeps the system fair while also enabling people to leave whenever they want to without ever having to lose their money.
Crypto Texan: Yeah. That sounds fair too. So yeah, it's something you've obviously thought about quite a bit. So what assets are currently available for people to quote unquote, PoolTogether, on your platform?
Leighton: Well, that's a good question again. There's a little bit of a nuance here because the V4 protocol was just recently released. So the V4 protocol, it's just USDC. And that's really, at least in the short term, I think where the protocol is moving is just supporting USDC but you can deposit it on any blockchain that's out there.
The V3 protocol price pools do have other assets, but to be honest given what's happened with Ethereum gas fees in the last six months, I wouldn't really recommend anyone to deposit into them because it's just too expensive. So it's really just focusing on USDC.
Crypto Texan: Okay. Yeah. And given that you're a more retail or the idea is to be more retail facing a DeFi protocol, how have those gas fees affected the growth or just overall perception of the protocol?
Leighton: Oh, yeah. It's been a huge problem for sure. If you look at the stats, the V3 protocol pools, no one really deposits into them anymore. I actually just ran the stats; 96% of all deposits are on Polygon now with the V4. So there's very few people who are still using Ethereum. So that's an issue, but I guess the good side of that issue is that it's an issue that has not completely been addressed, but it's been largely addressed, right? Like with Polygon now being available, with these other blockchains as well with the L2s and, you know, once the critical piece I think is like, once you can go from Coinbase to Polygon directly, that's when it will really get unlocked. It's definitely been a big inhibitor to growth for sure. You know, I don't think anyone, if you had asked me a year ago, I don't think anyone thought gas fees were going to get as high as they've gotten. A year ago it was maybe like a dollar in transaction fees and now it's like $150. So it's crazy.
Crypto Texan: And just in your opinion, what do you attribute to these high gas fees? Do you think it's just that the demand of the network and people are willing to pay those high gas fees for the overall security of Ethereum? Or do you think in the future that Ethereum's mainnet will be just used by protocols and L2s they batch transactions down to the mainnet or I don't know what future you see for mainnet in general.
Leighton: Yeah, I definitely see what you just said. Like, and again, that's why I just always tell people don't deposit because it's only going to get worse basically, in my opinion. I mean worse, maybe it's not the right word to use because in some ways it's better, right. Higher fees mean more economic security, but I think what you're right is that it's going to be Ethereum layer one will be protocols using it to move large amounts of money around. It will be L2 using it for security to verify stuff. It's not going to be normal people using it to do transactions.
I think the reason for a lot of the gas fees right now it's the arbitrage and it's the bots, right? There's so many arbitrage opportunities on AMMs to buy an asset and then sell it on a different one. And those bots are just running automated and the bots don't care. They'll spend $5,000 on gas to make $5 because they just are trying to make $5. So they don't care. I think that's why gas fees get so high because these are not price sensitive transactions. These are transactions that people will run regardless of how much it costs as long as they're turning a tiny little profit. And that's what's happened with mainnet.
Crypto Texan: Well, yeah, I haven't really thought about the arbitrage bots and how that's truly affecting the gas price. That's an interesting take and I had David Hoffman on a couple of weeks ago, or was it last week? That was two weeks ago. And he just had that conversation with Brian Armstrong from Coinbase. And when he asked Brian Armstrong “wen Polygon”, he said we're working on it. So I think there's a light at the end of the tunnel there at least.
Leighton: I think Q1 2022 is going to be pretty awesome for DeFi. I think Coinbase is going to come out with some stuff. I think we have the Zapper wallet that's going to come out. On-ramp is getting better with things like moon pay. So I do think we're going to have that breakout moment soon where people can actually use this stuff without having to worry about crazy transaction fees and a lot more people can have that aha moment that all of us on this call have already had.
Crypto Texan: Yeah, absolutely. And the Index Coop, you know, we've kind of been bridging assets over to Polygon to make that a little bit friendlier for retail on the gas standpoint, and then we've been moving people to the Dharma wallet. Because that’s a great fiat to Polygon on-ramp that is pretty seamless.
