Update 09:30 am UTC: This article has undergone revisions to provide further clarity on Polkadot’s financial situation.
The treasury of Polkadot currently contains assets valued at nearly $245 million. Despite recent reports causing concerns about the project’s financial runway being limited to two years, this may not be the case.
Community worries emerged following a treasury report from Polkadot that suggested the project would only have a budget for the next two years at its current spending rate.
In a treasury report for the first half of 2024 dated June 28, Tommi Enenkel, Polkadot’s head ambassador, highlighted the increasing complexity of the project’s treasury operations. He noted that Polkadot is not only spending directly but also allocating resources for bounties and collective projects to be utilized in the future.
Enenkel mentioned that based on the current expenditure, the treasury might have around two years of funding left. However, due to the volatile nature of cryptocurrency-based treasuries, making precise predictions is challenging. This situation has triggered discussions on topics ranging from stricter budgeting approaches to adjusting the system’s inflation parameters.
It’s important to note that Polkadot’s treasury will not exhaust its funds after utilizing the existing $245 million. This is because approximately 7% of the total token inflation, represented by staking rewards, flows into the treasury continuously.
Contrary to concerns about a limited financial runway, Polkadot’s treasury receives continuous injections of fresh funds through staking, ensuring its sustainability, as explained by Giotto de Filippi, a prominent supporter of DOT, in a statement to Cointelegraph.
The blockchain platform holds $188 million in liquid assets, mainly comprising the native Polkadot (DOT) token as well as stablecoins like Tether (USDT) and USD Coin (USDC).
During the first half of the year, Polkadot observed a significant increase in expenditure, totaling $87 million. A substantial portion, over 40% amounting to $36.7 million, was allocated towards advertising, influencers, conferences, and events.
Enenkel emphasized that the project saw significant returns on its DOT investments, especially as the token’s value reached a peak of $11.46 in mid-March 2024, its highest level since May 2022. Despite a subsequent decline to $6.33, DOT has witnessed an almost 11% increase in value over the past week according to CoinGecko.
Cointelegraph has reached out to Polkadot for further comments on the treasury spending concerns that have emerged.
Enenkel acknowledged a growing unease within the ecosystem regarding the treasury’s usage, with balances decreasing since mid-2023. The revenue of the treasury saw a decline of 58.5% from the second half of 2023, dropping from 414,291 DOT to 171,696 DOT due to reduced network fees.
In the first half of the year, the treasury received over 5.2 million DOT from inflation-based sources, down from 7.8 million DOT in the preceding six months.
To manage the treasury’s funds more effectively, Enenkel proposed the establishment of departments represented by bounties and collectives, suggesting an evolution towards greater organizational structure within the ecosystem.
Furthermore, he advocated for lowering DOT’s current inflation rate of 10% to alleviate selling pressure, emphasizing the importance of a stable DOT/USD exchange rate for a predominantly DOT-based treasury to maintain its purchasing power.
Lastly, Polkadot’s Indy 500 driver Conor Daly shared an anecdote about his father’s interest in DOT holdings, reflecting the widespread appeal and diverse community around the Polkadot ecosystem.