Polkadot’s treasury, holding just under $245 million in assets, has approximately two years of spending left at its current rate, according to a recent report. Despite its substantial funds, the blockchain has faced revenue declines and calls for adjustments to its token’s inflation rate.
Complexities and Spending Patterns
Polkadot’s head ambassador, Tommi Enenkel, highlighted the increasing complexity of the treasury in a June 28 report. “Polkadot’s Treasury is becoming more complex and harder to grasp,” Enenkel noted, explaining that the treasury is not only spending directly but also allocating funds to bounties and collectives for future use.
Currently, the treasury holds $188 million in liquid assets, primarily in Polkadot’s native token, DOT, as well as stablecoins like Tether and USD Coin. Despite the significant funds, the volatile nature of crypto assets makes future predictions challenging. Enenkel emphasized that the treasury has about two years of runway at its current spending rate, sparking discussions about stricter budgeting and potential changes to inflation parameters.
Increased Spending and Revenue Decline
In the first half of 2024, Polkadot experienced a substantial increase in spending, totaling $87 million. Over 40% of this amount, approximately $36.7 million, was allocated to advertising, influencers, conferences, and events. Despite this spending surge, the price of DOT peaked at $11.46 in mid-March, its highest since May 2022, before dropping to $6.33. DOT is still up nearly 11% on the week, according to CoinGecko.
Concerns about the usage of the treasury have grown, especially as its balances have been falling since mid-2023. Revenue from the treasury declined by 58.5% from the second half of 2023, dropping from 414,291 DOT to 171,696 DOT, largely due to decreased network fees. Additionally, inflation-based income for the treasury fell from 7.8 million DOT in the previous half-year to 5.2 million DOT in the first half of 2024.
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Calls for Strategic Adjustments
Enenkel proposed the creation of departments represented as bounties and collectives to effectively deploy treasury capital. He suggested that these executive bodies should take on more responsibility, given their increasing role in the ecosystem. Additionally, Enenkel advocated for lowering DOT’s 10% inflation rate to reduce selling pressure. Since the treasury is mostly DOT-denominated, its purchasing power is heavily influenced by the DOT/USD exchange rate.
The current situation demands strategic adjustments to ensure the long-term sustainability and effectiveness of Polkadot’s treasury. As discussions continue, the community is closely monitoring how these proposed changes might impact the ecosystem.
