Lottoken: A case for fairness, equality and transparency

Have you ever participated in a raffle ? And did you win ? If yes, Congratulations ! I hope you enjoyed your winnings. If you haven’t, you can take consolation in that you’re not alone — the vast majority of us didn’t win either. But whether we won or not, I hope you’d agree that at various points we’ve all had a million doubts:

  • Is the raffle organizer legitimate ?
  • Will the raffle be fairly run ? Or is it rigged ?
  • Will I really win the advertised prize ? Or is it just a decoy ?
  • What are my odds ? Who am I competing with ?
  • How can I improve my odds ?

After all, winning a brand new latest model sports car worth tens of thousands of dollars from an unknown organization just for answering a few questions in middle of a shopping mall does sound too good to be true !

The trouble with contests: How many thousands of times have we willingly ignored the allure of glitzy rewards and refused to partake in games of chance ? How many times have suspicion and mistrust won ? But this is only natural. Suspicion and mistrust are natural human responses to unpredictable outcomes. They have their roots in millions of years of our evolution [6] [7]. As a result, we are genetically programmed to avoid the unknown and the unpredictable in favor of what is known and predictable. Lotteries and raffles are unwitting victims to this most natural of human responses.

Contests are beset with fraud: To add insult to injury, as if betting against millions of years of evolutionary biology was not bad enough, lotteries and raffles are rife with fraud and corruption all over the world. From China (click here) to Jamaica (click here) lottery corruption is endemic. Even in the USA, with strict rules and transparency, lotteries are vulnerable to corruption from within as (click here) this case proves. The FBI issues warnings regularly: click here. These scandals undermine our faith in fair contests.

Participants are not entirely innocent themselves — their quest to game a contest, to gain an edge, so that the odds tilt in one’s favor, is as old as time itself (click here). The net result of these multitude of headwinds is that participants are discouraged from enthusiastically embracing lotteries and raffles.

Contests are expensive ! Pick up any audited financial report from the major lottery operators [2] [3] [4] and you will see millions of dollars of expenses that go into ensuring well run lotteries. This is money that can be funneled to deserving educational institutions or other organizations that the lotteries are designed to benefit. The organizers are well meaning, law abiding, often under extensive scrutiny but are handcuffed to legacy methods and procedures. As we will see later, with the latest advances in technology, this need not be. There is vast potential to further streamline big lottery and pass through the savings in the form of bigger awards or larger benefits to beneficiaries.

Contests are opaque: Very few lotteries share data real time about the odds of winning. Virtually no lottery shares the number of tickets each shareholder (anonymously) has purchased. Many lotteries hide the actual process by which they pick winning numbers, and even when they do, participants are left wondering if the balls (or raffle tickets) picked out of a basket are indeed fair. This adds to participants’ unease and suspicion.

The Number: US $275 Billion — that’s the estimated amount spent annually in lotteries worldwide [1]. To put it in perspective, the GDPs of 4/5th of the world’s countries are smaller in comparison [5]. We estimate the real economic impact to be much higher as we explain below:

It’s not only just money. Sometimes it is so much more. Adhoc lotteries are used to determine outcomes in many important areas of life with far reaching consequences. For example:

  • When highly sought after schools have many more qualified applicants than open spots, a very common scenario in many parts of the world, they routinely use a lottery to select candidates.
  • Families who qualify for affordable housing are waitlisted for years before they are selected based on a lottery to receive scarce affordable housing in expensive cities
  • Governments allocate scarce visas based on lottery. Click here and here and here.
  • Medical professionals use a lot of criteria to select recipients from national waiting lists when a scarce organ becomes available for transplant. But what if two or more potential recipients emerge for the same organ ? Can/Should a lottery be used ?

If there is a common thread that unites the above lottery applications, it is the vast impact to actual human lives. How do you put a value on missed educational opportunities for a deserving kid ? For example, as this case (click here) reporter hauntingly surmises about a much publicized case of corruption in lottery for school admission: “The saddest part of this debacle is that students who went through the lottery process honestly were denied seats. They could be missing out on life-changing opportunities, through no fault of their own. What a betrayal of the public trust ”.

Let there be light As we will share in our next blog with the recent advances in technology there is a great opportunity to make ALL lotteries fair, cheap, completely transparent and free from corruption — by design. We can democratize lotteries so that 100% honesty, transparency and fairness are not just the gold standard but the only standard. Automation, made possible by the wonders of technology make the entire process impossible to tamper with. And everyone can organize or participate in a raffle at the click of a button or a tap on their smartphones. Stay tuned.

Next Part: Lottoken, what it is, what it is not