But we've talked about Polygon a lot, what are your thoughts on Arbitrum and Optimism. I feel like the Index Coop is pretty bullish on Polygon and the future there, and it sounds like PoolTogether is too. Do you see any future with those layer two Roll-ups the optimistic roll-ups at least?
Leighton: I definitely do, and I'll be using them - that will be where the majority of my assets are. I don't know though that they're going to get to the 1 cent transaction fees that I think they have to for the mainstream. So I think I love both of them. I use both of them already. I will use them more, but I think they're going to appeal to sort of like a middle ground of people who maybe aren't whales, but also understand some of the decentralization security a bit more, and value that, and are willing to pay for that.
But I don't think they're going to ever get to and I could be totally wrong. So take it for what it is, but I don't necessarily know if they're going to get to like the 1 cent or like sub one cent transaction fees that we really want to get to. And I think Polygon maybe can stay there. I also think the zero-knowledge proof stuff, like the zK roll-ups, could potentially be there too. So I mean maybe the optimistic roll-ups can get there too, but I just know right now they're not.
Crypto Texan: Does PoolTogether have any strategies to deploy on those layer two roll-ups?
Leighton: Well, yeah, like I said, ultimately the deployments will need to be voted on by governance, but I think the general idea in the community, if you come and hang out, is yeah we want to have the protocol on every EVM compatible blockchain possible. EVM compatible, meaning sort of an Ethereum compatible.
So definitely once Aave gets deployed, I definitely expect there to be a vote to deploy PoolTogether as well onto Optimism and Arbitrum. But also other EVM compatible networks like Avalanche. I mean Binance smart chain is even compatible. Phantom is as well, like all those networks.
Crypto Texan: So not only just EVM compatibility, but also you need to have Aave there as well. Cause that's what y'all build on top of.
Leighton: So EVM compatibility would be a base requirement and then there would be some other dependencies and the most prominent one would be Aave. You know, Aave is not a hard dependency, like the protocol could use other yield sources for sure. But the integration has been built a long time ago. It's been audited. It's been live, it's been tested, you know, so there's a security component there where ideally you don't want to change that.
Crypto Texan: Yeah, then that makes sense. And so what type of revenue drivers does PoolTogether have to drive revenues to the protocol's treasury right now.
Leighton: I wouldn't call it revenue, but the protocol reserve is a mechanism to build value into the protocol. And that value, that unique thing I think about is that that value makes the protocol better. It's not just building value for the sake of value extraction. It's actually building value for the sake of making the protocol better for everyone who uses it and building this long-term. It basically builds the best place to save in the entire world, which is kind of awesome. So that's really the primary mechanism right now. But again at the end of day, that's really up to the POOL token holders in terms of what they want to or how they want to manage that, how they want to set that, et cetera.
Crypto Texan: Okay. And what are your thoughts on treasury diversification for DAOs and protocols? Just kind of want to get your opinion and what is the makeup of PoolTogether’s treasury. Is like 90% of it in the POOL token or a hundred percent of it in the POOL token. How does that look? What are your thoughts on that?
Leighton: Well, that's a great question. So in general, I'm a huge fan of treasury diversification. PoolTogether did one of the first treasury diversifications earlier this spring with several large investors that put 6 million USDC in and receive POOL tokens from the protocol - there was a vote on that. So I think that makes a lot of sense. I think if you look today, PoolTogether actually does have a diversified assets in the protocol. There's probably about $50 million in total assets and probably about 10% of those are in.. actually no, more like 20. 20% of those.. close to 20% of those would be in like non-POOL token assets. So there's a lot of assets. Actually, if you go to info.PoolTogether.com, you can see there's just a dashboard. You can see all the different tokens and what the composition is. So I definitely think that for the longevity of the protocol, you want to have diversity. And so I am a big fan of treasury diversification. Did Index Coop do one? I feel like you guys did one too.
