If I could prove the fairness (paying out to the winner) without compromising anything, I would. If you know of a way, I would be more than willing to do so.
Anyone entering can confirm that that their contribution was a certain percentage of the total funds received and that they had that same percentage of the chance for winning: even if the operator of the lottery wanted to be malicious they couldn't do so without making it obvious to anyone who checked.
There are some additional details that would matter, if you wanted to implement this seriously you may contact me separately for a discussion of some of those details.
I may be understanding you wrong, and if I am please let me know. I would love to make this 100% fullproof and trustworthy.
For this to work, ALL of the data needed to run the algorithm and determine the winner must be data that is outside the control of the contest organizer (or published before the contest begins) and publicly available. The algorithm I described should meet this criteria.
Assume you have published (before the contest starts) that the lottery itself takes a 1% cut, and that all funds should be deposited to a particular Bitcoin wallet. Anyone who is suspicious of you (or just very careful) can inspect the blockchain to see the total number of bitcoins received before the contest cutoff time (call it "N"). They can find the closing price of the NYSE and run it through the hash function to find the random input (call it "R"). Then they can perform "X = (N mod R)" and count through the transactions until they find the one that added the "X'th" bitcoin to the wallet. If that was their transaction then they know to expect to receive "0.99*N" bitcoins. Like I said before, for rigorous use, the algorithm needs some details and a little improvement, but this demonstrates the existence of algorithms that allow any participant in the lottery can verify that the lottery is fair.
Anyone here can verify that?