IDEO CoLab Ventures backs PoolTogether
Prize Linked Savings for the World
IDEO CoLab Ventures is thrilled to be backing and collaborating with the team behind PoolTogether, a Prize Linked Savings protocol built on Ethereum and popular Open Finance (or DeFi) protocols.
PoolTogether allows users to deposit a USD-pegged asset (currently DAI; soon, others) into a smart contract. That contract in turn places funds into another smart contract, Compound, a money market protocol. Every week, one depositor wins all the interest, but anyone can withdraw their full deposit at any time. Since the latest version of the protocol was launched in late December, nearly 2,000 accounts have deposited a total of nearly $1 million into PoolTogether, generating ~$1,500 per week in prizes.
In the United States, a country where saving rates are so low that nearly 40% of households would have difficulty covering a $400 emergency expense, over $70 billion per year is spent on lotteries that on average only pay out $0.60 on the dollar.
While the concept of a Prize Linked Saving account is not new, there is growing academic literature that suggests Prize Linked Savings encourages savings and redirects gambling behaviors. In one example in 2009, 11,000 households participated in a pilot of Prize Linked Savings accounts. Of participants, 54% did not previously save on a regular basis and 59% reported having played the lottery in the previous six months.
It seems that by tapping into a deep-seated human desire to win prizes, it may be possible to nudge people towards improving their financial health. PoolTogether’s Prize Linked Savings protocol makes this financial primitive available to anyone in the world to both participate in or build compelling localized experiences on top.
While it is easy to get lost in the technical nitty-gritty of blockchains and smart contracts, at IDEO CoLab Ventures, we believe that applications that are easy to understand and address deeply-rooted human needs or desires are the ones that will help expand adoption of these systems beyond the current group of early adopters. Since first meeting the PoolTogether team last spring, we have collaborated with them on prototypes and experiments testing various implementations of Prize Linked Savings through IDEO CoLab’s fellowship program in San Francisco and Boston and our Last Mile Money program in India and Southeast Asia. In every setting we’ve explored this concept, it has been one of the most compelling applications for getting new users excited about Open Finance.
We’re excited to continue to work with PoolTogether to achieve their vision of building products that enhance the financial health of people around the world.