Crypto Texan: Yeah. I mean, we do have some diversification in our treasury where we definitely sold some Index to get some USDC as a hedge against potential price volatility in our own native token, the Index. But then we also hold some DeFi pulse Index, metaverse Index, we hold our own products in the treasury as well as we probably should. Let's go back to the launch of version four probably about a month ago or so, what are the differences? You touched on this a little bit, but what are the main differences between version three and version four? And also I'm just curious; what did version one and version two of PoolTogether look like?
Leighton: Yeah. Well, okay. All versions have been the same core concept, right? No loss, deposit, withdraw whenever you want to, and while you're deposited you have the chance to win prizes. That's the same core concept. But what happened with version three? There's a couple of things. One thing that happened with version three is that it actually sort of became a victim of its own success because hundreds of millions of dollars were deposited into it. But version three had a very hard technical limit in terms of how many prizes could be awarded. So there's like five winners per week. And so what that meant is unless you were a whale, you basically had a really small chance to win, and that's not what anyone wanted. That's not how the protocol was intended to work. It was intended to work where even if you have a very small deposit, you still have a good chance to win. So, that was sort of what happened with version three.
The other issue with version three is that it was built on Ethereum and obviously gas fees got out of control. And if we wanted to deploy it onto other protocols or other blockchains, it would require starting from scratch. So the V3 protocol was deployed into Polygon, but the prizes were really small because it wasn't cross chain.
So what version four has done is two main things. The first is that it's truly cross chain. And what that means is regardless of what blockchain you deposit on, you have the same chance to win the same prizes. So what that means is you don't have to pay Ethereum gas fees anymore. So that's really, really awesome.
So that and that allows for growth without fragmentation. Right? So instead of having a $10,000 prize and Polygon and a $5,000 prize on Optimism and a hundred thousand dollars prize in Ethereum, you just have a $150,000 prize that you can access on any chain. The other thing that's really cool about V4 is you can have an unlimited number of winners and prizes. So previously it was like a hundred thousand dollar prize, and there's five winners who each win $20,000 now. And again, this is up to governance so it can change, but basically it can be set up any way that governance votes for. So it could be like, “Hey, there's a hundred thousand dollars in total prizes, but there's going to be one $50,000 prize, and a thousand, a hundred dollars prizes and 10, whatever the math is on, like different tiers.” Those can be adjusted over time.
What that means is as it grows, instead of your chances of winning getting worse and worse, your chances of winning can stay the same or actually even get better because new prize tiers can be introduced. And so just to put this into specific numbers, the V3 USDC prize pool ran for 47 weeks. And over that time it had like 200 winners total. The new V4 USDC has been running for seven weeks and it's already had over 2000 unique winners. So already over 10 times as many winners in a much, much smaller amount of time. So it's orders of magnitude better than the V3. And so this is really what I think is going to be the best design for the protocol to support helping people save.
Crypto Texan: I think it would also be interesting just to kind of estimate what were the cumulative gas cost for the V4 versus the V3 winners? Cause now Version four of PoolTogether is currently on mainnet and Polygon. And I know it's all based on governance, but what would you predict would be the next chain to be deployed for version four.
Leighton: The one that we've been talking about internally in the Discord is Avalanche, so I think that probably will be next. There's going to need to be a vote on that soon, and then I think after that would be Optimism and Arbitrum, I'm assuming, because I do think they will be over there pretty soon too. But to your point, with the V4 97% of all deposits are on Polygon. So there's actually only like a hundred depositors on Ethereum and there's like 4,000 something on Polygon. And the reason is because Ethereum really makes sense if you're a whale and you have a bunch of money you want to deposit.
Crypto Texan: Yeah, it's kind of a funny story. Actually, when version four came out, I deposited some funds onto mainnet. And then I won 20 bucks and I was like, all right. And to claim it, it's $150. And I was like...That's not going to work.
Leighton: I'm sorry. You had that experience.
Crypto Texan: No, that's okay. I moved over to Polygon, which I should have done in the first place. If I had thought about it a little bit more I would have come to that conclusion quicker. You said that y'all just ran the stats on numbers of winners for version four. Is that what you just touched on or did you have more that you wanted to elaborate on that?
