Kotto Play

On Kotto, all lotteries are conducted in KAIA tokens. This page explains how betting, prize settlement, and other elements work.

Incentive Pools

All prize payouts on Kotto are made entirely from the amounts that users bet and deposit. To participate in the jackpot, users purchase Kotto tickets stamped with unique numbers, and the proceeds from ticket sales form the prize pools.

• User Pool: When a user buys a ticket, the KAIA they pay goes into the User Pool. The KAIA in the User Pool serves as the primary source for prize payouts.

• Liquidity Pool: Kotto offers a liquidity-provision system so that even those who don’t bet can earn revenue—at the cost of taking on some downside risk—from the fees generated by users’ bets. All KAIA deposited by liquidity providers goes into the Liquidity Pool.

Liquidity Pool

Liquidity providers can supply liquidity to the Liquidity Pool only on the first day of each month. At that time, they specify a risk level for their deposit. If a ticket buyer wins, a provider’s KAIA suffers losses according to the risk level they’ve chosen.

Currently, users can choose from four preset risk levels—or set a custom percentage:

Low risk (20%), Recommended (33%), Aggressive (50%), YOLO (100%).

For example, a provider at Low risk (20%) will incur a 20% loss when a player wins and the Liquidity Pool is used to pay out.

The higher the risk level, the larger the share of rewards liquidity providers receive relative to the liquidity they supplied. Kotto’s rewards for liquidity providers include ticket-sale fees and distributions from the User Pool if no user wins.

Liquidity providers may withdraw their remaining balance at any time, minus any losses already incurred by jackpot payouts.

Lottery Logic

Kotto selects winners once per day using a randomness oracle (e.g., Pyth). The random number obtained from Pyth is compared against users’ ticket numbers to determine the winner. Depending on the relative sizes of the User Pool and Liquidity Pool, one of two scenarios applies:

When the User Pool is larger than the Liquidity Pool

A number is drawn from within the range of tickets purchased by users—so a ticket holder is guaranteed to win the jackpot. In this case:

• The Liquidity Pool remains intact, and payouts are made solely from the KAIA in the User Pool.

• Winners receive the entire KAIA balance of the User Pool.

When the Liquidity Pool is larger than the User Pool

A number is drawn from within a range equal to the number of tickets sold plus an equivalent number representing the size of the Liquidity Pool. If that number falls within the range of user-purchased tickets, a user wins; otherwise, no user wins, and liquidity providers share the User Pool.

• If a user wins, they receive the entire KAIA from the User Pool plus an amount from the Liquidity Pool equal to the aggregate risk percentage chosen by providers.

• If there is no winner, liquidity providers retain their full stakes in the Liquidity Pool a