Prize Fluctuations

The PoolTogether Protocol has awarded over $20,000 in savings prizes. These prizes are awarded weekly or daily depending on the pool. Both pools have grown tremendously but the size of each daily and weekly prize fluctuates. This blog post explains why!

The size of each savings prize is derived from three variables

• The amount of money deposited into the pool
• The interest rate the money in the pool is earning
• The amount of time the money in the pool is earning interest

The amount of time does not change so the two important factors are the amount of money and the interest rate the money is earning.

The amount of money in each pool has consistently grown, at the start of January 2020 the weekly pool had $71,512 Dai Deposited today it has $934,559! The daily pool has seen similar growth.

The interest rate earned on the money has significantly changed and currently is at historic lows. This has caused the prize size to drop even though the pool has continued to grow. The image below shows how the interest rates have changed each week of this year.

Due to the change in interest rates, the weekly prize has dropped from a high of $2,112 to a low of $197. This interest rate drop has all decentralized finance platforms and is not limited to PoolTogether.

When will interest rates go back up?

The cause of the major drop in interest rates was a downturn in the crypto market that occurred around March 12th. The downturn increased demand for stable coins which lowered interest rates. As markets stabilize demand will decrease and interest rates go back up.

We can’t predict the future but based on the data we expect interest rates will be 5–10x higher than today by the end of the April.

Do I need to do anything?

No! We’re writing this post simply to inform users of why the prize can become smaller even when the pool is growing. The lower interest don’t change any of the risks associated with using PoolTogether (we outlined those risks in this post).

In fact, given that the PoolTogether protocol now has over $300,000 sponsored Dai — contributing interest without being eligible to win — the economic value of PoolTogether is greater than ever. This is despite the absolute numbers being quite small.

Despite the short term fluctuations in interest rates, the work of building the prize saving protocol continues with many new improvements coming soon!