Leighton: No. Yeah. I think that's mostly what I touched on. It's basically the stat to contextualize it. As of today in the first seven weeks or whatever, half of all unique wallets that are currently deposited have won a prize. If you tried PoolTogether with V3 or V2 or V1, there's probably a 99% chance you never won anything, but if you try it now, there's almost the exact opposite. If you had your money in for a few weeks, there's a very high chance you'll win at least something.
Crypto Texan: Yeah and I think another thing that PoolTogether is really known for is just having a great community. And I'm just kind of curious, what can you attribute to that success of having such a great community? What advice would you give to other DAOs and protocols to somehow mimic that success that PoolTogether?
Leighton: Yeah. Well, I think the first thing I'd say is there's no shortcuts to it. To create a great community, there's no shortcut, it takes a long time. It takes a long time having people in your community who are welcoming, who are willing to answer questions, who are willing to deal with trolls who come in to harass, who aren't looking for just a short-term profit, who believe in changing the world and who believe in making a big difference and a positive impact on society. There's some of those people are on this call. These are people who had been on the community star tree, who had been in the community who have helped countless people. You know, good people attract good people. And what you have to do is you just have to have patience. You have to just show up every day. And, over time though, you start getting more and more good people and more and more good people bring even more good people.
And that results in a really wonderful community, but it just takes time. I think that's one of the biggest things.
Crypto Texan: Yeah. And I've, I've kind of started to think that if you're looking for a protocol or a DAO to get involved with, and you're looking for one that has a good community, I think a good place to start your research is on Twitter. And just looking on people's Twitter names and seeing what emojis do they have on their Twitter names. And for y'all you have like the wave that crashes down and that's kinda y'all's thing. And I think it means a lot if someone's willing to identify their Twitter handle with a protocol that they've invested in or a community that they're trying to get involved in. So that's kind of maybe just a little anecdotal, something I've been kind of looking at recently. Olympus DAO does a great job of it too, with the (3,3), and that was pretty big.
Leighton: Yeah. It's really cool. I mean, that's a really interesting point. That's great. Like it's such a unique thing that has only happened in the last year. But it's very good. It's an interesting observation that that's kind of the new way of doing it.
Crypto Texan: Yeah. Cause it's not only are they just invested and involved, but they want other people to know too. And that's kind of their way in the metaverse of doing that. I think if you look at other protocols like Uniswap, every time there's a governance proposal and Uniswap, it makes headlines in the Twitter space at least. But I don't know if they have a very strong core community, and that's just another way that PoolTogether just kind of differentiates itself from these other DeFi protocols. You and I talked a little bit earlier, but there was a research report that came out by other internet research about PoolTogether Dao. How did that come about with that research paper?
Leighton: Yeah, well that, that was something that the pool grants. There's a really good grants program. I'm obviously not affiliated with it or on it, but it's an amazing program that I support. The grants committee actually funded that research report. And it's actually quite interesting because the other internet did two research reports, one on Uniswap and one on PoolTogether on the communities. And the reasons for doing those were really because they're opposites. PoolTogether having a very flat, highly engaged community and Uniswap having different different types of community.
It was really cool I think for everybody in the community to have some outside experts come and observe and do interviews and really validate what we all knew and believed, which was that this is a great community and that it is something special. And there's something really valuable about a special community. It was awesome to have that fun, and awesome to have that report done. And they also pointed out ways that the community could be improved. And I think everyone's really excited about acting on those two.
Crypto Texan: Yeah, something that I learned when I was just kind of skimming through that report was that PoolTogether was actually closed source at the beginning. And then around, I guess the summer of 2019, I think you or the community made a decision to open source the protocol. And it was like early days of DeFi, early days of these tokens that maybe the closed source was a more common thing, but what went into the thinking of starting closed source, and then what convinced you and the team to open that code.
