This lottery protocol on Base doles out $2.4m in rewards in less than a month – DL News

A user won a $250,000 grand prize Friday through Internet Token, a weekly lottery protocol on Base, bringing the total winnings distributed by Internet Token to $2.4 million.

Base is an Ethereum layer 2 network incubated by Coinbase, the largest publicly traded crypto exchange in the US.

The potential for six-figure wins on Internet Token is drawing lots of attention. Since its launch, Internet Token has given out 88,873 total tickets to more than 1,500 players.

Each week, users can enter to win Internet Token’s grand prize, which is funded from trades in their Uniswap pool, as each trade incurs a 1% fee.

Some 80% of the Ether fees and 20% of the INT fees accumulated are entered into the grand prize pool, which in the most recent round came out to 57 Ether and 633,672 INT, around $250,000 in total.

The remaining Ether fees are sent to the DAO treasury, which is managed by INT token holders and which now holds $88,000, while the remaining INT fees are burned, which means they are removed from circulation.

To qualify for a weekly lottery ticket, users must generate at least $5 in trading fees. This is how the process works. Users who want to purchase an Internet Token must do so with ETH. All trades through the INT/ETH pool on Uniswap incur a 1% fee.

A smart contract keeps track of everyone buying and selling, and once someone pays at least $5 in fees, that person receives a weekly lottery ticket. That means the user must buy at least $500 worth of Internet Tokens to qualify for the lottery.

Each ticket is valid only for the current week’s grand prize drawing. For entry in future weekly drawings, users must generate another $5 in trading fees each week to earn another lottery ticket.

At the end of the weekly timer, API3, an oracle (a provider of data from outside a blockchain), generates a verifiably random number for the winner of the grand prize.

But, the lottery doesn’t stop there.

In addition to the weekly grand prize, users can also win an IFT, which is an NFT representation of 1/10,000 of the total INT supply.

The distribution of IFTs is programmed to halve every five weeks, with 100 distributed in the first five weeks, 50 in the subsequent five weeks and so on.

If a user wins an IFT, they can burn the IFT to receive 1/10,000 of the total INT supply, which at current prices is around $7,000. To date, $2.1 million in IFT prizes have been distributed.

Internet Token’s growing treasury

Due to the dynamic of lottery tickets expiring each week, users who want to enter the drawing for each week’s lottery are required to either purchase more INT each week or sell the holdings they already have.

This is a key driver of the high volumes that INT has generated to date, and ultimately, a key driver in growing the DAO treasury.

For example, the third-largest holder of INT has been actively trading the token since its launch on March 22.

They appear to be using a strategy where they purchase a set number of tokens, in this case 141,766 INT, and immediately sell the same amount moments later.

While it may appear that this is gaming the system (although this user has received around 4,510 tickets since they began trading INT), the user hasn’t won the grand prize, all while generating fees that feed the treasury and weekly lotteries.

Ryan Celaj is a data correspondent at DL News. Got a tip? Email him at ryan@dlnews.com.