Home » Polkadot Treasury Faces Concerns Despite $245M Holdings

Polkadot Treasury Faces Concerns Despite $245M Holdings

Polkadot's $245M Treasury Faces Sustainability Concerns Amid Spending Surge and Revenue Decline, Calls for Strategic Changes

by Isaac lane
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Polkadot’s treasury, holding just under $245 million in assets, has sparked community concerns about its sustainability despite assurances from its head ambassador, Tommi Enenkel. Recent reports suggest the blockchain platform’s treasury might only have a two-year budget at its current spending rate.

Treasury Report Highlights Spending and Revenue Decline

In a June 28 report, Enenkel addressed these concerns, noting the complexity of Polkadot’s treasury, which involves direct spending and future allocations through bounties and collectives. He acknowledged the current rate of spending indicates about two years of the runway but emphasized the difficulty of making accurate predictions due to the volatile nature of crypto-denominated treasuries.

Enenkel assured the community that the treasury wouldn’t deplete entirely after exhausting the $245 million, as around 7% of the total token inflation from staking rewards is directed to the treasury. Currently, Polkadot holds $188 million in liquid assets, primarily in its native DOT token, along with stablecoins Tether and USD Coin.

Increased Spending and Advertising Efforts

Polkadot’s spending surged in the first half of 2024, totaling $87 million, with $36.7 million (over 40%) allocated to advertising, influencers, conferences, and events. This spending increase coincided with DOT’s price peak of $11.46 in mid-March, its highest since May 2022. Despite DOT’s decline to $6.33, it saw an 11% rise over the week, according to CoinGecko.

Enenkel noted growing concerns within the ecosystem regarding treasury usage, with balances falling since mid-2023. Revenue dropped 58.5% from the second half of 2023, attributed to a decline in network fees. The treasury’s inflation-based income also fell from 7.8 million DOT to 5.2 million DOT in the first half of 2024.

Calls for Strategic Changes

To address these challenges, Enenkel suggested creating executive bodies represented as bounties and collectives to manage the effective deployment of treasury capital. He proposed giving these bodies more responsibility as they increasingly take on departmental roles within the ecosystem.

Treasury balances (dark orange) have fallen since around mid-2023. Source: Polkadot

Enenkel also called for reducing DOT’s 10% inflation rate to lower selling pressure, arguing that a solid DOT/USD exchange rate is crucial for maintaining the treasury’s purchasing power. The proposal aims to ensure long-term sustainability and stability for Polkadot’s financial operations.

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