Leighton: Yeah, it's a good question. I mean, I definitely have originally approached PoolTogether and DeFi in a very web2 mindset. And closed source is a very web two mindset. It's very much like, “Hey, we're going to create this thing. We're going to copyright it. We're going to control it. And we're going to extract value and we're not going to let anyone else use it.” And I had that mindset to be honest in the beginning. I really didn't understand. I understood some of the tech around it, but I didn't understand around blockchains, but it didn't really understand open source & what that meant. I didn't understand what it meant to build public goods software to give up control. And so that was a huge learning for me. The impetus was really the community saying no, you guys can't do this or you shouldn't do this, there's a better way.
And there was a huge educational thing for me coming from a startup background in web2 and not really understanding open source software, what it meant, how it worked, et cetera. And so having a bunch of people, some of them in kind ways & some of them are not kind ways, explaining that to me was a huge aha moment for me and really changed my whole mindset to really just be dedicated to building open-source software that is decentralized and that's in control of the users. It's actually just a way, way better and more fun way to build because you aren't in control and that's scary. There may be downsides, but it's also a lot more fun because you get to see things take on a life of its own. You get to see people step up, you get to see how things evolve without being in control.
Crypto Texan: Yeah. And so we're kind of running up on time a little bit, but I just kind of want to ask a few, just kind of more fun, random questions. The first one being what other projects do you have your eye on right now?
Leighton: That's a good question. I think there's so many good DeFi projects right now that are so underrated. I really like ribbon finance, Maple finance. I think Index, I think the Fei and Rari merger is really cool. Those are some of the biggest ones right off the top of my head. Oh, perpetual protocol I think is really cool. I mean, I love the L2 stuff, I love Optimism and Arbitrum. I know there's no tokens, but those are awesome projects. I'm a huge supporter of awesome to use things too. So that's a, that's a quick thing, but you know I’m a DeFi believer through and through. So you're not going to convince me that this isn't going to change the world.
Crypto Texan: So you're a degen as well?
Leighton: Well, I wouldn't actually say I'm a degen. I'm not crazy aggressive financially. I love to try out stuff, but I don't consider myself to be a speculator. I'll say that I don't do trading. I don't do a lot of buying and selling. I put a lot of money into crypto, but it just kind of sits there. Yeah, that's what I would say.
Crypto Texan: Yeah. And it's interesting, you've mentioned like the Fei and Rari merger that they're proposing and you kind of saw that too with the Polygon Hermez deal as well. I wonder, do you think that that's going to be something that we see a lot more of in the future as protocols just kind of get this symbiotic relationship with each other? I mean, cause y'all use Aave so much, do you see a future where PoolTogether and Aave could merge or what's your outlook on that?
Leighton: Yeah, I mean, It's possible. I don't think that would happen, but it's certainly possible. And it's certainly, yeah. And I do think more of this will happen in the space in general. And I think it makes a lot of sense because it's also typically what you see in innovation cycles. Right? You see like a new underlying innovation, you see a sort of an explosion of projects and things built on top of it. And then you see some level of consolidation as people realize by combining forces, you can do more. So I'm definitely interested in that trend and to the degree that, you know, could that happen to PoolTogether? Definitely. I mean, I don't have any specific ideas, I haven't talked about it, but like, could that happen? I definitely think it could. I think it's something that we're going to see a lot more of. I think we'll see protocol to protocol stuff. We'll probably see company to protocol stuff. We'll see protocol to company stuff. Like where a protocol buys a company. We'll also probably see where a company maybe buys a protocol. I mean, obviously you can't really buy a protocol, but a protocol could vote to sort of put a company in control, like those types of things. So there'll probably be a lot of interesting stuff in 2022.
Crypto Texan: Yeah. I guess a company could purchase enough governance tokens to have enough control of a protocol. That's a possibility, right? So what else on the roadmap for PoolTogether outside of everything that we've talked about with like L2 and EVM compatible side chains, what gets you most excited or what other features would you like to see added to the protocol?
