Million Dollar Rat (MDR) is part NFT collection and part shopping mall car raffle.

With a prize pool that includes multiple CryptoPunks, Bored Apes, and Meebits, I’m forced to wonder, why didn’t this project sell-out overnight?

I’m an economist by training. I think in probabilities and profit margins. At the writing of this article, only 1366 of the total 3310 rats have been sold. These rats are listed at a price of .2 ETH (about $400) each.

A few inferences can be drawn from this metric. First, the creators of MDR (despite their name), have only logged around $545,000 in revenue from this project so far. Second, if I were to buy a rat, I’d have a 1 in 1367 (or 0.07%) chance of winning any given drawing.

Per the transaction history of the four Punks now owned by MDR, the average cost of these acquisitions was around $40,000 each. The market price for their three Bored Apes is around 10 ETH (roughly $20,000) each. They also hold a Meebit that’s held an average sale price of 7.5 ETH (roughly $15,000). Combined, the future prize pool is worth roughly $235,000!

Although I am not a gambling man, if I were, I would strongly consider purchasing a few of these rats!

  1. Your odds of winning a prize with MDR are considerably higher than with almost any other traditional lottery (explanation and examples below).
  2. Future prizes are worth more than previous prizes. So far, MDR has only given away roughly 14.325 ETH ($30,000) in assets. With the recent additions of the Punks and the skyrocketing value of the Apes, the creators are quickly upping the stakes!
  3. Even though MDR hasn’t sold-out yet, they are still sitting on a comfortable profit margin near $270,000 (not considering any labor costs paid to the artists or engineers of this project). A commendable feat for any collection!

Let’s Talk Odds
Consider the 1 in 10,737,573 chance of winning the Irish Lottery’s €2,000,000. Participants here have a .000009% chance of winning €2,000,000. This means, a fair value for the Irish Lottery would be (.00000007 x 2,000,000), €.18. However, lotteries don’t charge fair value prices, they tend to charge well above this price. In the Irish Lottery’s case, they charge €4.00 per ticket.

From here, we can derive a value-to-ticket price ratio which should serve as a good indicator for comparing fairness across various lotteries. In the Irish Lottery case, the ratio is (€.18/€4) .045. Let’s compare this with our value-to-ticket price ratio for one of the CryptoPunks up for grabs at MDR.

The previously established .07% chance of a win in any drawing (1/1366) is already 7777.77 times more favorable than the Irish Lottery! To find the fair value of a Rat in comparison to one of the raffled CryptoPunks is (.0007 x $40,000), brings us to $28. Again, all lotteries charge well-above the fair value. MDR charges $400 per ticket, this brings MDRs value-to-ticket price ratio to ($28/$400) .07.

While the difference between .045 and .07 appears minuscule, it represents a 43.4% better value for purchase! This additional value per purchase is compounded by the frequency of drawings. MDR holds drawings on a weekly basis and winners are guaranteed in each drawing. Inversely, state-run lottery systems can go months, sometimes even years without finding a winner.

What Might NFTs Bring to the Future of Lottery Systems?
Historically, lotteries have been restricted by geographic distance, limiting the number of participants.

I recall the suburban shopping malls of my youth. I remember the cars raffled off in food courts via a series of $20 tickets. While this system works, it is severely limited by the number of people walking through the mall.

The lack of participation also leads to greater transaction costs. For example, the time it takes for the pot to cover the cost of the car might not be realized for months. In those months waiting for prize money, the car is left to depreciate and the lottery owner may accumulate rental costs.

Through the advent of NFTs and collectives such as MDR, geography is no-longer an impediment to lottery/raffle participation. People from all over the world can purchase a Rat and compete for treasured tokens. With greater participation, faster asset distribution occurs and thus, lower transaction costs!

As this space evolves, we’ll see larger pots accumulate faster, bigger prizes, and ultimately better value than the traditional, centralized lottery systems.


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