Esports Essentials is a series intended as an introduction to esports for anyone looking to understand the industry.

UPDATE: The International 2018 prize pool has surpassed that of 2017. We have updated our story accordingly.

The International is the annual Dota 2 de facto championship that closes out the competitive season, and it does so not only with consistently vast viewership totals, but also the largest prize pool seen in any esport—by a wide margin. Yes, the Epic Games’ commitment to $100M in Fortnite esports prize pools might be big news, but the International is still far and away the biggest prize pool for a single esports event.

That number has surged since The International began in 2011 (with an already large $1.6M prize pool), with 2017’s tournament reaching a peak of $24,787,916. Yes, that’s nearly $25M for a single tournament, with winners Team Liquid walking away with a first-place prize of $10.8M. It’s an incredible figure, and one that Valve has just topped again The International 2018.

Where does all of this money come from? Here’s a look at how Dota 2 commands such incredible competitive cash, and how the process and end tally has changed over the years.

What is the prize pool?

The International’s prize pool is the total amount of money awarded to competing teams at the event, with a share of the pool awarded to all 18 participating squads. The winning team takes roughly 47% of the total pool, with much smaller percentages awarded to the rest; second place drops down to just over 17% of the tally, and the share steadily declines from there.

Where does it come from?

Valve puts in the first $1.6M, which is no small amount of money for a major esports tournament. But that number rapidly rises thanks to the very people who might watch The International year in and year out: Dota 2 players.

Everything past the $1.6M starting sum is crowdfunded by fans via sales of an in-game Battle Pass, a digital compendium that Valve releases about three months prior to each TI. Valve takes 25% of Battle Pass sales and dumps them directly into the annual International prize pool, generating millions of dollars of additional reward for pro teams while amplifying the stakes for both players and viewers alike.

What is the Battle Pass?

It’s a particularly crafty way of building hype around The International by giving Dota 2 fans many, many rewards to play for… or even pay for, if they choose. This year’s Battle Pass sells for $9.99 and immediately unlocks bonus game modes, in-game treasure, new music and cursor packs, and digital packs of player cards that let fans collect and build their own fantasy Dota 2 teams – kind of like fantasy baseball or football, but for the gaming age.

In short, it’s a whole bunch of digital goodies for Dota 2 devotees. But it doesn’t just stop there. As Battle Pass owners play matches and interact with the compendium, they earn points and level it up, thus unlocking more and more items and perks.

Fans eager to boost their Battle Pass progress can pay their way up the chart, too. They can buy a level 75 Battle Pass from the start for $36.99, and then buy level boost chunks along the way: five levels for $2.49, 11 levels for $4.99, and 24 levels for $9.99.

As a result, it’s not so hard to imagine how Valve can amass more than $20M in crowdfunding for the prize pool. And remember, that’s just one quarter of the total Battle Pass revenue. The rest, of course, goes straight to Valve.

Graph provided by Dota 2 Prize Pool Tracker

How large will the 2018 prize pool get?

We don’t know yet. As of this writing, it sits at $24,962,375, which is a new record for both The International and for a single event in esports history. Depending on where the final total falls, the grand prize for the winning team could land somewhere in the $11-12M range, if not higher.

Valve also incentivizes the Dota 2 community to be extra generous with their purchases. If the 2018 prize pool total surpasses that of 2017, every Battle Pass owner gets 10,000 bonus Battle Points. And if the total hits $30M, they’ll net yet another 10,000 bonus Battle Points.

Funding via Battle Pass sales continues until the end of the final day of The International on Saturday, August 25, so there’s still plenty of time for the prize pool total to swell.

How has the prize pool grown each year?

Valve has been consistent with its own prize pool funding: its contribution has been $1.6M each and every season, and in 2011 and 2012, that was the entire prize pool. The compendium was introduced in 2013, with the added crowdfunding raising the tally to $2,874,381 during its inaugural tournament.

From there, the total soared and the Battle Pass became responsible for the lion’s share of the prize pool. In 2014, the pool vaulted up to $10,931,103, and then hit $18,429,613 in 2015, $20,770,460 in 2016, and $24,787,916 in 2017.

The number of teams has grown from eight in 2011 to 18 in 2017, but the winners’ share of the grand prize has still escalated dramatically, from $200,000 per player in 2011 to more than $2M per player in 2017.

What are the pros and cons?

Every year, The International has broken the previous year’s record for the largest tournament prize pool in esports history, and the astronomical sum builds a lot of hype for the event. A $2M total prize pool is considered huge for the vast majority of esports competitions; only 20 tournaments in history have awarded $2M or more across all participants. As mentioned, in The International, each winning team’s share tops $2M per player.

Better yet, the Battle Pass engages Dota 2 fans in a seemingly significant manner. It provides incentive to play the game itself, creates excitement around the competition itself, and empowers fans by making them responsible for the vast, vast majority of the massive prize pool. These all seem to be positive things, although the push for in-app purchases and buying Battle Pass progress could rub some players the wrong way.

What’s the downside of the prize pool, then? As a recent Kotaku feature titled “The International is Bad for Dota 2” suggests, the tournament’s overwhelming prize pool makes other Dota 2 events seem miniscule by comparison. Plus, it could result in keeping player salaries down. That leads to roster instability, as players vie for what they think is the best chance to earn a spot into The International and claim some of the massive amount of cash available there. It’s impacting the overall Dota 2 ecosystem in unfavorable ways, the writer claims.

Valve has taken steps over the last year to try to grow and mature the Dota 2 ecosystem, but given how much buzz the prize pool creates around The International – and how much income that generates for the company – it’s hard to believe we’ll see this system dramatically change anytime soon.