Leighton: What gets me most excited is just that with the new V4, is that it's finally sort of working, right? Like people are coming into the discord and saying look, I used to buy lottery tickets, now I'm saving my money. There are people who are like, Hey, I'm showing my kids how to save money by doing this, like those types of things. Those are anecdotal, but I love seeing that. And I think we're going to see a ton more of that in the next year. I think the way that's going to happen, it's going to be through the protocol getting integrated into interfaces that are offering it to the end users. So I don't think the future of 2022 is like a bunch of people coming to PoolTogether.com and depositing through the interface that's on there. I think what's going to happen is fintechs, banks, exchanges, et cetera, will be integrating DeFi broadly, but also in that I think PoolTogether specifically, to make it really easy for people to access the value propositions of DeFi without needing to deal with all the complexities of it.
And so I think that's what I'm really excited for. I think DeFi as a whole, right? We're not in a space right now where we need necessarily new innovations. We have a lot of innovations. What we need is to make it easier and safer for people to access them. And that's similar to right with the Coop. For a long time, and I know now the DeFi Index tokens on Coinbase, but it was hard and you were talking about that with bridging over to Polygon. So it's not so much that we need to invent new things. It's just that we need to make it safer and easier and more accessible for people to use them.
So that's what I'm excited about and I'm excited about the impact that's going to have on people's lives as that happens.
Crypto Texan: Is the POOL token on Coinbase?
Leighton: No, it's not, it's only Polygon and Ethereum.
Crypto Texan: Okay. Yeah. I don't use Coinbase at all. I only use decentralized exchanges anymore. So when I have random friends that text me, “what do you think about this token?” I'm like, “where did you hear about that?” And they're like, “oh, it's on Coinbase.” I'm like, oh my God, there's so much on Coinbase now. Big shout out to our institutional business development team for getting the DeFi pulse Index on the Coinbase institutional platform. Which maybe means that we can get on actual Coinbase or Coinbase pro in the future as well. I think that's all the questions we really have. Is there anything else that you wanted to touch on while we have an extra six minutes here?
Leighton: No, I think this is great, I think I would just give encouragement for the people listening. If you're curious about this stuff. There's a welcoming community to help you, I'm sure. At Index Coop and also at PoolTogether. Generally the best way to get involved in that community is to join the discord for either of those two projects. I was someone two years ago or three years ago, knew nothing about how any of this works and knew no one who worked in crypto.
And now I know a lot about it and I know a lot of people and I'm happy to share that knowledge as best as I can, but I also just wanna encourage people. If you think it's too late, it's not, you can get started now. It's scary to go to conferences by yourself or things like that, but it's going to be a really rewarding experience. That would be my last thing to say, just give everyone encouragement to try things out, get involved and start learning. And I think they’ll be really rewarding.
Crypto Texan: I think one of the main reasons that it kind of deters people from getting involved is just, there's so much new jargon that you need to know. And that's kinda what I tell people is like, just get involved, listen to podcasts, read, get involved with the DAO. And you're going to hear words that you don't understand like sharding and mempool. But I think over time through osmosis, you just start to figure out what that stuff is and you don’t have to look it up or read an article about what the mempool is eventually. You're just like, oh, okay. Yeah. The mempool is full, so gas fees are going up or whatever.
Leighton: It's a lot of jargon.
Crypto Texan: Yeah. Well, Leighton, glad we were able to get you on. And also, uh, the Index Coop back in the summer had our DeFi summer panel and you were on it. So just want to give you a shout out there and say, thanks for joining that council with us as well, that panel discussion.
Leighton: Yeah, that was a lot of fun. That was one of the first post-COVID crypto things I went to. So that was awesome.
Crypto Texan: Yeah, me too, actually that was my first crypto event ever because I just happened to be in New York that weekend and I was like, Hey, I'll be in town, like I need to go to this. And of course all the guys that I contribute with over at Index were like, oh yeah, totally, just come on over. Great experience there, but Leighton, like I said, thanks again for coming on. Thanks to everyone who's listening live right now in the discord, a special thanks to Nakamomo who's going to be mixing this and we will get this mixed and published in about a week or so. Stay safe out there everybody. Don't get rekt and have a great weekend. Appreciate it.
Host: @Crypto_Texan
Audio Engineer/Mixing: @Nakamomo6
Marketing Image: @ChavisChance / @cafpunk
Transcript: @0xMitzy
Conversations with the Coop - Leighton Cusack - PoolTogether