# Handing multiple people pooling money into a crypto that compounds

This might be an odd one, but I’m looking for some advice. I have a few people wanting to pool money together into a crypto that compounds.

I’m looking for a good way to record the percentage that everyone has initially invested so when one person wants to withdrawal. I know exactly how much to withdraw even if it’s increased

For example. I put \$100 and get 10 tokens

Another person puts \$500 and gets 50.

So a total of 60 tokens. Now each hour we get 0.3 tokens added.

How can I track each persons contribution within total amount as it increases?

• Not directly relevant, but out of curiosity, what's the purpose of this? Usually when people pool their money it's for something they can't get individually. Why can't the interested individuals buy their own crypto? Dec 4, 2021 at 20:09
• While I don't consider cryptocurrency to be an investment, mathematically I expect this would work similar to an investment club. Dec 4, 2021 at 21:06
• @Derek The rate of return is independent from the size of the pool. Pooling the investment will not result in larger returns per investor. The primary advantage of such a pool would be to minimize transaction costs when buying/selling assets.
– amon
Dec 5, 2021 at 9:19
• @Derek I'm not sure you understand how compounding works. Unless the rate you get depends on the amount of money you put in. Dec 6, 2021 at 21:18
• Am I the only one getting a bad feeling about "crypto that compounds"? Dec 7, 2021 at 11:02

I'm not sure that pooling will really do much for you other than make the total value seem larger.

For example, using your given numbers:

Investor 1: 100 tokens (1/6 share of the pool)

Investor 2: 500 tokens (5/6 share)

Total Pool Value: 600 tokens

Rate: 10% growth per unit of time

After one time period you now have a total of (600 * 1.1) 660 tokens. Lets run the next time period for the pool:

Pool Value: 660 * 1.1 = 726 tokens (66 tokens in growth rather than 60, nice compounding!)

Now your investors want to withdraw from the pool. Investor 1 gets 1/6 of the total (121 tokens) and Investor 2 takes the rest of the 5/6 share (605 tokens)

What if they just did it on their own, forget the pooling?

Investor 1: 100 tokens * 1.1 = 110

110 * 1.1 = 121 tokens

(in time period 2 only 11 tokens is growth over the previous 10. Not as interesting as the 6 token increase in growth from the pool)

Investor 2: 500 tokens * 1.1 = 550

550 * 1.1 = 605 tokens

(in time period 2 we get 55 tokens in growth instead of 50. A 5 token increase, still less than 6 though...)

But wait! In both scenarios, Investor 1 ends up with 121 tokens and Investor 2 ends up with 605. The total growth is the same!

In closing, the only real reason I can see to pool your tokens is to bypass a minimum initial investment requirement.

Also, kudos to @mhoran_psprep for pointing out the tax situation. It will surely be more complex in a pool than it would be to just do it on your own. I don't know about you, but I think that taxes are plenty complicated the way that it is, no need to spice things up with pooling crypto.

Whatever percentage they start with is still the same percentage they own at the moment they sell their shares.

Assume three people: the initial investments are \$100, \$200, \$500. The last one has invested \$500 of the \$800 or 5/8 of the value.

When the largest investor wants out, they get 5/8 of the value.

The percentages are then recalculated so that you ignore the 3rd investor. Since the first person contributed \$100 of the \$300, they own 1/3 of the value going forward.

It gets more complex if you allow additional investments, or new investors, or partial withdraws.

A bigger question will be how the taxes are handled.

• Thanks! This is what I was thinking, creating a spreadsheet of all holders and amounts. That then can calculate their portions. Just not sure how to do it if more people want in afterwards! Dec 4, 2021 at 23:19