The world of Web3, Crypto and Blockchain is filled with cautionary tales of rug pulls, scams and hacks in the last decade and half of its existence.
This begs the question, why should you trust LuckyDraw protocol with your hard earned money? Let’s try to understand the history of Lottery Gaming to try to answer this question. We can divide 3 distinct eras of lottery gaming into Offline Lottery, Online Lottery and Blockchain Lottery.
- Offline Lottery
The first recorded signs of a lottery are keno slips from the Chinese Han Dynasty between 205 and 187 BC. These lotteries are believed to have helped to finance major government projects like the Great Wall of China. From the Chinese Book of Sings (2nd millennium BC.) comes a reference to a game of chance as “the drawing of wood”, which in context appears to describe the drawing of lots.
Since then, lotteries have gone through a tumultuous journey of getting banned and resurrected in various countries in different eras. Currently, most offline lottery enterprises are strictly government controlled and regulated and exists in most countries as a form of entertainment. These lotteries are extremely opaque about their operations and game integrity mostly because of its offline nature and lack of traceability and accountability throughout the supply chain. They are slow and inefficient and are prone to corruption because of the human involvement and obvious greed factor. It is almost impossible to prove that these operations are fair for a common player due to innumerable roadblocks due to opaque nature of these businesses. Still these enterprises flourished for centuries due to the lack of better alternatives.
Most lotteries have a concept of matching numbers for jackpot prizes and *roll-overs. Matching numbers means if you have a lottery ticket with 6-numbers; then all of those 6 numbers need to match in that particular order to claim a jackpot/ substantial prize. The odds of this happening is usually between 1 in 100 Million to 1 Billion. Even if 3 or 4 numbers of your ticket matched, it will be considered a loss and all your money will be rolled* over (pooled) into the next round of lotteries making the pool bigger and bigger until somebody matches all the 6 numbers. Essentially, your money is being used to fund other successive lottery pools without giving you any/ little benefit of participation. We at LuckyDraw believe this is an unfair form of lottery format to lure players in for ever increasing supposed payouts with ever decreasing odds of winning and receiving any payouts. Most lotteries operate in some variation of the above example to make it sound super lucrative but unsuspecting players usually get scammed into funding bigger lotteries.
We believe every lottery or contest (as we like to call them in LuckyDraw) should have a starting time and and ending time with clear and transparent communications of prize distribution. We will learn more about it later in this blog.
- Online Lottery
With the advent of internet in the early 90s, the world of lottery transitioned online with a lot of digital lottery products gaining prominence and scale. These online lottery products were much better at solving some of the problems of scale, operations and supply chain issues that plagued their offline counterparts for centuries. The main advantage they had was of creating large liquidity pools from across the state, country or in some cases the world. Because of their online/ digital nature of the product, they were easily able to market, onboard and retain players through cheaper digital solutions than the brick and mortar operations of the Offline Lottery industry. The online products also removed the need of having bookies/ retailers who would sell these lottery tickets and often indulge in scamming/ defrauding players of their winnings through ever changing schemes.
For all the goodness that came with Online Lotteries, there are still a lot of gaping holes. These products still do not prove with extreme transparency the random number generator (RNG) aspect of their lottery products. Basically, random number generators (RNG) is the software/ hardware technology which spits out the winning numbers of the lottery. So if a lottery has sold 1 Million 6-numbered tickets and only ONE 6-numbered ticket will win the jackpot prize, which one will it be out of the 1 Million combinations? To ensure the winning ticket was chosen to be a truly random combination and it was tamper proof, these Online Lottery companies usually partner with 3rd-party software/hardware technology which develop these RNG solutions for making the lottery outcomes fair and transparent. Ideally, if the group of humans who are running the operations of these Online Lottery companies are honest, fair and morally right individuals, things should go well. However, as we know where-ever there is a human element, there is always a possibility of greed, corruption and unfair practices. It’s almost impossible to prove if these Online Lotteries are using the RNG softwares with good intentions i.e. are they even using them for fair outcomes. It is easy to bias the software if they are tampered with to give outcomes which are more suitable for people who are running these lottery products.
The world needs a better solution. This industry was asking to be disrupted from the inside out. Enter Blockchain.
- Blockchain Lottery
With the invention of Blockchain in circa 2009; the blockchain has enabled trustless transactional systems i.e. players don’t have to trust any one party (any company, people etc). The whole system is governed by code which can transparently be reviewed, inspected and verified.
Meaning, the only solution which can provably solve for all the human conditions of greed, corruption, tampering in the lottery industry is a Blockchain Lottery. A lottery product which runs as a smart contract on a public blockchain with its codebase for anyone to view, inspect and verify. This solution is open, transparent, trustless and tamper-proof. We believe a Blockchain Lottery of the highest integrity needs to have the following things:
- On-chain Ticket Purchasing - We believe the lottery tickets should be sold on-chain to have extreme transparency about the participating players, their purchase activity and pooled money. This creates a truly global liquidity pool wherein any user from anywhere in the world can buy tickets within the bounds of the law. Almost all Offline/Online Lotteries do not disclose the number of tickets sold, the various permutations of ticket numbers sold and the association between players and their holding tickets. How do you even verify if the winning ticket was ever sold to anyone and was not withheld by the lottery operator? We at LuckyDraw disclose everything to our players, even before you buy a single ticket i.e. which wallet is buying how many tickets and their exact ticket numbers. This enables maximum transparency and accountability.
- On-chain Pool Logic - The calculation logic for prize pool must be executed on chain including but not limited to platform fees, prize money and any other transaction related fees so that is extremely transparent and verifiable for all participants. In most Offline/ Online Lottery it is impossible to determine a transparent correlation between the ticket sales and the actual prize pool. What if the Online/ Offline Lottery operator is giving only 20% of the actual ticket sales as prize money? Please take note, a lot of Blockchain/Crypto Gambling protocols use Crypto ONLY as a payment method and run the actual lottery privately which are in-verifiable/ inaccessible and NOT actually on the Blockchain. We at LuckyDraw have embedded the Pool formation logic which is a fundamental part of our smart contract. It is public and verifiable by everyone on the internet.
- Verifiable Prize Distribution - For a prize distribution to be a truly fair in a lottery game, everything depends on the source of randomness i.e. how a small number of lucky winners in a lottery are chosen out of a very large pool of participating players. With a true source of randomness, every ticket has an equal chance of winning the jackpot irrespective of how much money one players spends in the lottery. The highest integrity of randomness in the world of Crypto is provided by ChainLink VRF (Verifiable Random Function). VRF is a Random Number Generator (RNG) that generates an output that can be cryptographically verified as random. It should also be noted that ChainLink VRF is a decentralised solution. Obviously, Offline/ Online Lotteries (non-Blockchain lotteries) do not use verifiable (meaning players cannot verify) random number generators like ChainLink VRF; instead rely on privately run RNGs which are non-transparent in nature; leaving the entire integrity of prize distribution process at the mercy of these operators. We at LuckyDraw use ChainLink VRF and its usage can be verified in the LuckyDraw smart contract here and here.
We hope this blog help you understand why playing Blockchain Lottery is a highly transparent protocol makes sense for you as opposed to other operators. We hope to see you play with us and give us any feedback in our Telegram Community.